Why More of Israel's Iron Dome Will Be Made in the U.S.

The Iron Dome air-defense system fires to intercept a rocket over the city of Ashdod on July 16 in Ashdod, Israel Photograph by Ilia Yefimovich/Getty Images

Most of the funding for Israel’s highly effective Iron Dome rocket-defense system has come from the U.S. In exchange for more funds, the Pentagon is now requiring Israel to buy more of the parts of the missile-defense system from American contractors, including Raytheon.

The Senate Appropriations Defense Subcommittee approved on Tuesday a draft 2015 defense spending bill that would double—to $350 million—current levels of U.S. funding of Iron Dome. The full appropriations panel will consider the bill on Thursday.

Iron Dome has saved the lives of Israelis by exploding Hamas rockets in the air before they have a chance to land and deliver their lethal payloads. I saw the interceptors in action during a recent vacation in Israel.

But countering the spray of rockets from Gaza is using up a lot of Tamir interceptor missiles. Israel is getting supplementary funds from the Defense Department to replenish its inventory of interceptors and to build new mobile launch batteries. Meanwhile, the quid pro quo of more U.S. sourcing is starting to go into effect.

As Bloomberg’s Tony Capaccio reported in May, before the latest barrage of rockets from Hamas:

“The Israeli government has agreed to spend more than half the funds the Pentagon provides for its Iron Dome system in the U.S., bolstering the political appeal of the missile-defense system in America.”

July 17 (Bloomberg) -- Retired Israeli Brigadier General Danny Gold discusses the Iron Dome missile-defense system which he helped develop. He talks with Elliott Gotkine in Tel Aviv on Bloomberg Television's "The Pulse." (Source: Bloomberg)

A report to Congress by the U.S. Missile Defense Agency, a report Bloomberg News obtained at the time, said funds going to U.S. contractors for components of Iron Dome will jump to 30 percent this year and 55 percent next year. That’s up from just 3 percent in the past.

Raytheon, which is in Waltham, Mass., is the world’s biggest missile maker. It’s under contract with Iron Dome’s Israeli maker, government-owned Rafael Advanced Defense Systems, to find suitable U.S. suppliers, the Missile Defense Agency said in the report.

Israel has expressed concern that sourcing parts in the U.S. could cost more. So there’s a provision allowing production of any part to revert to Rafael if its U.S. price exceeds what it would cost to make in Israel by 5 percent or more, according to the documents.

Foreign Policy magazine reported on its website Tuesday that House committee members have “a long list of questions for the Israelis about how they plan to spend the money” and won’t turn over the funds until the questions are answered to the satisfaction of the Pentagon’s Missile Defense Agency. It said that’s not expected to be a problem.

Israel gets more military funding from the U.S. than any other nation. It’s also allowed to spend more of it on non-U.S. sources than other recipient nations. A Congressional Research Service report in April said that the U.S. had provided more than $700 million to Israel for Iron Dome. The latest bill would lift that to about $1 billion.

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