Baz Ratner / Reuters file

Mount Hermon is seen in the background as Israeli soldiers travel on mobile artillery units after an exercise on the Israeli-occupied Golan Heights on February 14. Israel is worried that the Golan, which it captured from Syria in 1967, will become a springboard for attacks targeting Israelis by jihadists who are taking part in the armed struggle against Syrian President Bashar Assad.

News analysis

TEL AVIV – About 2,000 Israeli army reservists were woken in the middle of the night this week and instructed by recorded announcement to report immediately to the northern border with Syria. They raced there, armed for war, only to discover it was a drill – Israel's largest in the north for years.

Every day, Israeli military leaders say, is a day in which peace could turn to war, especially in the north. Israeli army Chief of Staff Lt. Gen. Benny Gantz warned last month that Israel's border with Syria, its most stable border since the two countries signed their disengagement agreement 40 years ago, could explode at any moment.

"We are commemorating the 40th anniversary of the Yom Kippur War, and the years of quiet and stability are disappearing," he said at meeting at Israel's Institute for National Security Studies think tank, choosing his words carefully. "Instability (on the Golan Heights) is increasing."

Israel conquered the Golan Heights in the 1967 Six-Day War and later annexed it, a move not recognized by the international community which considers it to be occupied territory. Today, 44,000 people live on the Golan Heights and a United Nations force is stationed in a buffer zone between Israel and Syria. 

Israel has warned it will do whatever is necessary to prevent the Syrian government's large stockpile of chemical and biological weapons from falling into the hands of militants, believing that one day they may be used against Israel. It would be better, Israeli leaders believe, to fight in Syria against Islamists armed with non-conventional weapons than wait for them to attack Israel with them.

According to army sources quoted in the Maariv newspaper, Israel is sending fresh troops to man forward bases that have not been used for years because it was so quiet. The roads to the bases will also be paved and improved, the paper said.

Bullets and rockets have been fired from Syria into Israel at least a dozen times this year. Most are believed to be errant fire from fighting on the other side of the border, but the army says it sometimes comes from bunkers abandoned by the Syrian army, which pulled out to defend President Bashar Assad's regime in Damascus.

That vacuum along the border has been filled by Islamist militias – especially the al-Nusra front which says it is allied with al Qaeda – who repeatedly say their goal after toppling Assad is to use his territory as a launch-pad for attacks against Israel.

Israel has a history of short, sharp, specific attacks when its interests are threatened. In September 2007, Israel destroyed Syria's al-Kibar nuclear facility with a single devastating air attack. Earlier this year, Israel destroyed a truck convoy allegedly transporting strategic weapons from Syria to Hezbollah in Lebanon.

Slideshow: Syria uprising

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A look back at the conflict that has overtaken the country.

Launch slideshow

But the prospect of Israeli soldiers operating on the ground in Syria, even if to protect Israel's interests, is at the very bottom of Israel's agenda, according to military analysts and politicians alike.

From a high point overlooking Israel's border near the Syrian town of Quneitra, abandoned and heavily damaged during the 1973 war, there is little sign of tension for now. The United Nations base for 1,000 international peacekeepers whose job is to patrol the buffer zone between Israel and Syria, showed no sign of activity during a two-hour visit this week. Not one vehicle entered or left the base.

It sits on the Israeli side of a new hi-tech razor fence that Israel built along its 50-mile border with Syria to keep the Syrian conflict from spilling into Israel. It is designed to keep out Syrians seeking refuge, militiamen seeking to attack Israeli targets, and above all, to keep Israel from intervening in Syria's civil war.

But the longer the bloody conflict lasts, Israeli military analysts warn, the more likely Israel will be dragged in.

Martin Fletcher is the author of "The List", "Breaking News" and "Walking Israel."

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• Full Israel coverage on NBCNews.com

This story was originally published on Thu May 2, 2013 5:09 AM EDT

Ariel Schalit / AP

Israeli shop owners play backgammon in the Betzalel market in central Tel Aviv on Friday. A Bloomberg survey this week said the Israeli shekel was the strongest of 31 major currencies tracked over the last six months.

TEL AVIV, Israel -- Boosted by newly discovered natural resources, Israel is surging ahead economically – a success that is pushing the issue of the country's $3 billion in annual aid from the United States onto the agenda.

The country made its first intervention in the foreign currency market in almost two years Tuesday, buying $100 million to peg back the growing strength of its shekel.

A Bloomberg survey this week said the shekel was the strongest of 31 major currencies tracked over the last six months.

