YAAKOV KATZ and HERB KEINON , THE JERUSALEM POST Jul. 23, 2009
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Amid growing tension between Jerusalem and Washington, the IDF and Defense
Ministry have held brainstorming sessions to discuss the possibility that
the United States would cut military aid to Israel, The Jerusalem Post has
learned.

On Tuesday night, senior Defense Ministry and IDF officers gathered in Tel
Aviv for a discussion on US-Israeli relations, during which they discussed
new Pentagon regulations regarding the way Israel can use the almost $3
billion in military aid it receives from the US.

According to defense officials, the Pentagon informed the Defense Ministry
that the foreign military financing (FMF) needed to be used strictly for
weaponry and defense-related projects. In past years the Pentagon had made
exceptions and allowed the IDF to purchase nonessential items such as covers
for trucks, uniforms and even food for soldiers.

During the discussion, the officials also discussed the possibility that the
US would cut the FMF due to the political tension between the countries or
because of the global financial crisis.

The discussion in the Defense Ministry came just hours before a State
Department spokesman said at a press briefing that it was still "premature"
to talk about financial sanctions against Israel for its refusal to freeze
settlement construction.

Israeli defense officials said it was possible to interpret the remark as
meaning that now it is premature, but that at a later date sanctions might
be realistic.

Israeli diplomatic officials, on the other hand, completely discounted the
likelihood that the current disagreements with the US would lead to punitive
sanctions against Israel.

"This is nonsense,"one official said, responding to the State Department
spokesman's answer to a query on the matter.

"This US Administration believes in dialogue until the bitter end" the
official said. "There is no way that at the same time it wants to engage
with the Iranians, it is going to take sanctions against Israel. It just
doesn't make sense"

The official said there was no concern at this time in the Foreign Ministry
that Washington would use this weapon, especially since its pressure on the
Arab world to take gestures toward Israel is not bearing any fruit, but no
one is talking about potential sanctions against the Arab world for not
positively responding to the US president.

The US has in the past used loan guarantees as a lever to try to alter
Israel's construction policies in the settlements, withholding these
guarantees in the early 1990s, during the wave of Soviet immigration,
because of then-prime minister Yitzhak Shamir's settlement polices.

The US currently subtracts from loan guarantees to Israel money that the
government spends in the settlements.

The FMF is mostly spent in the US on advanced military platforms such as
fighter jets, attack helicopters and missiles.

At the meeting on Tuesday night, officials who were present discussed the
consequences of US financial sanctions but reached the conclusion that while
Israel would have difficulty replacing the $3b. in aid that it receives from
the Americans, it would be able to establish new relations with European
countries from which it could receive military equipment.

One official who was familiar with the discussion said that Israel was
recently approached by France to jointly develop an unmanned fighter jet.
Russia, the official said, has for years been urging Israel to purchase some
of its military platforms.

"We turned down these offers because of our relationship with the US," the
official said. "If that relationship changes we could always renew the
partnership with France and other countries."