October 30, 2018 / 4:33 PM / 15 days ago

Israel, Boeing sign reciprocal spending deal: ministry

FILE PHOTO: An Israeli F-15 fighter jet takes off during an exercise dubbed " Juniper Falcon", held between crews from the U.S and Israeli air forces, at Ovda Military Airbase, in southern Israel May 16. Picture taken May 16, 2017. REUTERS/Amir Cohen/File Photo

JERUSALEM (Reuters) - Boeing (BA.N) has agreed to spend billions of dollars in Israel over the coming decade if it wins major defense contracts, Israel’s Economy Ministry said on Tuesday.

The “reciprocal procurement” agreement calls for Boeing to collaborate with Israeli industries for at least 35 percent of the value of any transaction it signs with the Israeli government.

This could ease concerns in Israel over new requirements in a U.S. aid package that divert funds away from local industries.

Boeing is competing in Israel for a number of key Defence Ministry contracts, including the purchase of additional F-15 aircraft, fueling planes and a squadron of transport helicopters, the ministry said.

With Israel expecting to make about $10 billion of military purchases from Boeing over the next decade, the agreement with the U.S. aerospace company means $3.5 billion in new business in Israel, the ministry said in a statement.

“A reciprocal procurement agreement of this magnitude is a significant achievement that will lead to the growth of many companies in the economy, increase their activity and also their success in international markets,” said Economy Minister Eli Cohen.

Under a defense aid deal signed in 2016 by Israeli Prime Minister Benjamin Netanyahu and then U.S. President Barack Obama, the United States agreed to provide Israel with $38 billion in military assistance over 10 years.

However, one component of the deal was to phase out a special arrangement that had allowed Israel to use 26.3 percent of the U.S. aid on its own defense industry instead of on American-made weapons. All the aid will now have to be spent on U.S. equipment by 2026.

Reporting by Ari Rabinovitch; Editing by Adrian Croft

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