SHARMINI PERIES, TRNN: Welcome to the Real News Network, Im Sharmini Peries coming to you from Baltimore.On Tuesday, a new report was released by the Israel based human rights organization B’Tselem. The report criticizes Israels investigations into the killing of nearly 1,400 Palestinian civilians during the 2014 war on Gaza. This comes days after the United States and Israel signed a historic agreement granting Israel the largest military aid package in history. Today were going to take a continuing look into the agreement with political economist Shir Hever. Shir is a researcher for the Alternative Information Center based in Jerusalem [inaud.]. He joins us today from Germany. Thank you for joining us Shir. SHIR HEVER: Thanks for having me Sharmini.PERIES: Shir as you know weve been covering this MOU between Israel and the United States in a few interviews. The one that is on our site today with Larry Wilkerson as well as the agreement was signed we did an interview with Rania Khalek and Phyllis Bennis and I understand you would like to respond to some of the claims that were made but mainly something that Larry Wilkerson said in his interview that this was the largest aid package ever signed between Israel and the United States and also that Israel is a strategic liability to the US. Those two claims you wanted to address so please do.HEVER: Right so I think this aid agreement is very important and very telling about the development in the relations between Israel and the United States. The claim that this is the largest aid packet that Israel has ever received is nominally true but in real terms its actually not true because if we imagine what wouldve happened if the US wouldve kept this aid to Israel constant since 1973, not increased it but just kept it up to inflation, then today the aid wouldve been 16 billion dollars a year. Now instead the United States signed a deal with Israel for 3.8 billion dollars a year. 3.8 is more in nominal terms than the 3 billion that Israel received back in 1973 but its purchasing power is less than a quarter of what it was back then. I think that means there is an erosion in the aid and I think we can learn a lot form this ongoing erosion. What exactly is changing in the relation of the two countries. The main thing to understand is there is actually not one hegemonic interests in the US side and not one hegemonic interest on the Israeli side.PERIES: And what do you mean by that? Who else has interest in this MOU?HEVER: This brings me to the second argument that was made by Lawrence Wilkerson that Israel is a strategic liability for the United States. Its a strategic liability for the United States military of course and for US foreign policy in the Middle East. That I completely agree. But for the US military industry, military industrial complex, the arms companies, Israel serves a very important role because they test and demonstrate the effectiveness of US weaponry and this is what the aid is about. It means that the United Sates gives Israel weapons. Its a massive subsidy of the US taxpayers to the US arms companies which then sell their weapons at full price but the moneys paid by US tax payers. The weapons are used against Palestinians, against Syrians, against Lebanese by the Israeli military and then the US companies can learn from that and improve their weapons and also market them for better and so on. So for that, Israel is not a strategic liability but actually to borrow a term by Andrew Feistein a scholar of the arms industry, it turns Israel into the US shop window. So when customers of US weaponry want to see how US weapons function, they look at Israel and what Israel is doing with these weapons.PERIES: And while this is somewhat of a subside for the US military industrial complex, the political consequences to this decision to Israel in terms of eliminating subsidies for the Israel arms industry has great implications. Explain that tell us more about the consequences and the implications it will have.HEVER: Yea one Israeli journalist in [inaud.] was actually written that MOU is a way for President Obama to have this revenge on Netanyahu. Actually delivering a terrible deal and a humiliating deal that Netanyahu suffers from and indeed there is a lot criticism in Israel about this deal because of 3 points. The first point is indeed what I mentioned that in real terms the aid is not actually increasing. The second point is that theres a clause in the term that makes it impossible for the Israeli government to seek additions when theres a certain need and to appeal directly to congress in order to ask for more money. So they sign the deal and they take it as it is and only under extreme emergencies can they an extra request and they have to give them money back. So actually the aid is very clearly delineated. The third point which I think is the most important is that the Israel arms industry and that one is excluded from the aid deal. Now Israel is the large recipient of US military aid in the world. There is no contesting that. But Israel also has a privilege that no one other country in the world has. They can use a portion of that aid to finance their own arms industry. That means that a lot of companies in Israel are actually developing weaponry and other combat system which are designed to be used by the Israeli military but knocked some directly by the US military