Analysis
Israel may have to fund its own $25 billion aircraft purchases as U.S. aid faces an early end
American assistance has helped finance major military procurement, including aircraft and air defense systems. Without the expected funding, the burden will increasingly fall on Israeli taxpayers.
If one takes U.S. President Donald Trump’s remarks to Fox News at face value, Israel’s defense and budgetary establishment has received three pieces of bad news.
First, the U.S. is expected to withdraw from the aid agreement signed in 2016, meaning it will not provide the $7.6 billion in military assistance scheduled for 2027 and 2028. Second, there will be no aid agreement for the following decade, covering 2029–2038. Third, the decision to terminate the existing agreement was made before any decisions had been reached on a proposed “military cooperation mechanism” between Israel and the U.S.
These three developments came as a surprise to the Israeli side. They are troubling from a budgetary perspective and, on the surface, represent a personal failure for Prime Minister Benjamin Netanyahu.
Netanyahu was indeed persuaded that Israel should eventually forgo the American aid agreement, but he did not envision its cancellation unfolding in this way. He believed that Israel’s standing in the U.S. had changed and that public support for aid to Israel had dwindled to near zero. As a result, he concluded that the nature of the relationship between the two countries needed to change. But he intended to remain in control of the process.
In a January 2026 video interview with The Economist, Netanyahu said Israel should wean itself off American security assistance. He made clear, however, that this would involve a gradual reduction over the coming decade. In a subsequent interview with CBS, he reiterated the point, arguing that the relationship between Israel and the U.S. should be defined by “cooperation” rather than “aid.”
Behind the scenes, it emerged that Netanyahu had adopted the thinking of Ron Dermer, who was convinced that every effort should be made to establish a foundation for a new framework of cooperation between the two countries. Dermer spoke of “one hundred billion dollars in cooperation, in honor of Israel’s centennial.”
Within Israel, however, Netanyahu has also faced opposing views. Major General Yaakov Amidror and Brigadier General Yaakov Nagel, both of whom were involved in negotiations over previous aid agreements, have argued that Israel should secure as much assistance as possible. At a certain point, the debate came down to specific figures. Nagel represents the more hawkish position, advocating for approximately $38 billion in aid over the coming decade, while Netanyahu has proposed a framework under which Israel would request only $21 billion.
Crucially, however, the idea of giving up all American aid over the next decade was never seriously on the table. Netanyahu appointed Defense Ministry Director-General Amir Baram to lead the negotiations. The guiding principles were to arrange a gradual phaseout of the existing aid agreement while beginning to lay the groundwork for a new cooperation framework to replace it.
Most of the aid funds have already been earmarked
Trump’s remarks last night caught the Finance Ministry and the defense establishment off guard. This was not what they had anticipated. The logic behind Netanyahu and Dermer’s approach was straightforward: “If we voluntarily relinquish the aid funds, we make it easier for Israel’s supporters to back us, while preventing Israel’s opponents from claiming a ‘victory’ in the form of the ‘cancellation of aid.’”
But Trump appears to have taken the termination of the aid agreement several steps further. He has eliminated the gradual phaseout, scrapped the final two years of the existing agreement and offered no commitment to future cooperation. As a result, Netanyahu’s ability to control the narrative and present the move as “ending aid of our own volition” has been significantly weakened.
The budgetary implications of Trump’s remarks are substantial. For the 2027–2028 budget, the announcement represents a major blow. The Finance Ministry and the Defense Ministry had treated these funds as a certainty and already factored them into their operational plans. It is safe to assume that the vast majority of the money has already been allocated or earmarked for specific purposes.
Israel will now need to find alternative sources of funding to cover approximately NIS 12 billion a year. That is a substantial sum, equivalent to roughly 1.7% of the state budget or the cost of building four new hospitals.
Israel will now have to pay from the pockets of its own citizens rather than those of American taxpayers.
The implications for the coming decade are also serious. While the budget for that period has not yet been finalized, much of the American assistance has traditionally gone toward the procurement of aircraft. The Israeli government has already committed to purchases totaling approximately $25 billion over the next ten years. These are aircraft Israel needs, and it will have to pay for them regardless. The difference is that the money will now have to come from Israel’s own coffers rather than from American taxpayers.
The same applies to air defense. Israel had planned to make purchases from the U.S. worth several billion dollars. Those acquisitions will still have to go ahead, but the funding will have to come from Israel.
These developments are likely to push an already expanding defense budget to even greater heights, making it harder for Israel to maintain adequate civilian and social services or return to a sustainable level of national debt.
There is a third complication. The proposed Israeli-American cooperation framework has yet to be finalized. Such an arrangement could offer Israel some budgetary relief, but Trump’s remarks suggest that the termination of the existing aid agreement is not contingent on the signing of a new cooperation pact.
The proposed framework is intended to work as follows: Israel and the U.S. would jointly develop defense projects of mutual interest, with each side covering 50% of the costs. If the Defense Ministry uses the arrangement wisely, pursuing only projects it would have undertaken independently, Israel could effectively save money. Instead of bearing the full cost of a development project, it would pay only half.
The savings under such an arrangement would clearly not come close to replacing the aid agreement. But even this alternative remains uncertain, as the two countries have yet to reach an agreement on the proposed cooperation mechanism.
One important caveat should be added to all of the above. Trump made his remarks on U.S. Election Day, and his account has not yet been fully corroborated or confirmed by Israeli representatives. The reality may differ somewhat from his description. It is possible, for example, that the existing aid agreement will in fact be phased out gradually over the coming decade, as Netanyahu had intended.
For now, the situation remains unclear. It is worth watching how the discussions develop. Time will tell.
