The Reagan administration yesterday confirmed its commitment to ease the financial pain of Israel's decision to cancel the controversial Lavi fighter plane project, according to U.S. and Israeli officials.
Secretary of State George P. Shultz told Israeli Finance Minister Moshe Nissim in a letter that the administration would support earmarking $450 million of Israel's annual $1.8 billion U.S. military aid budget for the Lavi, to pay termination charges in contracts with U.S. and Israeli companies working on the plane.
The Israeli cabinet voted narrowly recently to kill the fighter -- funded almost totally by U.S. aid -- because it threatened to crowd out other needed arms purchases. Hundreds of Israeli aerospace workers demonstrated against the decision. And cabinet member Moshe Arens, a former ambassador to the United States and father of the project, resigned in protest.
Shultz told Nissim, officials said, that the administration also will try to increase $100 million to $400 million a year the unique authority Israel has to use part of its U.S. aid money to buy Israeli products.
In addition, Shultz told Nissim the administration will continue to allow Israel to require U.S. defense contractors to buy $150 million a year in Israeli products to "offset" the cost.
In the usual case, offsets are permitted only for countries that pay cash for U.S. arms. Critics of the Israeli program, which was to be phased out this year, say that there is nothing to "offset" because Israel is using U.S. aid money, not its own, to make defense purchases here.