http://www.reuters.com/article/2015/03/04/us-usa-israel-missiledefense-idUKKBN0LZ2LI20150304

U.S. budget caps could complicate Israel's missile funding request

By Andrea Shalal

WASHINGTON

Mar 4, 2015

(Reuters) - Mandatory caps due to resume this year for the U.S. defense budget could complicate Congress' ability to honor Israel's request for $317 million in extra funding for missile defense programs on top of $158 million already requested by the White House.

U.S. lawmakers continue to strongly support Israel, but congressional aides said Israel's push for more than $475 million in U.S. funding for missile defense programs in fiscal 2016 could run into trouble if Congress does not ease or rescind budget caps on the overall level of the U.S. defense budget.

"We've been very generous with the Israelis ... but the first step is to see where we are on the budget resolution. Anything else is putting the cart before the horse," said one aide on the U.S. House Armed Services Committee.

Two other aides cited "frustration" about the size of the Israeli request given the current budget uncertainty.

Defense Secretary Ash Carter and other U.S. officials have warned that cutting the Pentagon's proposed 2016 budget by $38 billion to stick to the caps would harm the U.S. military's ability to respond to crises around the world.

It remains unclear if deficit hawks in the Republican-controlled Congress will agree to lift the budget caps.

Israeli officials last week asked lawmakers for $41.2 million for the short-range Iron Dome rocket interceptor, which has already received more than $1.2 billion in U.S. funding, and $268 million for further development of the longer-range David's Sling and Arrow 3 missile defense programs.

They also requested $165 million for initial procurement of both systems, said two aides familiar with the request.

A senior Democratic aide said Israel had shifted its focus from Iron Dome, now a mature system, to completing development of David’s Sling, which defends against cruise missiles.

Depending on what was included, Israel's request was potentially as high as $488 million, the aide said.

The House committee aide said the procurement request would require a new U.S.-Israeli bilateral agreement allowing co-production of the new weapons systems by U.S. and Israeli firms.

"This can't just be a blank check to the Israelis," the aide said.

Raytheon Co is working with Israel's Rafael Advanced Defense Systems Ltd on the Iron Dome and David's Sling programs. The Arrow program is jointly developed by Boeing Co and Israel Aerospace Industries (IAI).

Riki Ellison, founder of the nonprofit Missile Defense Advocacy Alliance, said Congress was likely to approve the request, if the budget caps are lifted, but the funds would be taken from other programs, including Lockheed Martin Corp's Terminal High-Altitude Area Defense (THAAD) program.

John Isaacs, senior fellow at the Center for Arms Control and Non-Proliferation, said one possibility would be for Congress to include the Israeli programs in a supplemental request for war funding, or "overseas contingency operations."

(Reporting by Andrea Shalal; Editing by Diane Craft and Paul Tait)