Next U.S.-Israel Memorandum of Understanding

The current U.S.-Israel security-assistance memorandum of understanding was signed on September 14, 2016, and represents the third such bilateral understanding in the countries' history.[1] It covers fiscal years 2019 through 2028 and pledges $38 billion in military assistance, subject to annual congressional appropriations: $33 billion in Foreign Military Financing grants and $5 billion for joint missile-defense programs, structured as $3.3 billion and $500 million per year respectively.[1][2] The agreement was concluded during the Obama administration while Benjamin Netanyahu was prime minister and has since governed the primary financial architecture of U.S.-Israel defense cooperation.[3][4]

U.S.-Israel assistance MOUs are not legally binding like treaties and do not require Senate ratification; their funding levels remain subject to Congress's appropriations power.[3] While Congress has generally appropriated aid in line with the MOU in effect, it retains authority over annual aid levels and supplemental appropriations.[5] In practice, most of the funds have been spent in the United States on American-made defense systems, channeling significant resources to U.S. defense contractors.[3]

One distinctive feature of the current agreement is its phaseout of Off-Shore Procurement — the arrangement that had previously allowed Israel to convert part of the U.S. assistance into shekels for purchases from Israeli defense firms.[3] That allowance stood at $815.3 million at the start of the agreement, fell to $250.3 million in 2026, and is scheduled to reach zero in 2028, the MOU's final year.[6] The phaseout has particularly affected smaller Israeli defense companies.[6] By FY2028, the entire annual package will be spent through U.S. suppliers.[5]

The July 14, 2022 U.S.-Israel Strategic Partnership Joint Declaration anticipated a successor arrangement, stating that a follow-on MOU should address "emerging threats and new realities," though it set no proposed amount, duration, or other specific terms for that future agreement.[7]

The push for a successor framework gained momentum from a shift in Israeli strategic thinking at the highest level of government. In January 2026, Prime Minister Netanyahu announced a strategic goal of gradually reducing U.S. military aid to zero over the following decade, arguing that Israel should move toward greater defense and economic independence.[5] He had previously articulated this direction in an interview with The Economist, saying that Israel needed to "wean ourselves off of American security aid."[1] By May 2026, he stated publicly that he wanted the financial component of U.S. military cooperation drawn down to zero over the next decade and that the process should begin immediately.[8]

Israeli defense officials had been laying the groundwork for this position for some time. Gil Pinchas, then chief financial adviser to the IDF and Defense Ministry, said Israel would seek to prioritize joint military and defense projects over cash assistance, describing the $3.3 billion annual grant component as one part of the MOU that "could decrease gradually" while emphasizing that the partnership's value extended beyond its net financial amount.[9] An Israeli government commission separately recommended adding $30 billion to Israeli military spending over the next decade, signaling that Israel was prepared to increase its own defense outlays substantially.[1]

Netanyahu presented plans for a future arrangement during a meeting with President Donald Trump in December 2025, and an Israeli delegation's subsequent visit to Washington was planned from that point forward.[6] In April 2026, Israeli media reported that official talks were expected to begin the following month, with Israel's team to be led by Defense Ministry Director General Amir Baram alongside Ambassador Yechiel Leiter and representatives of the Defense and Finance ministries, the IDF, and the National Security Council.[4] The reported U.S. participants included Secretary of State Marco Rubio, Michael Needham, and Ambassador Mike Huckabee.[4]

On June 5, 2026, Israel's Ministry of Defense announced that it and the U.S. administration had opened formal talks on a new security-cooperation framework.[10] The inaugural formal meeting had taken place that week, with further sessions planned in both countries.[10] Israel's negotiating team was led by Defense Ministry Director General Amir Baram in coordination with Ambassador Yechiel Leiter; the U.S. team was led by State Department Counselor Daniel Holler and Ambassador Mike Huckabee.[10]

The Israeli Ministry of Defense described the proposed framework's central aims: strengthening the IDF's qualitative military edge through expanded joint investment in research, development, and co-production, and deepening the overall U.S.-Israel partnership.[10] The stated goal was to "gradually transition from aid to a completely reciprocal partnership" — a formulation that distinguished the proposed framework from the traditional grant-based model.[11][10] These were announced negotiating objectives, not finalized terms of a concluded agreement.

In a June 30, 2026 address, Baram argued that the future security MOU should serve both countries' interests.[12] He said Israel and the United States assigned different priorities to the Iranian threat: Israel viewed it as existential, while Washington treated it as a regional challenge alongside broader global concerns.[12] Baram described the basis for a future partnership as "a strong, independent and proactive Israel, which stabilizes the Middle East," and said such an Israel would be "an asset that allows the US to direct resources to Asia."[6] His remarks set out the Israeli strategic rationale for the negotiations rather than agreed provisions.

