US-Israel Defense Aid Talks Hit Deadlock Over Technology Transfer Demands
As the US-Israel military aid memorandum expires in 2028, negotiations face a major hurdle over technology transfer demands. Future funding will see deep cuts, while smaller defense firms adapt to changing US procurement policies.
The current US military aid memorandum of understanding with Israel expires in 2028, and a solution regarding the post-2029 decade remains uncertain. While Prime Minister Benjamin Netanyahu assessed that Israel will not be able to continue relying on US security assistance in its current format and called on the economy to prepare for significant changes, sources indicate that the primary stumbling block between Jerusalem and Washington involves technological cooperation rather than financial aid.
Under US demands, Washington seeks not only the sharing of knowledge but also the transfer of Israeli technological expertise to the United States under American management, including patents and joint development programs. Israel views this scenario as a severe threat to the technological edge of its defense industries in the global market.
Future Aid Set for Significant Reduction
Negotiations led on the Israeli side by Ministry of Defense Director-General Maj. Gen. (ret.) Amir Baram are expected to accelerate following the US midterm elections. In any case, future aid will differ substantially from the expiring memorandum signed in 2016 by Prime Minister Netanyahu and former President Barack Obama, which guarantees $3.3 billion in annual Foreign Military Financing (FMF) alongside $500 million for missile defense cooperation.
Both nations have agreed to substantial cuts in FMF. Furthermore, the conversion clause—allowing a portion of the annual grant to be converted into shekels for local defense procurement—will drop to zero by 2028. This shift particularly impacts smaller defense companies that lack established US subsidiaries.
Defense Industries as a Strategic Asset
Despite declining financial aid, major Israeli defense firms continue to leverage the America First policy through US-based subsidiaries such as Elbit America, IAI North America, and Rafael USA. Meanwhile, smaller defense startups increasingly rely on joint ventures and local partnerships to secure US contracts, a trend highlighted at recent defense exhibitions.
According to SIPRI data for 2021–2025, Israel ranks seventh globally in international arms trade, accounting for 4.4% of the market, while the United States leads with 42%. Israeli defense technologies continue to demonstrate global demand, ranging from smart targeting systems adopted by the Japanese Navy to joint manufacturing initiatives in Europe and missile integration tests conducted by Lockheed Martin in the United States.