Last week, Israel passed another milestone, a potential gamechanger for its economy. Gas began to flow from gas fields off the coast. By 2015 Israel is expected to be fully energy independent, and may be a net exporter.

And there’s more good news: In this water-challenged region, Israel is well on the way to water independence. Its water desalination industry supplies up to 40 percent of the country’s demand for water, and another 40 percent comes from recycled water from domestic and commercial consumption. Israel reuses its water two to three times.

The boom may give a louder voice to calls for a reduction to the $3 billion worth of financial assistance Israel receives from the U.S. each year – especially in the Washington, where budget battles continue.

U.S. campaign groups such as Stop The Blank Check and the Council for the National Interest have long campaigned for the aid program to end, but Republican Sen. Rand Paul recently joined the debate by saying the U.S. could no longer afford to keep borrowing money and then handing it out to others.

"It will be harder to be a friend of Israel if we are out of money. It will be harder to defend Israel if we destroy our country in the process," Paul told the Jerusalem Institute for Market Studies, an Israeli think tank, in January.

'A political football'
That view is echoed by some in Israel, such as Naftali Bennett, a software tycoon and leader of the right-wing Jewish Home political party, who during the recent election campaign said the country needed to free itself from U.S. assistance.

“Our situation today is very different from what it was 20 and 30 years ago. Israel is much stronger, much wealthier, and we need to be independent,” he said.

Michael Koplow, program director of the Israel Institute, a Washington think tank, said: “Foreign aid is always a political football – even more so when it comes to Israel. There is no doubt American attention is focused on its own finances.”

However, he noted that 74 percent of the U.S. aid, which is meant for military and defense equipment, has to be spent with U.S. companies.

“Given that Israel is a reliable military spender, you would have to think the defense lobby is going to make sure this aid continues,” Koplow said.

Even those hostile to the aid think it unlikely that Israel’s prosperity will prompt a change.

“The money doesn’t help alleviate poverty in Israel now, so there is no reason why lack of poverty there would cause it to end,” said Robert Naiman, director of Just Foreign Policy.

Yossi Mekelberg, associate fellow of the Middle East and North Africa Program at the U.K.’s Chatham House think tank, said: “It would be a matter of national pride to be economically successful and independent, but providing financial support also gives some leverage with Israel.”

And Israel still has economic problems. Unemployment is relatively low at 6.3 per cent, but the gap between rich and poor is one of the highest of all developed countries, according to the OECD.

“I don’t think a natural gas boom is going to do much to change that,” observed Koplow.

That disparity swept Yair Lapid, an inexperienced but popular new politician, into the finance ministry earlier this year as part of Prime Minister Benjamin Netanyahu's ruling coalition. Most of his support came from the disillusioned middle class whose summer of protests in 2011 changed the country’s priorities from political to social issues.

Now Lapid, 49, has to make good on his election challenge, “Where’s the Money?”

Newspapers on Wednesday reported that Lapid had clashed with officials in his department who proposed increases to tuition fees for university students. Lapid responded on his Facebook page that “if students have to pay more I’ll go home and demonstrate against myself.”

And as the government searches for budgets to cut and taxes to raise, newspapers are full of reports that Israel’s richest man, Idan Ofer, has decided to relocate to London in order to avoid paying more taxes – a motive his associates deny.

He has become a juicy target for critics who have long claimed that the country’s handful of tycoons have been milking the country dry, leaving the poor to foot the bill.

The gap between rich and poor, and how strange this is for Israelis brought up on the kibbutz ethos of “we’re all equal,” was well illustrated by the proverbial taxi driver who told a reporter, “Israel has changed. We all used to wear sandals. If you were rich, you wore better sandals.” 

NBC News' Alastair Jamieson and Becky Bratu contributed to this report.

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Ilia Yefimovich / Getty Images

A kid holds a Palestinian flag as Palestinians erect protest tents in a camp on March 20, in the E1 area next to Ma'ale Adumim. The action took place at the same time as U.S. President Barack Obama arrived to Ben Gurion airport near Tel Aviv.

RAMALLAH, Israel – Away from the pomp and ceremony of Barack Obama’s appearance in the West Bank on Thursday, the reaction to the president’s visit ranged from hostility to indifference.

Mustafa al Khteeb, a school teacher with seven children, was preoccupied with supporting his family, not the president’s arrival.

“I cannot feed my children,” he said as he gestured at an empty refrigerator and suppressed tears. “I feel like half a man. This is a shame.”

Al Khteeb’s salary, small to start with at about $700-a-month, is rarely paid on time, and usually he gets only half of it. The Palestinian Authority is strapped for cash and the first people to be affected are the 153,000 civil servants, including teachers, who can barely survive the month. In January, they went on strike calling for full payment of their salaries.

