ABSTRACT
Superpower rivalry in the Middle East, coupled with other political or military considerations, has contributed over the years to the strengthening of US-Israeli relations. Since its establishment, Israel has had to allocate a significant portion of its economic resources to defence. Investigation of the impact of defence expenditures is essential in order to have a better understanding of the Israeli economy over the years, and to assess the actual importance of US assistance to Jerusalem. An examination of the Israeli balance of payments indicates a continuous reliance on foreign trade, in order to acquire additional resources to the economy, which has played a crucial role in its development and in securing growth in real income per capita. The American contribution to Israel included, in addition to diplomatic support, expanded arms supplies as well as promises of economic assistance.
