Aid. Israel has been the largest recipient of U.S. foreign aid since 1976. In 1998, Israeli, congressional, and Administration officials agreed to reduce U.S. $1.2 billion in Economic Support Funds (ESF) to zero over ten years, while increasing Foreign Military Financing (FMF) from $1.8 billion to $2.4 billion. The process began in FY1999, with P.L. 105-277, October 21, 1998. Separately from the scheduled ESF cuts, Israeli has received an extra $1.2 billion to fund implementation of the Wye agreement (part of the Israeli-Palestinian peace process) in FY2000, $200 million in anti-terror assistance in FY2002, and $1 billion in FMF in the supplemental appropriations bill for FY2003. P.L. 109-102, November 14, 2005, the Foreign Operations Appropriations Act, 2006, provided $240 million in ESF, $2.28 billion in FMF, and $40 million for the settlement of migrants to Israel. H.R. 5533, the Foreign Operations Appropriations bill, FY2007, passed in the House on June 9, 2006, appropriates $120 million in ESF, $40 million for migration and refugee
assistance, and $2.34 billion in FMF (of which $610 million may be spent for defense acquisitions in Israel), for Israel. The Senate has not yet passed a bill. On July 11, 2005, Israeli press reported that Israel was requesting about $2.25 billion in special aid in a mix of grants and loan guarantees over four years, with onethird to be used to relocate military bases to Israel in the disengagement from Gaza and the rest to develop the Negev and Galilee regions and for other purposes, but none to help compensate settlers or for other civilian aspects of the disengagement. Preliminary discussions were held but no formal request made and, in light of the costs of Hurricane Katrina, Olmert postponed it. On November 15, an Israeli news source reported that talks had resumed on a $1.2 billion aid package for the Negev and Galilee and that $800 million for military aspects of disengagement had been
deleted after a negative U.S. response. In January 2006, Shimon Peres reportedly discussed the aid package with Secretary Rice. However, neither the FY2005 supplemental nor the FY2006 foreign operations bills appropriated the aid. On July 14, 2006, during Israel’s war against Hezbollah in Lebanon, the Pentagon notified Congress that it planned to sell up to $210 million in jet fuel to Israel. On July 22, it was reported that the Administration is expediting the delivery of precision-guided bombs that had been ordered by Israel in 2005.
Congress has legislated other special provisions regarding aid to Israel. Since the 1980s, ESF and FMF have been provided as all grant cash transfers, not designated for particular projects, and have been transferred as a lump sum in the first month of the fiscal year, instead of in periodic increments. Israel is allowed to spend about one-quarter of the military aid for the procurement in Israel of defense articles and services, including research and development, rather than in the United States.
Finally, to help Israel out of its economic slump, P.L. 108-11, April 16, 2003,
provided $9 billion in loan guarantees over three years, use of which has since been extended to 2008. As of July 2005, $4.9 billion of the guarantees remained unused.