In July 2026, a senior Israeli official described Netanyahu's vision in more specific terms: gradually reducing the $3.3 billion in annual FMF grants while maintaining some of the $500 million annual ballistic-missile-defense assistance, and establishing a roughly $16 billion joint U.S.-Israel fund for research and development of weapons systems.[13] The report attributed these details to the Israeli official and did not describe a formal U.S. agreement, finalized terms, or a binding implementation schedule.[13]

While no successor terms had been agreed as of October 1, 2026, official and analytical descriptions outlined a possible framework involving a gradual shift from direct financial grants toward jointly funded programs for defense procurement, research, development, and co-production.[14][10] Such a model could emphasize shared financial commitments, access to Israeli innovations, and work for both U.S. and Israeli industrial workforces.[14]

Calcalist reported that Israel was discussing a ten-year transitional framework for 2029 through 2038, with direct U.S. financial assistance for weapons purchases declining over time and a stated objective of reaching zero by the end of that period.[4] The American Jewish Committee reported a different Israeli aspiration for a 20-year agreement running through 2048, but presented that duration as a reported plan rather than a settled term.[15]

Reported areas for joint cooperation included laser air defense, defenses against hypersonic missiles, counter-drone systems, and artificial-intelligence applications in defense.[16][4] Defense Ministry research-and-development director Daniel Gold described David's Sling, Arrow, and Iron Dome as already involving joint production with the United States. He noted that Iron Dome interceptors were also manufactured in Arkansas and said that 50 percent of Iron Beam production was being carried out in the United States under a financing agreement.[17] These examples illustrated the model that officials anticipated expanding under a successor agreement.

The American Jewish Committee reported that the proposed successor might also encompass defense-related artificial intelligence and cooperation connected to the "Golden Dome for America" initiative, as well as expanded research, development, and joint manufacturing.[15] Quantum computing was reported by The Jerusalem Post as not then considered a leading priority for joint cooperation.[16]

In September 2026, Gold confirmed that the MOU was "currently under discussion" and stated that "we will see what comes of it," reflecting the unresolved state of the negotiations.[17] Israel's defense establishment had indicated it believed it could pursue its force-building plans without American financial assistance — but only if it secured a larger defense budget.[4]

The Congressional Research Service documented the negotiations in multiple reports updated through September 30, 2026.[14][18] A CRS brief noted that, if completed, the successor would be the fourth U.S.-Israel bilateral security-assistance understanding.[14] It described the sides as potentially seeking to complete an agreement in the months ahead, in the context of Israeli elections scheduled for fall 2026 and Israel's need to replenish munitions after the war with Iran and other conflicts.[14]

Because MOUs of this kind are not treaties, they do not require Senate ratification, and their funding levels remain subject to the annual congressional appropriations process.[3] Congress has generally appropriated aid consistent with the MOU in effect, but it can modify annual levels or enact supplemental appropriations independently.[5] The financial architecture of any successor framework would therefore depend on congressional action each fiscal year, regardless of what the two executive branches negotiate.

CRS also identified a practical financial concern bridging the two agreements. Existing sales under the current MOU involve long procurement timelines — including advanced fighter aircraft — that could require financing from grant aid or Israeli national funds extending beyond the current MOU's duration or its total FMF allocation.[1] A Special Billing Arrangement allows Israel to use national cash reserves for funding requirements, including termination liability, for Foreign Military Sales cases that extend beyond the current MOU's term.[1]

CRS identified joint missile-defense, counter-tunnel, counter-drone, and emerging-technology programs as existing areas of U.S.-Israel defense cooperation outside the MOU's regular FMF structure.[14] For FY2026, it reported $202 million in appropriations for cooperative defense programs outside the MOU, while the MOU separately provides the regular $500 million annual contribution for missile defense.[14] CRS described expansion of such joint programming as a possible component of a future arrangement, not a settled commitment.[14]

The scale and structure of current U.S. military assistance to Israel carry significant economic implications for both countries. The Institute for National Security Studies assessed that U.S. aid represents approximately 0.5 percent of Israel's GDP but still accounts for roughly 15 percent of its defense budget.[2] INSS argued that a reduction in assistance would require budget adjustments at a time of rising security needs, while noting that a planned, gradual transition could support more domestic procurement and production, reduce dependence on external supply chains, and improve longer-term budget planning.[2] The authors cautioned against automatically replacing every dollar of reduced aid with a corresponding dollar of other spending.[2]

Israeli defense officials told Calcalist that by the current MOU's expiry, Israel would have several billion dollars in outstanding commitments for U.S. purchases.[4] Those obligations were expected to be covered under the next framework; if no framework were reached, Israel would need to pay them from its own budget.[4] The Foundation for Defense of Democracies reported that Israeli procurement plans had "apparently already spoken for more than $20 billion in FMF" for the ten-year period beginning in fiscal year 2029 — a figure that underscored the financial stakes of the transition.[11]

FDD cautioned that a rapid or complete phaseout of Foreign Military Financing could leave Israel without sufficient resources to defend shared interests and counter common adversaries, arguing that the timing of any transition should account for future military requirements and procurement commitments already made.[11] Supporters of the phaseout, by contrast, framed the change as a natural evolution toward a more reciprocal partnership between two mature defense economies and as a means of increasing Israeli strategic autonomy.[8]

If grant aid were phased out, CRS noted, Israel could use national funds to buy U.S. defense articles, but might also face fewer financial constraints on purchasing from other suppliers or expanding domestic arms production — an outcome with implications for U.S. defense contractors that currently benefit substantially from FMF grants.[1]

