TEL AVIV, Israel, May 17 (UPI) -- Amid growing concerns about security threats from Syria and Iran, Israeli Prime Minister Binyamin Netanyahu has greatly reduced planned defense budget cuts.
But officials remain worried that Israeli military capabilities will still be weakened.
"The big worry is that we'll have to reduce defense procurements and orders from defense industries," observed Deputy Defense Minister Danny Danon.
Defense contractors "will be the first to get hurt," he said. "If the cut's not gradual over 3-4 years so that defense industries can prepare for it, they will collapse, causing great damage to the economy."
Israel is the most militarized state in the Middle East and the region's sole nuclear superpower, backed by the United States.
"Israel spends more on its military and intelligence establishments, in proportion to its total economy, than almost another nation," U.S. author and journalist Patrick Tyler observed in his 2012 book "Fortress Israel."
"The military alone receives more than 6 percent of annual gross domestic product."
This week, the government reduced a planned cut of $1.1 billion from a defense budget of $16.6 billion to $273 million.
Insiders say that with some innovative bookkeeping the effect of this will be minimal, as is often the case in a state where the military wields more clout than in most Western nations.
Most of the key defense programs are heavily funded by the United States, which provides Israel with $3.1 billion a year in military aid, plus untold billions more in grants, long-term loans and other fiscal measures.
The key programs of the moment, development and production of anti-missile systems, vital to defend Israeli cities from massive bombardment by Iran and its allies, are pretty much covered by U.S. support.
These systems range from the Arrow-3 high-altitude, counter-ballistic missile being developed by state-owned Israel Aerospace Industries and the Boeing Co. of the United States.
Another is David's Sling, a mid-range defense system being developed by Rafael Advanced Defense Systems and Raytheon Co. of the United States.
The air force is to start taking delivery by 2017 of 20 Lockheed Martin F-35 Joint Strike Fighters, deemed the most advanced combat jet in the world, under a $2.76 billion contract.
Eventually the air force wants at least 75 of these jets, valued at $15 billion, to maintain Israel's regional military supremacy.
With defense cuts minimized, and with the $273 million the Defense Ministry will supposedly lose to be covered from Treasury reserves, the defense industry shouldn't encounter any immediate downturn in orders.
Increasingly dependent on export sales, it's centered on four major companies, IAI, Elbit Systems, Israel Military Industries and Rafael.
These are supported by dozens of small and mid-sized specialty firms.
Joseph Ackerman, Elbit's outgoing president and chief executive officer, says that in a rapidly changing market Israel's defense industry needs to consolidate because "there are no small companies anymore. It'll be a disaster if we don't do this."
Israel's defense establishment has resigned itself to some cuts, which are inevitable because of the need to boost social spending following nationwide protests over falling standards of living.
But it has long maintained that any significant cuts undermine the military's ability to meet the plethora of security threats the state faces and those that invariably arise with little warning.
One such phenomenon was the so-called Arab Spring, pro-democracy revolutions that toppled the longtime presidents of Egypt, Libya and Tunisia is 2001.
Israel's security policy was predicated on these Arab strongmen, particularly Egypt's Hosni Mubarak, keeping their militants in check.
With Mubarak's fall, Egypt's 1979 peace treaty with Israel appeared threatened, and the Jewish state is having to build up defenses on its long calm southern border.
The 2-year-old rebellion against Syria's President Bashar Assad poses another, unpredictable security threat.
Israel's northern border with Syria had been quiet since 1973 because the Assad dynasty employed Lebanese proxies to threaten the Jewish state. But that arrangement's collapsing and Israel faces the prospect of a hard-line Islamist regime taking power in Damascus.
"The Ministry of Finance told the security cabinet that the security threats facing Israel have diminished," Globes, Israel's business daily, reported.
"The ministry ... believes that in preparing against these threats, the military has already invested sufficiently in recent years, allocating large resources" to counter Iran's nuclear program and other threats.