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U.S. to phase out economic, boost military aid to Israel


From CNN State Department Correspondent Andrea Koppel and Producer Elise Labott

WASHINGTON (CNN) -- The United States and Israel signed a memorandum of understanding on Friday phasing out economic aid to Israel but increasing U.S. military assistance, Israeli and U.S. officials said.

The memorandum, which officials said "codified agreements made over the last year," was signed by Assistant Secretary of State Edward Walker and Israeli ambassador to the United States David Ivry.

The deal calls for a reduction of civilian assistance by the United States to Israel by 495,120,000 new shekels ($120 million) per year until 2008, at which time the aid will completely cease.

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At the same time, U.S. military aid to Israel will increase by 247,560,000 new shekels ($60 million), reaching 9.9 billion new shekels ($2.4 billion) by 2008.

Israel spends the majority of the aid money on products from the U.S. defense industry, an Israeli official said.

(The deal) "lays out the Clinton administration's views of the shape that U.S. assistance to Israel should take in the coming years," a State Department official said. "It was our desire to capture these understandings before the administration left office."

"These levels are consistent with proposals made previously by the government of Israel and supported by the administration in Congress in the annual appropriations process since (fiscal year) '99," said another U.S. official, who added that the agreement "takes into account the strong economic progress Israel has made" over the last several years.

Although the agreement is non-binding and can be altered by the Bush administration, it is expected to be widely accepted by members of Congress who approve international assistance.

"This memorandum of understanding reflects the unshaken commitment by the United States to Israel's security and to Israel's qualitative edge," Ivry said after the signing. "Only a strong Israel can make peace."

In the 2001 budget, the United States provides 8.17 billion new shekels ($1.98 billion) in military aid and 3.465 billion shekels ($840 million) in economic aid.

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