Department of Research, Studies and International News  01-02-2025

The White House announced that a meeting between Donald Trump and Benjamin Netanyahu is scheduled for Tuesday, which will “demonstrate continued support for Israel.”

As Daniel Shapiro, former U.S. Ambassador to Israel and former Deputy Assistant Secretary of Defense for Middle East Policy, writes  the meeting will announce the start of negotiations for the next Memorandum of Understanding (MoU) on military aid. The current MoU expires in 2028, and the new one will take effect in 2029.

The current MoU has allowed Israel to acquire a third squadron of F-35s, 25 F-15IAs, and four KC-46As. The new MoU will likely require the modernization or replacement of Israel’s aging F-16s and the purchase of additional F-15IAs. The Supplemental Appropriations Act for Israel’s Security, passed by Congress and signed by Biden in 2024, allocates $14.1 billion to replenish tank ammunition stockpiles.

The 2016 MoU provided a steady allocation of $500 million annually for Israel’s missile defense programs, avoiding the need for constant congressional approvals. However, this did not prevent additional appropriations in 2022 ($1 billion) and 2024 ($5.2 billion) to replenish the Iron Dome and David’s Sling missile defense systems, as well as to further develop the Iron Beam laser system. Future additional appropriations may be needed to replenish Arrow 2 and Arrow 3 interceptors after their use against Iranian ballistic missile attacks in April and October 2024.

Trump supports Israel and will undoubtedly want to help meet its defense needs. He may also want his name associated with a “big and beautiful deal.” However, as with any negotiation, there will be opportunities for leverage and counter-pressure. In this context, three key questions arise:

Regional Context:

The MoU could be signed amid significant regional developments, such as a potential Israeli-Saudi normalization agreement, which, according to the Saudis, requires some form of Palestinian statehood. Could Trump use the MoU as a “sweetener” to get Netanyahu to accept this “bitter pill”? How would this align with a U.S.-Israel defense treaty? How would the next turn in Iran’s nuclear program—tightened sanctions, a new deal, or a military strike—affect Israel’s perception of the Iranian threat?

Aid Allocation:

Israel will have high demands for aid due to its significant defense needs. However, the U.S. has other recipients of Foreign Military Financing (FMF), including Egypt and Jordan, which are important partners for Israel. Trump appears determined to cut much of the federal budget. If military aid to other countries is reduced while aid to Israel increases, Israel could end up receiving a disproportionately large share of the total FMF. Currently, Israel’s annual $3.3 billion in aid (not counting the substantial supplemental funding for 2024) already makes up just over half of the total FMF.

Defense Industry:

The current MoU ended the Off-Shore Procurement (OSP) program, which allowed Israel to use up to 26.3% of FMF funds to purchase from Israeli defense companies. Israel resisted the U.S. phase-out of this program during negotiations, arguing that it would harm its defense industrial base. Barack Obama believed Israel’s defense industry was sufficiently self-reliant and wanted FMF funds to be spent on U.S. defense production. Israel may try to revive this provision, given the need to bolster its own defense production after active combat operations end. However, they may find that Trump supports Obama’s logic of spending funds within the U.S.