“I blame President Obama,” al Khteeb said.

“Why?” a reporter asked.  “Why not blame your own government, or Israel? Why is it America’s fault?”

“Because Israel does what America tells it to do and America is on the side of Israel,” he answered.

The Palestinian Authority’s money shortfall is due to a combination of disappointing domestic revenue, falling international donations and Israel sometimes withholding the hundred million dollars it collects a month in tax on behalf of the PA.

Meanwhile, unemployment runs at around 18 percent, and average annual income for a Palestinian at about $12,000 a year, less than half of that in Israel.

Many here pin the blame for the hardship on the United States, and that spilled over as Obama’s visit approached.

Workers in the Muqata, the government compound, played cat and mouse for days with protesters who defaced posters of the American leader, waited for them to be replaced, and defaced them again.

Small demonstrations against Obama popped up daily in Ramallah with slogans like “O-Obama, go back, Palestine is not for sale,” and “Obama, you are the enemy of the people of Palestine and ally of the Jews. You are not welcome here.”

Joy and hope
This anger was in marked contrast with the joy and hope with which Palestinians greeted Obama’s first term. They believed his 2009 speech in Cairo in which he called for democracy and for the rights of Palestinians and expected a change in American policy away from what they see as America’s blind support for Israel.

Four years later, little has changed for them: Israel continues to solidify its control on much of the West Bank and few believe in any peace process. No mention of the issue was made on Wednesday when Obama arrived in Israel.

So you hear it everywhere here: Life is hard on the West Bank and it is Obama’s fault.

“There are thousands like me,” said al Khteeb, the school teacher. “Nobody can live like this.”

The small numbers that attend the demonstrations tells another part of the story. A few dozen, a hundred or so at most, marched around the main square on Thursday, holding banners, calling through megaphones, as bystanders watched and went about their business.

“What good does it do?” one said. “Nobody listens to us.”

Obama’s visit to Israel is seen as a charm offensive, to mend fences with Israelis who have felt slighted and ignored by the American leader. He faces exactly the same problem with the Palestinians.

Martin Fletcher is the author of "The List,""Breaking News" and "Walking Israel."

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Iran presidency via EPA, file

Iranian President Mahmoud Ahmadinejad (center) inspects the Natanz nuclear plant in central Iran in March 2007. The U.S. and Israel fear Iran wants to build a nuclear bomb, a claim Tehran denies.

The leaders of the United States and Israel are about to have some serious face time -- five-and-a-half hours culminating in a late-night dinner on Wednesday. Three key issues will dominate the agenda: Iran, Syria and the Palestinians. In the first part of our "On the Brink" series, NBC News correspondent Martin Fletcher -- who has been covering the region for three decades -- gives his take on a problem of global significance: the prospect of Iran getting nuclear weapons and military action to stop that happening.

News analysis

Israel’s Prime Minister Benjamin Netanyahu will have one key question for President Barack Obama when they meet Wednesday: If push comes to shove, will America attack Iran to stop the Iranians from developing a nuclear bomb?

Obama has a question of his own, just as critical. Will Israel promise not to attack Iran without American approval?

Ahead of the U.S. president's trip, Israel’s President Shimon Peres described Iran as “the greatest threat to peace in the world.”

Lucas Jackson / Reuters, file

Israel's Prime Minister Benjamin Netanyahu points to a red line he has drawn on a graphic of a bomb used to represent Iran's nuclear program as he addresses the United Nations General Assembly in September last year.

He made the remark in a March 12 speech to the European Parliament in Strasburg, but he likely had Washington in mind.

On paper there is little light between the U.S. and Israeli positions. Obama and Netanyahu both say they will not permit Iran to obtain nuclear weapons. They both hope sanctions and political pressure will do the job. Both say all options are open, including military.

So how come neither trusts the other?

Israeli analysts point to North Korea, which has also been subject to international sanctions and American warnings against pursuing a nuclear weapons program.

Yet today, North Korea not only has a nuclear weapon but has threatened to use it to attack America.

So the Israeli analysts ask, what good are American promises on Iran?

On the other hand, can Israel really go it alone?

The reality is that Israel’s so-called red line -- the point at which it must attack for the strike to be effective -- is much closer than America’s because the U.S. has many more, and more powerful, bunker-busting bombs that can hit Iranian nuclear installations like Fordow.

Also in this series: Syria chaos looms large over Obama's Israel trip

The shared U.S.-Israeli assessment appears to be that the Iranians will have enough weapons-grade uranium for an atom bomb by mid-2013. So what to do?