defense but rather through the  from the United States. This is a privilege that applies to 26% of the aid and Israel is the only country in the world that has that privilege. And that privilege is going to be revoked. And when Obama started the negotiations with Israel about the aid package and of course there was some expectation that the United States was going to increase aid as a kind of compensation for the [Iran] ordeal. Then President Obama made this comment. He said this privilege of the 26% that Israel can use for its own arms industry has to be canceled for the mutual interest of both sides. I think this is a very cynical statement. I think it was completely understood that its not a mutual interest of both sides. Its only in the interest of the US arms companies that this privilege will be revoked. And for the Israeli military industry this is a threat to their very existence. Something that of course I dont mourn that Israeli arms companies are at threat of disappearing. Of course I think that it would be a very good thing if Israel would stop producing weapons and exporting them. But one must understand that within the Israeli political system, the arms industry is extremely important. Theres no other country in the world with arms industry so important to the economy as it is for Israel. And thats where we see a very interesting development within Israel that in this part of the economy and that part of the political sphere which is completely funded by the US aid and by the arms exports and the wars is now receiving a terrible blow. Theres no coincidence that shortly after President Obama made that statement that its in the interest of both sides to revoke the privilege that Netanyahu fired his Minister of Defense, Moshe Ya’alon who was very deeply embedded within that Israel security elite of the big arms manufacturers. So he was kicked out. Instead Netanyahu appointed a defense minister Avigdor Lieberman who is now part of that elite who is now tighter and who doesnt care so much whos going to be the leaders of the arms industry and hes trying to push his own people there but he doesnt promote people from inside the industry. As Netanyahu is now fighting to get rid of that influence of that military class, the military elite inside Israel and to push them out of political decision making process, the new MOU package means that this security elite is actually going to lose the branch that theyre sitting on. Theyre going to lose their main source of income when the US will cut out that privilege. PERIES: Now Shir theres another component to this that is rather interesting that this is a 10-year agreement. What implications does that have? I mean does President Obama obviously want to lock in this deal for 10 years? HEVER: The implications are first of all that no matter how the inflation in the United States is going to be and how much the dollar is going to lose its value, Israel cannot get more than 3.8 billion dollars a year. Second it means that during those 10 years the Israeli government is prevented from making appeals to the US government for extra aid. Thats not a small thing because if we look at the last couple of years, every year Israel made special appeal to the US congress asking more money for missiles or for anti-missile systems and so on. All these projects were kind of ways for pro-Israeli mainly republican congress people and senators to show their support for Israel by spending a few millions there, a few hundred millions over here and thats got to be stopped for the next 10 years. Thats going to be prevented and Senator Graham has already made a statement to Netanyahu, how could you do this to us. How could you sign a deal that makes it impossible for us in the senate to show our support for Israel. And the third thing about such a long term agreement is that it allows this phasing out of Israeli special privilege to be spread out gradually. Not being one blow. So that means that politically it gives Netanyahu some time before the full ramifications of his decision are going to be felt and I think Netanyahu is really counting his days in office and really trying to make sure that he can get as many as possible and stay Prime Minister for as long as he can so if this is phased out hes hoping maybe there wont be mass layoffs and thousands of new unemployed people from the arms industry in Israel on his watch when hes Prime Minister.PERIES: And further we should note that Netanyahu had actually asked for 50 billion dollars in aid but got 39 over 10 years. HEVER: Yea Netanyahu actually played a very interesting political trick with this 50 billion. Because what he did was he told the senior negotiators from the military industry, his big generals and arms manufacturers and he told them that you should go wild. Ask for whatever you want. Maybe the most outrageous demands of the US knowing full well that theyre not going to get their wish. But this way he can shift the blame a little bit on them and make their demands even reasonable and hes trying to sell the Israeli public on this idea that he somehow got a good deal from the US when I think that its quite clear that he didnt get a good deal at all.PERIES: Alright Shir. I thank you so much for your analysis and were looking forward to having you back very soon.HEVER: Thank you very much.PERIES: And thank you for joining us on the Real News Network.