Billions of dollars at stake as Israeli military looks to wean off aid from Washington
By Neri Zilber, Reposted from Financial Times, January 27, 2026
[EDITOR’S NOTE: In 2024 alone, the United States gave Israel $23 billion in military aid – paid for with US taxpayer dollars – two thirds of Israel’s entire 2026 military budget. A majority of American voters now oppose sending additional economic and military aid to Israel, a stunning reversal in public opinion since the Oct. 7, 2023, attacks; meanwhile, overall support for Palestine has been on the rise.
Thanks to US tax dollars providing billions in military aid to Israel, Israel is able to provide its citizens with universal health coverage and heavily subsidized college tuition. Israel’s national debt and unemployment rate are lower than our own. Read more here.]
Israel is readying for talks with the Trump administration over a new 10-year security deal, with the aim of extending US military support even as Israeli leaders prepare for a future without billions of dollars of American cash grants.
Israel’s current 10-year “Memorandum of Understanding” with the US, under which Israel has received $3.8B annually, is set to expire in 2028, and Prime Minister Benjamin Netanyahu has said he wants US military aid to “taper off” in the coming decade.
Gil Pinchas, speaking to the FT before stepping down as chief financial adviser to Israel’s military and defense ministry, said Israel would seek to prioritize joint military and defense projects over cash handouts in talks he expects to take place in the coming weeks.
“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,” he said, in the first public comments by an Israeli defense official about the expected negotiations. “The view of this needs to be wider.”
Pinchas said pure financial support — or “free money” — worth $3.3B per year, which Israel can use to purchase US weapons, was “one component of the MOU [that] could decrease gradually”.
But the MOU also includes $500M annually earmarked for joint projects such as the Iron Dome and David’s Sling, air-defense systems that protect against rockets, drones, and missiles.
The brigadier general said Israel would seek to discuss current and future joint development projects for military systems that could continue on an ad hoc basis, and not necessarily as part of a new decade-long deal agreed in advance.
“You put money, and they put money, and you both win,” he said. “We need to see what the American side says.”
Pinchas also referred to US air defense systems and fighter jets deployed across the Middle East to defend Israel from Iranian missiles and drones, as well as the US B-2 bombers that dropped bombs on Iranian nuclear sites last June, as examples of American aid beyond the MOU that were worth “many billions more”.
Since Hamas’s October 7 2023 attack from Gaza on southern Israel triggered two years of regional conflict, US assistance has proved essential for Israel in what became the country’s longest and most expensive war.
On top of the annual MOU and direct military support, the administration of former President Joe Biden also provided $8.7B in additional funding, including to refill stockpiles of air-to-ground munitions used repeatedly in Gaza and elsewhere.
The future of such US support is unclear, with President Donald Trump skeptical of foreign aid in general and both progressives on the left of the Democratic Party and far-right MAGA Republicans increasingly critical of Israel.
Lindsey Graham, a staunch pro-Israel Republican senator, gave voice to the shifting tides in Washington earlier this month by claiming that, with Israel “apparently” wanting to change the US aid system, he would seek to “dramatically expedite” the timetable to do so.
As the chief financial officer in the Israeli defense establishment for the past five years, Pinchas and his team of 400 economists were responsible for tracking every shekel that came in and went out.
“The system doesn’t move without money,” Pinchas said, alluding to the $190M he released on the day of the Hamas attack for transportation costs and the mobilization of 226,000 reservists.
More than 70,000 Palestinians have been killed in the conflict, according to health authorities in the enclave, with the Israeli offensive reducing much of the territory to a rubble-filled wasteland. Nearly 2,000 Israelis have also been killed during that time, the majority during the initial Hamas attack.
That first month of the war, according to Israeli data, cost $400M per day, as the Israeli military frantically increased its arms stockpiles from a dozen countries worldwide and launched a ground invasion of Gaza.
With peaks and troughs in the fighting, the daily average cost ultimately decreased to $232M per day. In total this came to $70B in direct war costs, part of a total of $112B in costs to the economy, according to official figures.
The 12-day war between Israel and Iran last June alone cost Israel around $6B, half of which went to armaments and air defense interceptor missiles.
The controversial Israeli “Grim Beeper” intelligence operation in 2024, in which Israel detonated thousands of exploding pagers targeting Lebanese militant group Hizbollah, cost $300M going back years, Pinchas said. This included both the components themselves and hours of work by Israeli officers and agents.
Israeli officials from the military, finance ministry, and Bank of Israel say the country has come out of two years of war in a strong economic position, pointing to rising growth, a strengthening currency, and a manageable debt-to-GDP ratio.
While defense spending soared to 7.6 per cent of GDP in 2024, double the figure of two years earlier, it is set to fall to about 5 per cent according to the latest budget, totaling $35B. Critically, these figures do not include US financial aid.
Israeli officials expect military spending to further decrease as a share of GDP in the coming years, despite the threat of renewed escalation with Iran, the question marks surrounding Washington’s continued largesse, and Israel’s own massive $100B defense build-up for the coming decade, set to start next year.
While much of the increase in spending stems from rearmament and the lingering costs of the recent war, the need to maintain relatively large numbers of troops on multiple fronts, including Gaza, Lebanon, and Syria, will remain both a financial drag and a domestic political liability.
The Israeli military had asked for more money and more reservists for the coming year. But the Netanyahu government imposed a 40,000-cap on the daily average of reservists on duty. By comparison, around 6,000 reservists per day were on duty prior to October 7.
“In some of the places we’ll simply decrease the numbers and manage risk, so to speak,” Pinchas said.
Neri Zilber is a reporter for the Financial Times.
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