Most analysts in Israel agree on two things. First, Israel must act. No country can ignore threats to obliterate it, especially a country born from the Holocaust. Second, Israel cannot destroy Iran’s nuclear program alone. At best, it can delay it. Yet that is what Israel’s policy has been for a decade.

Israel is already fighting a secret war against Iran, reportedly assassinating Iranian nuclear scientists, planting computer viruses in the heart of Iranian scientific complexes, destroying centrifuges by taking over their operating programs and making them spin themselves to destruction, and booby-trapping key items that Iran imports from foreign countries.

So why up the stakes by launching an air attack, with all the risks of downed pilots being captured, civilian casualties, and massive reprisals?

This would at best buy a few years' time, while giving Iran the excuse it needs -- in the light of open Israeli aggression -- to publicly declare its need for a defensive nuclear option.

Israel’s considerations go beyond an actual attack. The question is, will Iran’s response be so severe that Israel would regret attacking it for evermore? That’s certainly what Iran wants Israel to think.

But Iran’s threats to rain down thousands of rockets a day on Israel appear increasingly hollow.

Syrian support for Iran is now far from guaranteed. And economic sanctions mean Iran is less able to finance and supply its allies in the war against Israel -- Hezbollah in south Lebanon and Hamas in Gaza.

Israeli military analysts are increasingly sanguine about the threat. They believe Iran’s response will be severe, but nothing like it would have been before the revolt against President Bashar Assad in Syria, which weakened him and Hezbollah.

As for Washington, there is certainly no stomach for another war just as it is winding down troop levels in Afghanistan.

It’s the last thing America needs as it tries to cut down on spending and reduce its $16 trillion national debt.

Yet Obama appears committed to doing whatever it takes to stop the Iranians from getting a nuke.

Foreign Policy magazine reported last October that America and Israel were considering a joint air attack that could last days, or maybe just hours. But then what?

The best hope for a peaceful solution would be regime change in Iran, or a change of heart by the present fundamentalist Muslim leaders.

Neither seems likely.

On Monday, Martin Fletcher looks at what is possibly an even more urgent threat to Israel: the civil war in Syria.

Martin Fletcher is the author of “Walking Israel," "The List" and "Breaking News."

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Netanyahu says nuclear talks buy Iran time to build the bomb

Analysis: Israel airstrike may foreshadow Iran attack

Ronen Zvulun / Reuters, file

Yair Lapid, right, stands behind Israeli President Shimon Peres, who is seated next to Benjamin Netanyahu, at a reception in Jerusalem on Feb. 5. Lapid, a relative newcomer, has been able to gain numerous concessions from the veteran Netanyahu as the latter struggled to form a coalition government.

News analysis

TEL AVIV -- It is no surprise that Benjamin Netanyahu will be Israel's prime minister for the third time. The makeup of his Cabinet, however, may be jarring, especially to him.

Two days before the deadline imposed by election rules, he overcame the final obstacles and reached a compromise with Yair Lapid, the political novice who heads the second-largest party in the Israeli Knesset.

The agreement, which is expected to be signed Thursday, gives his coalition 68 seats out of 120 in the new parliament, which should be sworn in next week.

Lapid may be a novice, but analysts here say he achieved major victories over the prime minister. He demanded that there be a maximum of 20 Cabinet ministers instead of the bloated 30.

Struggling to find seats for his party members, Netanyahu fought tooth and nail against Lapid and lost. There are now likely to be 22, including Netanyahu.

Netanyahu was determined to keep the education portfolio for his own party. Lapid insisted on having it and appears to have won.

It didn't all go Lapid's way, but the message to the voters is clear: Lapid is the man to watch. Indeed, the former television host has already let it be known that he wants to be Israel's next prime minister.

If Lapid, and for other reasons Naftali Bennett and Avigdor Lieberman, were the winners in the Jan. 22 elections, the losers, to a large extent, were the ultra-orthodox religious parties. The Haredim, as they are known here, who form 10 percent of Israel's population and are by far the fastest-growing group, have no seat at the Cabinet table.

That means the government has the opportunity to cut the funds devoted to ultra-orthodox institutions such as their study yeshivas and schools, which in the 2012 education budget totaled close to $1 billion.

Large state subsidies go to their traditionally large families and fund the men who study the Torah full time. These are some of the issues that upset Lapid and his voters, and that now, as Israel's minister of finance, he would have an opportunity to change. That's why control of the education ministry was so important to him: Most yeshiva funding goes through that ministry.

