Israel has test-fired its new Arrow-3 anti-ballistic missile system, the country's main defense against Iran's Shehab-3 missiles, as it drives to boost its arsenal of about 120 of the weapons amid rising tension in the Persian Gulf.

The tests, conducted at the Palmachim Air Base on the Mediterranean south of Tel Aviv, were carried out to check the propulsion system and tracking sensors and were apparently successful, the Arutz Sheva news agency reported.

The Defense Ministry is meanwhile grappling with the problem of how to fund the development of Arrow-3 and the system's new Magnificent Pine radar. Ministry sources say $3.9 billion is needed to produce more batteries of the long-range, high-altitude Arrow built by state-owned Israel Aerospace Industries.

But large sums are also needed to develop and produce other anti-missile systems that will eventually form a multilayer defense shield. These are designed to counter everything from intermediate-range ballistic missiles to short-range unguided rockets like those used by Hezbollah in Lebanon and Palestinian militants in Gaza.

Iron Dome, which is operational, and David's Sling, still under development, are built by Rafael Advanced Defense Systems. Iron Dome intercepts short-range missiles and rockets, while David's Sling, scheduled to be combat-ready this year is designed to intercept medium-range projectiles.

With the right-wing government of Prime Minister Binyamin Netanyahu forced to cut the defense budget to fund social programs following unprecedented nationwide protests in 2011, state funding for missile projects is harder to come by.

As usual, the Israelis are looking to the United States to pitch in and provide the money, on top of the $3 billion a year the Jewish state receives in U.S. military aid. Despite a sharp U.S. economic downturn, Congress has approved increasing missile defense funds for Israel to $235.7 million for 2012, up from $217.7 million in 2011.

This will cover Arrow-2, the variant in service with the Israeli air force, development of Arrow-3 and final development for David's Sling.

Whether that will mean further U.S. funding to help Israel over its defense budget problems isn't clear.

But U.S. Rep. Steve Rothman, D-N.J., a member of the House Defense Appropriations Subcommittee that approved the funds, noted, "It's a mark of the importance of these jointly developed missile defense programs … that they were robustly funded by our subcommittee."

The Arrow program is one of the centerpieces of the U.S.-Israeli strategic alliance and one of the most advanced systems if its kind.

The Americans, who have shown no interest in buying Arrow themselves, have provided more than half of the $3 billion development cost of the Arrow program, launched in 1986.

U.S. defense companies have also provided technology and helped in the development work, as they have with Iron Dome and David's Sling, and that's likely to continue.

The Arrow-3, when it's operational in 2-3 years, will give Israel a greater degree of protection against ballistic missiles, most likely from Iran but possibly also closer at hand from Syria as well.

It's intended to be able to intercept missiles earlier in their trajectory than Arrow-2.

Using an X-band radar unit provided by the United States, and deployed at an Israeli air base in the southern Negev Desert, Arrow-3 could intercept missiles in space up to 300 miles from Israel.

The X-band, an AN/TPS-2 built by the Raytheon Co., is used with the U.S. equivalent of Arrow, the Theater High Altitude Air Defense system, and can detect ballistic missiles fired from Iran when they're 5-6 minutes from impact.

That's 3-4 minutes earlier than the Arrow system's Green Pine radar. The Israelis would thus be able to hit the ballistic target further away and with greater accuracy at an altitude of 30 miles.

Israel has two batteries of Arrow-2 deployed, one near Palmachim to cover the sprawling Tel Aviv urban area where more than 2 million of Israel's 7 million people live, the other near Hadera in the north.

A third battery was recently deployed but, unlike the other two, it's linked to the Magnificent Pine radar, an advanced and long-range version of Green Pine.

An Arrow battery has four-eight launchers, each with six of the $2.7 million, 1.2-ton missiles.