{"id":34055,"date":"2024-01-26T17:55:58","date_gmt":"2024-01-26T17:55:58","guid":{"rendered":"https:\/\/one.sightlinemg.com\/federaltimes\/uncategorized\/2024\/01\/26\/special-aid-tool-for-israel-approved-for-taiwans-use-but-not-ukraine\/"},"modified":"2026-08-08T01:02:12","modified_gmt":"2026-08-08T01:02:12","slug":"special-aid-tool-for-israel-approved-for-taiwans-use-but-not-ukraine","status":"publish","type":"post","link":"https:\/\/one.sightlinemg.com\/federaltimes\/congress\/2024\/01\/26\/special-aid-tool-for-israel-approved-for-taiwans-use-but-not-ukraine\/","title":{"rendered":"Special aid tool for Israel approved for Taiwan\u2019s use, but not Ukraine"},"content":{"rendered":"\n

WASHINGTON \u2015 President Joe Biden\u2019s foreign aid request for Ukraine, Israel and the Indo-Pacific remains stalled on Capitol Hill, inhibiting funding for a unique mechanism that could help U.S. allies and partners build up their own defense industries.<\/p>\n\n\n\n

Until recently, Israel was the only country with a special privilege called offshore procurement, which has allowed it to use a portion of its Foreign Military Financing, or FMF, grants to invest in its own defense-industrial base instead of purchasing weapons from U.S. defense contractors as other recipients are required to do.<\/p>\n\n\n\n

Congress approved offshore procurement for Taiwan FMF more than a year ago, hoping to replicate the Israel model and help Taipei grow its on-island production lines as it seeks to deter a possible Chinese invasion. The roughly $110 billion foreign aid bill stalled in Congress<\/a> would allow Israel and Taiwan to use Foreign Military Financing for offshore procurement, but it does not extend those privileges to Ukraine or eastern European allies impacted by the war.<\/p>\n\n\n\n

\u201cWe need to build production capacity there; we need to build it here,\u201d said Brad Bowman, the senior director of the Center on Military and Political Power at the hawkish Foundation for Defense of Democracies, noting offshore procurement can help friendly countries make their defense industries more self-sufficient.<\/p>\n\n\n\n

\u201cWith applications to Ukraine, Israel and Taiwan, we want to make the defense-industrial base in each of those three beleaguered democracies as healthy and robust as possible in order to meet their respective military requirements while first prioritizing the U.S. defense-industrial base,\u201d said Bowman. \u201cBut the second brush needs to be that we are doing everything we can in our defense-industrial base to create additional defense-industrial capacity to help our beleaguered democratic partners because this is a wise investment and not charity.\u201d<\/p>\n\n\n\n

Taiwan<\/h2>\n\n\n\n

When Congress approved up to $2 billion per year<\/a> in FMF for Taiwan in the fiscal 2023 National Defense Authorization Act, it made 15% of that amount eligible for offshore procurement.<\/p>\n\n\n\n

\u201cThe comparison to Israel was brought up in the policy discussions saying, \u2018Look, we\u2019ve had success with using our FMF for Israel\u2019s domestic defense industry, we should do the same for Taiwan. We made the argument it\u2019s even more relevant because of this need for on-island protection,\u201d said Josh Paul, the former congressional affairs director at the State Department\u2019s Bureau of Political-Military Affairs.<\/p>\n\n\n\n

\u201cThat\u2019s something the administration supported with the theory being that we want Taiwan to build its on-island capacity to produce munitions because in some Taiwan contingencies, you can imagine a scenario where it\u2019s hard to get stuff to the island,\u201d Paul told Defense News.<\/p>\n\n\n\n

Most FMF grants and loans allow the recipient countries to buy weapons from U.S. defense companies via the Foreign Military Sales process. Allowing Taiwan to use FMF money on its own defense industry could help relieve the roughly $19 billion Foreign Military Sale backlog<\/a> partially caused by U.S. defense-industrial base constraints<\/a>.<\/p>\n\n\n\n

Eric Gomez, a senior fellow at the libertarian Cato Institute, said offshore procurement is \u201ca good idea for trying to get countries like Taiwan to develop their defense industry on their own.\u201d Still, he pointed to discussions on Capitol Hill and the State Department about whether FMF is \u201cappropriate\u201d for Taipei given the island\u2019s estimated $800 billion GDP for 2023.<\/p>\n\n\n\n

Concerned about placing additional strain on the State Department\u2019s base budget<\/a>, congressional appropriators opted to fund Taiwan FMF as loans instead of grants for FY23<\/a>. The State Department obligated $80 million in Taiwan FMF in August. If Congress passes the foreign aid bill, much of the $2 billion in Indo-Pacific FMF is expected to go toward Taiwan.<\/p>\n\n\n\n

\"\"
Visitors stand on the booth of the Israeli defense technology company Israel Aerospace Industries (IAI) at the Eurosatory international land and airland defence and security trade fair, in Villepinte, a northern suburb of Paris, on June 13, 2022. (Photo by Emmanuel DUNAND \/ AFP) (Photo by EMMANUEL DUNAND\/AFP via Getty Images)<\/figcaption><\/figure>\n\n\n\n