Bad blood
This is not what Netanyahu wanted. He wanted his usual rightist/ultra-orthodox coalition. Instead, through failed brinksmanship he ended up with exactly the opposite: a coalition of his rightist party, Likud-Beitenu, with the left and center, as well as with his natural partner, another new young politician, Naftali Bennett, who leads a rightist party that coordinated every move with Yair Lapid.

Blame the wife. That's what the analysts here say. Bennett, who was once Netanyau's chief of staff, had a major falling out with Sara Netanyahu, ending in bad blood between him and the prime minister.

The natural coalition after the January elections was between the two rightist parties, Netanyahu's 31 seats and Bennett's 12 seats, which would have guaranteed them power if allied with the ultra-orthodox parties. Experts say Netanyahu should have drafted Bennett to the cause immediately.

Instead Netanyahu miscalculated and, reportedly because of personal animus, tried to form the basis of a government without him.

That drove Bennett into the arms of Lapid, where he stayed. The two new young leaders displayed a virtue rare in politics: loyalty to an ideological opponent, based on the power of their word.

Result: Netanyahu has what he most wants, the position of prime minister. But he has the Cabinet that he least wants. A rocky term awaits him.

NBC News' Martin Fletcher is the author of "The List,""Breaking News" and "Walking Israel."

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News analysis

TEL AVIV, Israel - For Israel, the good news on the West Bank was that in 2012 for the first time in 39 years terrorism claimed not one Israeli victim.

But in a region where events can overtake expectations with neck-snapping speed, that is not a sign of peace to come. The question occupying Israelis and Palestinians is: Has the third intifada begun?

For weeks Palestinians have been confronting Israeli troops in numerous areas of the West Bank, sometimes as a result of local grievances, sometimes sparked by attacks by Jewish settlers, and most recently, by the death in detention of a Palestinian, who Palestinian officials claim was tortured to death.

Arafat Shalish Jaradat, a 30-year-old Palestinian who was arrested for allegedly throwing stones at Israeli soldiers, was arrested Feb. 18 and died in prison for no clear reason five days later. He is a Palestinian hero, a rallying call for angry young men and women.

Israeli analysts, however, believe that the protests are being carefully managed by Palestinian military officials, whose aim is to turn up the heat on the West Bank before President Barack Obama’s March 20 visit to Jerusalem and Ramallah. The theory is that the Palestinians want to make sure that their struggle with Israel tops the agenda, and not Iran or Syria.

If true, it’s a dangerous ploy. Amos Gilad, the Director of the Political-Security Staff in the Defense Ministry, told Army Radio, “It looks as if the Palestinian Authority is trying to walk a delicate tightrope: both raising unrest and displays of violence and not wanting the matter to spin out of control.  The problem is that in this game, you never know when things are spinning out of control.”

Related: Rocket explodes in Israel, first attack from Gaza since truce

Tension in the West Bank has been rising for about the last six months, partly because the United States and Israel have withheld promised funds, causing the Palestinian Authority to say there is no money to pay the salaries of Palestinian police and civil servants. Unemployment has also soared at the same time.  The resulting anger and frustration fuel protests against Israel.

The first intifada, or popular uprising against Israel, was sparked by anger at a traffic accident in Gaza in which an Israeli truck driver killed four Palestinians in Dec. 1987.  According to many, the second intifada was provoked by Prime Minister Ariel Sharon's visit to the holiest place in Judaisim and the third holiest place in Islam -- known as the Temple Mount or al-Aksa Mosque, respectively. It led to riots and arrests.  

Each initial incident, relatively small in itself, tapped into a cauldron of spontaneous rage, deep-seated anger and frustration and, ultimately, support from the Palestinian leadership, albeit covert, and led to years of violence, arrests and deaths.

So what’s up now? Among Palestinians there is again deep anger at the plight of their roughly five thousand prisoner in Israeli jails, which threatens the rule of Fatah in the West Bank. In Gaza, Hamas managed to free more than a thousand of their prisoners from Israeli jails in return for the release of their one Israeli captive, Sgt. Gilad Shalit, who they held for five years. Now Hamas appeals to voters in the West Bank: Give us control of the West Bank and we’ll soon free your prisoners.

The Palestinian Authority government led by President Abu Mazen has to look as if it is doing something, so it is supporting the prisoner protests, even while warning the protesters that it will not tolerate serious violence against Israel -- an explosive contradiction.

One thing that Palestinian and Israeli analysts do agree on: Obama wants to encourage the peace process, but the danger is that the West Bank will explode before he even gets here.

Martin Fletcher is the author of "The List," "Breaking News" and "Walking Israel."

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