US steps up efforts to get Israel to scrap jet project. Israel fears jobs and `national pride' would be lost

The war between Israel and the United States over the future of Israel's multi-billion dollar Lavi jet-fighter project has escalated, only days after the first Lavi prototype's maiden flight. In the past year, the Reagan administration has stepped up criticism of the Lavi and is now publicly pressuring Israel to abandon the costly project. On a just-ended visit to Israel, a US Defense Department team offered Israel what it said were several less costly alternatives.

American officials here admit that their battle to woo Israel from the Lavi is an uphill one, acknowledging a reluctance of any Israeli government to take the politically explosive decision to end the plane's development.

Killing the project would throw thousands of technicians out of work - in a nation extremely sensitive to unemployment and already suffering from a brain drain. The Lavi's supporters include its producer, Israel Aircraft Industries, Israel's largest single employer.

The project also is defended by Prime Minister Yitzhak Shamir and Foreign Minister Shimon Peres, both of whom have described it as a ``national project.''

Not only is the project vital to Israel's defense and technological advancement, its backers say, but its completion is inextricably linked to national pride. Mr. Peres has likened Israel's pursuit of the project to the US's exploration of space.

Israel began developing the Lavi in 1974 and hopes to start producing it in 1992. More than $1.2 billion - most of it in US aid - has so far been spent on the state-of-the-art fighter plane. The annual $550 million development costs come out of US military grants to Israel.

Critics note that the Lavi's Dec. 31 maiden flight was three months behind schedule. But even they say that bringing a prototype of such a sophisticated jet to the test-flight stage is impressive. The plane made a second test flight Thursday.

But US deputy undersecretary of defense, Dov Zakheim, and his team of US Air Force officers and Pentagon economists seem unimpressed. Not only is it possible to cancel the Lavi, Mr. Zakheim said, but Israel's security may in fact hinge on abandoning the project. In several days of meetings with senior Israeli officials, Zakheim and his team hammered home their arguments that: the Lavi is simply too expensive for Israel; it is an ``unproven'' plane, sucking funds from Israel's already anemic defense budget; as the Lavi grows, other Israeli Army and Air Force projects shrink; Israel does not know whether the Lavi will be the state-of-the-art fighter bomber it hopes for or whether it will ever be able to export the airplane.

The US Air Force would not be interested in importing the Lavi, Zakheim said, and does not believe it will have capabilities superior to American fighter-bombers.

Zakheim stressed that the US is unlikely to increase the $1.8 billion it grants Israel annually for military needs. At Israel's own estimate, the Lavi will continue to cost $560 million annually into the 1990s. But by US estimates, production costs will be closer to $1 billion annually. If so, Israel would be left with precious little to fund other vital defense projects, Zakheim argued.

The US assault on the Lavi did not end with pointing out the problems with the project. In meetings with Israeli officials and in a press conference later, Zakheim described several alternative packages. He argued that each alternative could give Israel the number and quality of fighter-bombers it needs at the same or lower cost than the Lavi, within the same time frame or sooner and with promises of jobs for at least some of the 6,000 people now employed on the Lavi project.

One alternative Zakheim offered was for Israel to buy 50 F-15 Es, a new US long-range strike fighter, and 250 Harrier aircraft. Another option was for Israel to locally produce or locally assemble US F-16s.

``I do not think that Zakheim's alternatives were really well thought out,'' said Dan Halperin, former economics counselor at Israel's Washington Embassy and now a consultant to Israeli and American firms, some of which are involved in the Lavi project.

But other Israelis, including some senior defense officials, seemed more inclined to listen to Zakheim's arguments. ``They are beginning to understand, finally, what it will mean to all the other defense budgets and all the other defense projects if this thing continues,'' said one economist, a long-time critic of the Lavi.

Speaking before the Knesset foreign affairs and defense committee, Israeli chief of staff, Moshe Levy, said: ``There is no place for declarations on its [the Lavi] being a national project. It should be made such a project by providing it with backing and funds. There is no sense in carrying out a lame, meager project. Obviously, it will be impossible to implement it if the IDF [Israeli armed forces] will have to bear the entire load.''

Israeli observers say Levy's position on the Lavi has gradually changed since he argued in closed Cabinet sessions a year ago that the project must continue.

What remains to be seen is whether Israel's coalition government will cancel the project even if it does determine that the Lavi is too costly. Throughout its troubled history, the Lavi has been a project that advanced almost without government decisions, seeming to have a life of its own.

``Our ideal was to confront the Israeli government with the problem,'' said one American official. ``We are putting the Israelis on notice that the money for the Lavi is going to have to come from somewhere else.''