Jerusalem is readying for talks with the White House on a new foreign military financing deal that would focus more on joint projects than cash handouts, according to a senior Israeli official.
"The partnership is more important than just the net financial issue in this context ... there are a lot of things that are equal to money," Gil Pinchas told the Financial Times, prior to stepping down as chief financial adviser to Israel's Defence Ministry last month.
He was referring to military and defence-development projects on which the US and Israel work together. "The view of this needs to be wider."
Talks on the new Memorandum of Understanding (MoU) are to take place in the coming weeks. The current MoU, which began under the Reagan administration and is up for renewal every 10 years, provides Israel with $3.8 billion annually, including $500 million for cooperative missile defence programs.
Earlier this month, Israeli Prime Minister Benjamin Netanyahu told The Economist that he wants to "taper off" that aid within the next decade.
He said that he had discussed the matter with US President Donald Trump in Florida on December 29, telling him that Israel “deeply appreciates” the military aid that “America has given us over the years – but here too, we’ve come of age.”
The Jewish state has “developed incredible capacities. And our economy … will soon reach, certainly within a decade, about $1 trillion. It’s not a huge economy, but it’s not a small economy,” Netanyahu told the magazine.
He said that the plan was already “in the works.”
The prime minister’s comments caused some backlash from within Trump’s Republican party, given that the majority of the aid sent to Jerusalem is used to purchase US-made weapons and technology.
But Israeli observers who support replacing the direct aid model with joint projects argue that Israel will gain more independence, make wiser decisions about its military needs, and place its relationship with the US on firmer footing, moving it from a “security aid recipient” to a “true strategic partnership”.
Israel will also strengthen its domestic arms production, they say. Nearly all US foreign military financing must be spent in the United States. As a result, the IDF prefers buying munitions from American companies, letting domestic production lines shut down.
A spotlight was thrown on the dangers of allowing domestic arms production to lag after the October 7, 2023, Hamas attack. During the subsequent Gaza War, the Biden administration held back critical military supplies from Israel amid objections over the miltary’s conduct in the Strip.
Israel has since ramped up domestic production. On Tuesday, Israel’s Ministry of Defence announced a multi-year order for air munitions manufactured by Haifa-based Elbit Systems, valued at approximately 570 million shekels ($183 million).
Defence Minister Israel Katz said in a statement announcing the deal, “The policy I’m driving forward prioritises growing our domestic defence sector, boosting Israeli manufacturing and deepening partnerships with local industry.
"A robust industrial base and strong ties with Israeli companies guarantee independence, reliable supply chains and long-term force development.
"It strengthens our economy, reinforces national resilience and equips the IDF to meet security challenges both now and in the future.”
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