Israel, Boeing Sign Multibillion Dollar Reciprocal Spending Deal

Boeing has agreed to spend billions of dollars over the coming decade in Israel in the event that it is awarded major defense contracts by Tel Aviv.

The “reciprocal procurement” agreement says Boeing will collaborate with Israeli industries for at least 35 percent of the value of any transaction with the Israeli government. Boeing is vying for several crucial Defense Ministry contracts, such as the purchase of additional F-15 aircraft, fueling planes and transport helicopters, Israel’s Economy Ministry said on Tuesday, Reuters reported.

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Israel expects to make about $10 billion worth of military purchases from Boeing over the next decade, which would translate to the company investing about $3.5 billion in Israeli businesses, the ministry added.

The agreement would not only benefit the US aerospace company but also could placate Israel regarding requirements in a US aid package which diverted the use of US funds away from local Israeli businesses. “A reciprocal procurement agreement of this magnitude is a significant achievement that will lead to the growth of many companies in the economy, increase their activity and also their success in international markets,” said Israeli Economy Minister Eli Cohen.

Under the terms of an official deal between the US and Israel signed in 2016 by Israeli Prime Minister Benjamin Netanyahu and then-US President Barack Obama, the United States government agreed to provide $38 billion in military assistance to Israel over the decade. However, that agreement phased out a stipulation which had long allowed Israel to use 26.3 percent of US military aid for purchases from its own defense industry instead of buying American-made weapons. Thus, all $38 billion of the deal will have to be spent on US equipment by 2026.

Israel’s new deal with Boeing will partially offset its domestic industry losses from that change.