Israel eyes joint defense projects as cornerstone of new US defense deal

Israeli Prime Minister Benjamin Netanyahu said that he wants to “taper off” that aid within the next decade.

By David Isaac, JNS

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, Reuters reported on Tuesday, citing the Financial Times.

“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 Defense Ministry.

He was referring to military- and defense-development projects on which the United States and Israel work together. “The view of this needs to be wider.”

Talks on the new Memorandum of Understanding 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-defense 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 U.S. President Donald Trump in Florida on Dec. 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 Economist.

He said that the plan was already “in the works.”

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 United States 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 U.S. foreign military financing must be spent in the United States.

As a result, the Israel Defense Forces 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 Oct. 7, 2023, Hamas attack.

During the subsequent war, the Biden administration held back critical military supplies from Israel in order to pressure it to carry out certain policies.

Israel has since ramped up domestic production. Just on Tuesday, Israel’s Ministry of Defense announced a multi-year order for air munitions manufactured by Haifa-based Elbit Systems, valued at approximately 570 million shekels ($183 million).

Defense Minister Israel Katz said in a statement announcing the deal, “The policy I’m driving forward prioritizes growing our domestic defense 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,” he said.