from the September 2016 issue

US and Israel agree $38b aid package over 10 years

Israel's ability to use 25% of the aid for domestic defense procurement will be gradually phased out between 2018 and 2023.

The US and Israel will sign an American aid package for Israel later today worth $38 billion over 10 years - the biggest ever aid package provided by the US.

The package is composed of $33 billion in direct military aid for procurement solely in the US, and $5 billion for Israel's missile defense development program, and production of the missiles. This is much less than Prime Minister Benjamin Netanyahu had hoped for at the outset of the negotiations. Israel will receive about $3.8 billion annually from 2018, when the current package expires.

The agreement is in the form of a Memorandum of Understanding (MoU), which will form the legislative infrastructure of the aid. The MoU will be signed for Israel by the acting head of the The talks over the deal have taken many long months and one of the bones of contention has been the US insistence that the existing protocol be cancelled, whereby Israel was allowed to spend 25% of the aid in procurement from Israel's defense industries. Ultimately, Israel was compelled to back down on the issue and local defense industry chiefs have warned that the new agreement will lead to layoffs in Israel.

In any event, Israeli defense sources told "Globes" that the protocol will be cancelled gradually to allow Israel's defense industries to adjust to the new situation. The money that Israel will allocate to its domestic defense companies will be cut gradually and the measure won't be fully felt until midway through the aid package in about 2023.

Reprinted from the Israel High-Tech & Investment Report September 2016

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