Those Who Dislike US Iraq Subsidies Should Look at the Israel Dole

Those Who Dislike US Iraq Subsidies Should Look at the Israel Dole
by Stephen Glain
The National 08/12/08

This week, Congress indulged in some populist Arab-bashing when it was revealed that high oil prices could earn the Iraq government a budget surplus of US$50 billion (Dh183.6bn) this year. How scandalous, declared US lawmakers, that American taxpayers should be subsidising Iraq's post-war reconstruction when the Iraqis are perfectly capable of financing it themselves.It's a fair point, on its own. But it overlooks the central role subsidies have played in the annals of Middle East occupation and empire. The Ottomans funded a complex web of subsidies for their clients in the Middle East, an arrangement that preserved economic and political stability for generations until the sultanate collapsed nearly a century ago. The Roman emperor Heraclius, bankrupt from war with Persia, withheld his annual payout to Christian tribal leaders in Syria, who responded by allying themselves with the Muslim armies in driving out the rum.

But the treasure divvied out in the Middle East by imperial powers over the millennia is dwarfed by the mother of all Middle East subsidies: the Israel dole, a golden calf of American military aid, humanitarian assistance, and low-interest loans that are forgiven before the checks even clear. Washington has tossed an estimated $85bn at the Jewish state since the 1978 Camp David peace accords in annual allotments that average between $3bn to three or even four times that much, a handout that enables Israel to subsidise its own micro-empire on Palestinian land.

It's a peculiar kind of philanthropy; Israel, the largest Levantine economy as measured by per-capita income - $22,600, the world's 25th highest - is also the world's largest recipient of American aid.Once a socialist slug, Israel has revived its economy into a free-market thoroughbred. The country's industrial base, particularly its defence and security sectors, is world class. The Israeli military commands a qualitative advantage in symmetrical warfare that its neighbours could never hope to challenge. (Israeli armies, contrary to the "David vs Goliath" conceit, have never once been outnumbered on the battlefield, owing to their robust deployment, or "lift" capability.) Israel's capital markets are liquid and efficient, its roads, ports and highways first rate.

Despite this, both Washington and Tel Aviv insist on treating Israel like a fragile, mendicant state. American legislators who celebrate Friedrich Hayek, the 20th century libertarian economist, grope for any opportunity to distort Israel's economy and politics with free money. Washington's minimum annual dollop of $3bn - handed over in one lump sum in the first month of the fiscal year rather than in four quarterly instalments the way the balance of US aid is allocated - is only the most direct form of assistance.

Tucked inside obscure bits of legislation and memoranda of understanding are earmarks that guarantee Israel preferential trade status akin to Canada and Mexico while allowing it defence technologies denied to close US allies.Every year or so, Washington will unveil a package of new weaponry to preserve Israel's quantitative military edge. (It has its own acronym - QME - an indelible seal of permanence in imperial Washington.) Last January, for example, when the White House announced an arms deal for its Gulf allies worth $20bn over 10 years, it tossed in an extra $30bn for the Israeli Defense Force.

There have been calls for restraint. In the early 1990s, George HW Bush struggled to delay loan guarantees to Israel as a hindrance to the peace process in the face of a recalcitrant Congress. Ephraim Sneh, a retired general and prominent leader of Israel's Labor Party, has argued plaintively that excessive US aid creates an unhealthy dependence and slows his country's defence sector. Washington, meanwhile, continues to woo Israel and its supporters with an aid giveaway that most American taxpayers know little about. Powerful US players have a stake in this scheme; farmers sell a fortune in produce to Washington, which gives it to Egypt in return for its peaceful relations with Israel.

Defence contractors have made billions of dollars from US military sales to Israel while enjoying an effective veto power over its aerospace companies as potential competitors. When Israel wanted to develop its own fighter jet in the 1980s, America's own highly subsidised defence contractors manoeuvred to kill it - proof that there are constituencies in Washington more powerful and pernicious than the pro-Israel lobby.

There was nothing necessarily wrong about US lawmakers piling on the Iraqis for hoarding some of their windfall oil profits at a time when the bill for Iraqi reconstruction is nearly $50bn. (Some legislators even demanded American taxpayers be refunded from the Iraqi treasury - a nice election-year touch.) If anything, it was a reminder of how easy it is for imperial powers in the Middle East to ensnare themselves in their own web of subsidies, be they unintended or self-inflicted.