* Pentagon chief Hagel visits Mideast ally next week
* Israel says austerity drive hurts combat readiness
By Dan Williams
JERUSALEM, May 9 Budget-strapped Israel is
pressing the United States to conclude a deal extending defence
aid beyond 2017, when Washington's current $3 billion annual
payouts to its Middle East ally expire, officials said on
They said a swift agreement on future U.S. grants would help
Israel's military draft a five-year austerity plan accommodating
Prime Minister Benjamin Netanyahu's conservative government.
"It's difficult to budget into 2018 and 2019 without knowing
what funds will be available," an Israeli defence official said.
U.S. Secretary of Defence Chuck Hagel will visit Israel next
week and the future aid will probably be raised by his hosts,
according to a different official who declined to be identified
by name or nationality.
The previous Republican administration signed a 10-year deal
with Israel in 2007 granting it $30 billion, most of it going on
American defence products.
U.S. President Barack Obama, a Democrat, has sparred with
Netanyahu over Iran's nuclear programme and peacemaking with the
Palestinians. But support for Israel's security remains strong
in Washington - even as policymakers there slash spending on a
range of U.S. military programmes.
"Our two nations are forever bound by our shared history and
our shared values, and every American dollar spent on Israel's
security is an investment in protecting the many interests that
our nations share," U.S. National Security Adviser Susan Rice
said on Friday, concluding three days of consultations in
Israel's Defence Ministry and the U.S. embassy in Israel
declined comment on the aid negotiations, which are under way.
INCREASED FUNDING SOUGHT
A U.S. official briefed on the talks and who spoke on
condition of anonymity said Israel was seeking an overall
increase to between $3.2 billion and $3.5 billion a year, while
the Obama administration had spoken of $2.8 billion.
The allies would probably settle on $3 billion "or
thereabouts," the official predicted, adding that Israel "wants
to get this worked out as soon as possible".
Israel's defence budget of around $14.5 billion has been
challenged by Finance Ministry demands to cut $870 million.
Netanyahu's security cabinet in December separately approved a
$930 million boost to the defence budget, but the military says
it needs more to contend with proliferating regional threats.
"We cannot bridge this budget rift," Defence Minister Moshe
Yaalon told Israeli lawmakers on Wednesday. "There has been a
mortal blow to training, to readiness and to fitness."
A senior Israeli military officer said the belt-tightening
had put the brakes on David's Sling, a missile interceptor
developed jointly with U.S. firm Raytheon Co. and which
is being considered for purchase by Poland as it accelerates its
defence preparations in response to the Ukraine-Russia standoff.
David's Sling could be operational in Israel in a year, the
officer told reporters on Thursday - but only if more funds were
found. "The moment you don't have the money, you pull back on
the development and on getting the kit in the field," he said.
In addition to the annual defence grants, Washington has
separately helped bankroll Iron Dome, a shorter-range Israeli
rocket interceptor system already deployed. Rice put the amount
of U.S. funds earmarked for Iron Dome at nearly $900 million.
(Editing by Mark Heinrich)