Two teams of Israeli officials began talks here yesterday about additional U.S. aid for the Jewish state, with Israel expected to ask that its present military assistance level of $1.4 billion be increased next year by $700 million, or by about 50 percent.
That comes on top of indications given during Israeli Prime Minister Shimon Peres' visit here last month that his government probably will seek an additional $1.5 billion in economic aid over two years to battle raging inflation. Such increased amounts would raise Israel's total U.S. aid from $2.6 billion in the present fiscal year to $4 billion or more in fiscal 1986.
Requests of that magnitude pose some potentially difficult choices for the Reagan administration, which is contemplating asking for major budget cuts in domestic spending to reduce the federal deficit.
The Israeli requests also come as the administration, which had deferred several Mideast arms decisions until after the U.S. presidential election, is facing a decision on whether to sell large amounts of tanks, jet fighters, air transports and various kinds of ground-launched and air-launched missiles to Saudi Arabia and Jordan.
The administration is expected to act favorably on most of these requests to keep the moderate Saudi and Jordanian governments allied with U.S. interests in the Middle East. But Israel could then argue that it needs sizable increases in its military aid to maintain its qualitative and quantitative edge over its Arab adversaries.
The Israelis also are expected to contend that the increased influence exerted by radical states like Syria, which has had large infusions of Soviet arms, makes it important to ensure that Israel is the strongest country in the Middle East.
Peres wants to launch a massive program of replacing aging or outmoded Israeli weaponry with newer planes, tanks and missiles. He also has made clear that Israel's economic crisis will not permit this without U.S. help. The Israeli press has reported that Israeli negotiators here this week will propose a 50 percent increase in military aid. Diplomatic sources said yesterday that this is a "well-informed estimate of what the Israelis would like."
However, both U.S. and Israeli officials yesterday turned aside such questions as "premature speculation" about the eventual size and shape of the administration's requests for Israel. Instead, they said, the talks here this week should be regarded as technical, working-level discussions aimed at getting a joint assessment of Israel's needs in the military and economic areas.
One Israeli team is headed by Emanuel Sharon, director general of the Finance Ministry, and will discuss economic questions with U.S. officials led by W. Allen Wallis, undersecretary of state for economic affairs. The other, led by Gen. Menachem Meron, director general of the Defense Ministry, will hold parallel talks on security assistance with William Schneider Jr., the State Department's undersecretary for security assistance.
On the economic side, Israeli sources said the Peres government is putting together its economic recovery program and is not ready to make a specific aid request. Instead, the sources said, the talks here will focus on preparations for convening, possibly next month, the joint U.S.-Israeli economic group established during the Peres visit to address how and where U.S. assistance can be most effective in helping Israel's economic recovery.
The total foreign aid package for Israel in fiscal year 1985 is $2.6 billion: $1.4 billion in security assistance and $1.2 billion in economic aid. In contrast to past years when half the military aid was in the form of loans, the entire $2.6 billion consists of grants that Israel does not have to repay.