We are all too familiar with the human cost of the ongoing conflict between Israel and Gaza — the death toll has now passed 110 — but less frequently discussed is the huge monetary cost.

Much discussion recently has centred on the successes of Israel’s relatively new Iron Dome anti-rocket system, a source of pride for many Israelis for its high rate of success at blocking missiles from Gaza. But at up to $80 million per battery and $62,000 to $100,000 for each interceptor missile, the system doesn’t come cheap.

Lefty Israeli newspaper Haaretz reported on Sunday that Defence Minister Ehud Barak is to ask for an extra 750 million shekels (A$183 million) to bring forward the installation date of the upcoming Iron Dome batteries, projected to bring the total up to 13 batteries over the next few years. A fifth movable Iron Dome battery was deployed on Saturday in the Tel Aviv area.

Israel’s military spending as a percentage of gross domestic product is among the highest in the world, at 6.5%. The equivalent figure for the United States is 4.7%. Australia, by contrast, sits at around 1.56% of GDP. This adds up to an annual Israeli defence budget of about $15 billion, of which $3 billion is provided by the US. America is also providing additional funding for Iron Dome on top of its regular contributions.

A report by the Bonn International Center for Conversion last week, a German think tank, rated Israel as the most highly militarised society in the world — ahead of regional rivals Syria (third) and Iran (34th).

Israeli Prime Minister Binyamin Netanyahu promised last year to reduce military spending to pay for social reforms in response to cost-of-living protests in Israeli cities. Netanyahu’s subsequent backflip was prompted by deepening regional instability as relations with traditional allies Turkey and Egypt soured, and the prospect of a nuclear Iran become more likely.

And although still high, Israel’s current military expenditure is a far cry from 1986 when 17% of its budget was allocated towards defence.

In 2010 the head of Rafael Advance Defense Systems’ Iron Dome project, Yossi Drucker, claimed each interceptor missile costs around $100,000. Others have asserted the cost is closer to $50,000. The system’s rate of success at shooting down rockets bound for inhabited areas sits at about 85%.

It is difficult to know how much the current Pillar of Defence operation will cost. It’s estimated the 2008-09 Gaza war cost Israel just under $1 billion, but the total cost this time around will depend heavily on whether Israel decides to again opt for a ground offensive on the Hamas-controlled territory.

Given the intense Hamas-Fatah factionalism of Palestinian politics and the strategic interests of outside powers in destabilising Israel, the Gaza government undoubtedly spends a large proportion of its budget on defence, though it is unknown exactly how much. Reliable data about the secretive Hamas-led government is hard to come by, but the Israeli military estimates that, before the current military operation began, Hamas had about 10,000 rockets and mortars.

Gaza’s total budget for 2012 is estimated at about A$740 million, much of which comes from Palestinian expatriates, the mildly Islamist Turkish government and wealthy supporters in the Persian Gulf.

Hamas’ refusal to support close Iranian ally Bashar al-Assad in the ongoing Syrian civil war is thought to have cost it A$22 million a month in funding from Iran. The majority of Hamas’ arms are believed to come from Iran, smuggled via Sudan and Egypt through the no-man’s land of the Sinai desert. Opportunistic arms dealers in Libya have also taken advantage of the chaos following the fall of the Gaddafi regime to sell national weapons stockpiles to anyone who is willing.

Until recently it appeared Hamas’ defiance of Israeli blockades was paying off economically for the residents of Gaza, with the territory registering a 2011 growth rate of above 20%, compared to only 4% in the more compliant West Bank. This year, however, problems in the agricultural sector have dragged Gaza’s economy down, slowing growth to around 6% and leading to an increase in unemployment levels. Israeli strikes on the territory will slow Palestinian economic progress and further entrench long-term enmity.

Peter Fray

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Peter Fray
Editor-in-chief of Crikey