Israel<\/h2>\n\n\n\n

Roughly half of the State Department\u2019s annual FMF budget, or $3.3 billion, goes to Israel each year. Israel had historically been allowed to use a quarter of its FMF for offshore procurement on its own defense contractors instead of U.S. companies, which FMF recipients are generally required to buy from.<\/p>\n\n\n\n

The $38 billion, 10-year memorandum of understanding with Israel signed under the Obama administration gradually phases out its offshore procurement privileges through 2028. The offshore procurement privileges for Israel\u2019s annual $3.3 billion in FMF is slated to drop from more than 20% in FY24 to less than 15% in FY25, according to the Congressional Research Service<\/a>.<\/p>\n\n\n\n

However, the Senate\u2019s foreign aid bill allows Israel to spend 100% of its extra $3.8 billion in FMF on its own defense contractors instead of U.S. companies, while taking the unusual step of waiving the standard congressional notification requirements. Paul noted this push came from the White House\u2019s Office of Management and Budget, or OMB, after Hamas\u2019 Oct. 7 attack on Israel.<\/p>\n\n\n\n

\u201cThis was a point at which we were putting together a rushed supplemental,\u201d said Paul. \u201cThe push from OMB was not only use all the available authorities, but we need to come up with any new authorities as well just to show that we can do everything in our power to be supportive of Israel.\u201d<\/p>\n\n\n\n

Paul, who resigned to protest the civilian death toll in Gaza in October as the Biden administration assembled the supplemental<\/a>, noted offshore procurement in Israel has helped it build an industrial base that sometimes competes with U.S. defense contractors.<\/p>\n\n\n\n

\u201cThis has been a very major subsidy for major companies like Rafael, Elbit or IAI as they sort of invest in themselves to grow their own capabilities to the point where they\u2019re now a top 10 global defense exporter, particularly in fields such as unmanned aerials systems, including one-way UAS and a lot of other electronic military intelligence systems,\u201d said Paul.<\/p>\n\n\n\n

Still, Bowman said \u201cthere\u2019s no scenario where I think Israel will become fully independent in its defense-industrial base.\u201d<\/p>\n\n\n\n

Bowman argued Israel \u201cshould focus\u201d on developing \u201cthe systems they would have problems getting in a future war with Hezbollah in Lebanon.\u201d He noted this would reduce Israel\u2019s dependence on Washington since some Democrats have called for conditioning its military aid<\/a> <\/a>amid human rights concerns.<\/p>\n\n\n\n

\"\"
Ukrainian welders of the 24th Brigade work at a workshop for repairing military vehicles, in the Donetsk region, on January 25, 2024, amid the Russian invasion of Ukraine. (Photo by Roman PILIPEY \/ AFP) (Photo by ROMAN PILIPEY\/AFP via Getty Images)<\/figcaption><\/figure>\n\n\n\n

Ukraine and Europe<\/h2>\n\n\n\n

There is no authorization to use offshore procurement for Ukraine FMF, and Biden\u2019s foreign aid spending request didn\u2019t ask for it. The current bill includes $1.7 billion in FMF for Ukraine and countries impacted by the war.<\/p>\n\n\n\n

The majority of FMF appropriated in previous Ukraine aid packages has gone to European countries impacted by the war rather than Kyiv, which has received the bulk of its U.S. support from direct weapons transfers from U.S. stockpiles and longer-term assistance via the Ukraine Security Assistance Initiative.<\/p>\n\n\n\n

Gomez said there\u2019s less need to give NATO members offshore procurement because they already have appropriate defense-industrial capacity. \u201cIt\u2019s just that they don\u2019t spend enough money on it.\u201d<\/p>\n\n\n\n

Biden and Senate Minority Leader Mitch McConnell, R-Ky., have touted the fact that most military assistance in the foreign aid supplemental goes to U.S. defense contractors, arguing it spurs job creation.<\/p>\n\n\n\n

In Ukraine, the Biden administration has sought to help Kyiv build its defense systems in-country with the Commerce Department hosting a U.S.-Ukraine defense-industrial base conference in December. Lockheed Martin and Raytheon signed a memorandum of understanding in September to produce Javelin anti-tank missiles in Ukraine.<\/p>\n\n\n\n

\u201cAnother big difference between Ukraine and Taiwan is the active conflict in Ukraine,\u201d Gomez added, noting one of the problems for offshore procurement in Ukraine is the question of whether its \u201cdefense industry can be survivable enough to produce things.\u201d<\/p>\n\n\n\n

President Volodymyr Zelenskyy has warned Ukraine could lose the war<\/a> if Congress does not pass the foreign aid spending bill, and it\u2019s unclear how Congress and the State Department will pay for FMF for Taiwan without the supplemental.<\/p>\n","protected":false},"excerpt":{"rendered":"

Taiwan can now use U.S. aid to grow its own defense industry, a benefit only Israel has had before. 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