The pace of the negotiations proved slower than Israeli officials had anticipated. A July 2026 Jerusalem Post report said Israel was trying to accelerate the process but that progress had been limited: an expected Israeli return visit to Washington had not been finalized, and it was unclear whether a renewed MOU could be approved before a new U.S. Congress took office in January.[16] The report said the talks were expected to consider winding down aid over ten years and replacing it with funding connected to joint projects, but that the scope, timelines, and substance of those projects remained open.[16]

Also in July 2026, Globes reported that an Israeli delegation led by Baram was preparing to travel to Washington for talks at the Pentagon and in Congress, with the aim of kick-starting negotiations on a replacement MOU.[6] The visit had been in planning since Netanyahu's December 2025 meeting with Trump, when Netanyahu presented plans for future assistance.[6] Globes reported that there had been no substantial progress on the U.S. side and described Israeli concerns that U.S. political priorities and internal constraints were delaying the process.[6]

By September 24, 2026, Globes described the talks as being on a complete hold, reporting an Israeli assessment that senior U.S. officials wanted to defer the issue until after the November midterm elections.[19] The Israeli Defense Ministry acknowledged only that discussions were continuing "on an ongoing basis" to formulate an MOU reflecting the countries' partnership and close defense ties, declining to provide further details.[19] A CRS brief updated on September 30, 2026 stated that the sides might seek to complete an agreement in the months ahead but gave no completion date.[14]

Alongside the official negotiations, think tanks and analysts put forward detailed frameworks for what a successor agreement could look like. The Institute for National Security Studies recommended establishing a new formal agreement that would anchor the bilateral relationship while enabling a gradual transition from military aid to a business partnership.[2] Its proposed direction included preserving Israel's access to U.S. defense systems and development programs, removing export and import barriers between the two countries, enhancing production capacity in both, and integrating Israel more deeply into U.S. research and development pipelines.[2] INSS presented these as policy recommendations rather than agreed provisions.

The Foundation for Defense of Democracies proposed a successor it called a "United States-Israel Strategic Partnership Agreement" (SPA), potentially beginning in fiscal year 2029 and lasting ten years or longer.[20] The proposal called for approximately $5 billion annually in U.S. funding through a "Partnership Investment Incentive," with all of those funds spent in the United States.[20] It also proposed Israeli commitments to spend at least 4.5 to 5 percent of GDP on defense, at least $1 billion annually from Israeli national resources on U.S.-made military hardware, and at least $150 million annually on joint military research and development.[20] These were the author's recommendations and not announced government positions.

Geostrategy expert Kobi Barda offered a different approach: continuing approximately $4 billion in U.S. assistance, adding $4 billion in Israeli government purchases under a proposed "America First Procurement Act," and including a Bank of Israel commitment to invest in U.S. bonds or Nasdaq.[19] Barda pointed to the BIRD Foundation — which supports joint industrial research and development between the countries — as a possible model for a broader security partnership, arguing that adapting such a structure could allow President Trump to present the arrangement as one in which Israel invests in the United States.[19] Kobi Michael of the Jerusalem Center for Security and Foreign Affairs separately suggested that Israel could propose a framework centered on research cooperation and the development and production of advanced weapons systems, while converting part of the assistance into long-term loans.[21]

The most fundamental contested question was whether phasing out traditional grant aid served Israel's security interests. JNS reported opposing assessments: supporters framed the change as a shift from aid to partnership and a natural expression of Israel's growing independence, while critics warned that reducing direct assistance could weaken military preparedness without ending Israel's reliance on American weapons and defense-industry support.[8] CRS reported that some Israeli lawmakers and experts favored maintaining or increasing U.S. aid rather than phasing it out.[1]

The reported positions of the two governments also diverged on the pace and nature of the transition. Netanyahu proposed gradually ending U.S. military aid and reportedly indicated that Israel could forgo or return some assistance scheduled for 2027–2028 under the current MOU.[15] The American Jewish Committee reported that President Trump was skeptical of ending aid and favored continued assistance — a reported position that placed the two governments at odds over the proposal.[15] No cited source confirmed that the U.S. side had accepted Netanyahu's phaseout plan.

The official framework covers fiscal years 2019–2028 and expires in 2028, as stated by Israel's Ministry of Defense and other sources.[10][8] A July 2026 Jerusalem Post article instead described it as running from January 2019 to 2029 and projected a successor period of 2029–2039.[16] That isolated formulation conflicts with the official expiration year and the agreement's fiscal-year structure and should not be treated as an equally authoritative alternative endpoint.

CRS reports also used differing formulations for the status of the process. Two described the governments as reportedly negotiating or having begun discussions.[14][18] Another, apparently reflecting a different update cycle, said formal negotiations had yet to start.[1] The Ministry of Defense's June 5 announcement confirms that a formal inaugural meeting had occurred, indicating that the CRS variation reflected reporting lag or differing distinctions between preliminary discussions and formal negotiations rather than continuing uncertainty over whether formal talks had launched.[10]