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The cost of war and the benefits for Israel

2023-12-06 12:58

Issam Khoury

#MiddleEastTensions , #IsraelHamasConflict , #IsraeliEconomy2023 , #USForeignAid , #DefenseSpendingAnalysis , #GeopoliticalEconomics , #MilitaryFinances , #IsraelGDPInsights , #GlobalMilitarySupport , #HamasImpact , #IsraeliDefenseStrategy , #EconomicResilienceIsrael , #StrategicAidAnalysis , #IsraelUSPartnership , #ConflictCostAnalysis,

The cost of war and the benefits for Israel

"Israel's 2023 economic resilience and military aid in response to Hamas attack, highlighting US support and defense spending."

The Israeli Minister of Finance, Bezalel Smotrich, announced on October 19, 2023, that his government is preparing a large and comprehensive aid package for those affected by the Hamas attack. This aid package is said to be bigger and wider than the assistance provided by the Israeli government during the COVID-19 pandemic[1].


The Israeli economy is robust and can support multiple aid packages for its citizens who have been impacted economically or displaced due to the evacuation of settlements by Israeli authorities in Gaza or near the Israeli-Lebanese border. In 2023, the Israeli Gross National Product (GDP) reached around $521.69 billion[2].


The Israeli economic newspaper, Calcalist, estimated that the approximate cost of the war, if it continues for 8-12 months, would be 200 billion shekels[3], which is about $51 billion. This amount is less than 10% of the total national income. It should be noted that this statistic does not include the amount of money provided by civil organizations from various countries worldwide. Many active organizations in the United States and Europe have initiated online platforms for donations to assist the Israelis affected by the Hamas attack.


Furthermore, the statistic from Calcalist does not include the financial aid coming from supportive governments to Israel. President Joe Biden requested approval from Congress for a $106 billion aid package[4], of which $14.3 billion is allocated for Israel. However, the Republican-dominated House of Representatives passed another bill on November 2, 2023, providing a $14.5 billion[5] aid package for Israel, thus avoiding the amount of money that will be sent to Ukraine, estimated at $61 billion, as proposed by President Biden.


From here, we understand that both Republicans and Democrats are united in their material, military, and logistical support for Israel. The proposed $14.5 billion from the United States represents 27% of the estimated cost of the war, as reported by Calcalist newspaper. It is likely that this financial package will be followed by further financial support, as seen in the case of Ukraine.


Additionally, Israel receives $3.3 billion annually from US foreign military financing programs, as well as $500 million for research, development, and deployment of missile defense systems such as Iron Dome, from fiscal year 2019 to fiscal year 2028. All these numbers will benefit the Israeli Ministry of Defense, meaning that the United States alone is responsible for funding 35% of the cost of the war.


According to statistics from Global Fire Power[6], Israel is ranked 18th in military strength, with a defense budget of $24.3 billion. Undoubtedly, a significant portion of this budget will be included in the current ongoing war costs in Gaza, accounting for 47.6% of the estimated cost of the war according to Calcalist newspaper.


However, if we examine the numbers assumed by Calcalist newspaper, we can see that the estimated cost of the war, amounting to $51 billion, includes the following expenses:


  • Financial losses in terms of revenue range between $10 billion (40 billion shekels) and $15 billion (60 billion shekels).


  • Compensations for affected companies range between $4.25 billion (17 billion shekels) and $5 billion (20 billion shekels).


  • Rehabilitation of damaged infrastructure ranges between $5 billion (10 billion shekels) and $5 billion (20 billion shekels).



Therefore, the $25 billion will not be part of the expenses for the military war, but rather included in the financial compensations for the affected. This indicates that the budget of the Israeli Ministry of Defense alone is capable of covering the cost of the military war. The additional funds received from the US and supporting countries will be used to enhance the vitality and capacity of the Israeli army in the event of an expanded armed conflict that reaches the northern front with Hezbollah.



From this perspective, we can see the realistic statements of the Israeli Minister of Finance, especially if Israel emerges victorious in this war and takes the initiative to rebuild Gaza in cooperation with the international community and financial donors. This reconstruction will contribute to revitalizing the economy for both the Palestinian and Israeli sides.




[1] Israel's war economic aid package to be bigger than during COVID -Fin Min/ Reuters/October 19, 2023



[2] An Overview of Israel’s Economy/ Nasdaq/ NOV 3, 2023


[3] War with Hamas to cost Israel above $50 billion/ the daily star “Calcalist financial newspaper reports”


[4] Biden Requests $106 Billion for Israel, Ukraine, Border/ By Justin Sink/ October 20, 2023



[5] House approves $14.5 billion in assistance for Israel as Biden vows to veto the GOP plan/ Lisa Mascaro, Associated Press/ Nov 02, 2023



[6] 2023 Israel Military Strength/ Israel is ranked 18 of 145 out of the countries considered for the annual GFP review. The nation holds a PwrIndx score of 0.2757 (a score of 0.0000 is considered 'perfect')/ 10/08/2023.

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