ABSTRACT
Economics and national security are closely intertwined. Together with military, technological and manpower capability, a country's economy is an important component of its overall power. Unlike the situation in the other industrialized countries, however, developments in the global oil market after 1973 claimed an additional 10 percent of Israel's GNP due to the changes brought about in the regional strategic balance which compelled Israel to increase its defense spending. The drop in the defense spending portion of the Israeli GNP from 30 percent to 22-25 percent can be explained to a considerable extent with reference to the recent change in Israel's strategic situation — i.e., the peace treaty with Egypt. Economic warfare has always been an integral part of the Arab states' overall strategy in their struggle against Israel. In the past, Arab leaders believed that weakening Israel's economy would facilitate its defeat by undermining the country's overall posture.
