The United States is seeking to amend the terms of the memorandum of understanding for U.S. military aid to Israel in the next decade. With the nearing of a final settlement deal in the latest round of negotiations, Washington is aiming for the cancellation of an article that allows Israel to pump millions of dollars of aid into its private defense budget. According to a report from the American journal Foreign Policy, if Washington succeeds in its efforts to remove this article, it will constitute a painful blow to the Israeli security sector, the highest exporter of arms in the world with the exception of the United States.

The report from the American journal confirmed that this change in the article of the agreement will be a surprise for American arms contractors who are striving to sell their military products abroad to compensate for the decrease in domestic sales. It indicated that the Middle East and Asia have a fundamental role in driving the growth of this sector; sales of weapons there form a quarter of the revenues from international sales, in comparison with 15 percent in 2008.

Lauren [sic] Thompson, who worked for a long time as an inspector for American arms contractors, said that the probable change in the agreement is ”good news for the U.S. defense industry.” The American demand to cancel this sensitive clause deprives Israeli security firms of about $10 million over the next ten years, according to the report in Foreign Policy. This is an enormous amount for the vital security sector in the Israeli economy, as the American demand compels Israel to expend money from the American aid in America to buy U.S. equipment and goods, thus serving American, and not Israeli, industries. This will benefit the giant American firms such as Lockheed Martin, the biggest military industrial producer in the world in terms of income, which makes the F-35 fighter plane, or Raytheon, an American company specializing in defense systems, one of the ten biggest defense companies in the world.

In contrast, Israel is trying, according to Foreign Policy, to persuade the Americans to drop the cancellation of this provision immediately or at least gradually. America has designated a part of its defense budget for the buying of Israeli arms since 1980 when it was trying to build up a private defense sector for the occupation. Since then, Israeli security companies have flourished and have begun competing with American defense contractors in the world market; Israel sold $5.7 billion of arms in 2015 from sophisticated radars, electronic systems, and drones and missiles. The doubling of the amount of weapons produced in 2003 was indicative of the growth of the Israeli arms sector.

Furthermore, Washington has assisted Israel in its defense industries for decades. Israel has emerged as one of the biggest exporters of drones, while also expanding its presence in Asia, with indications that Israel and Japan are currently convening talks for cooperation in the development of drones and other new weapons.

The American administration, according to a U.S. official, considers that this Israeli growth in the arms industry “no longer serves U.S. interests.” Indicating that Israel’s economy has experienced large growth for three decades (since the beginning of American assistance), he said that as Israel became one of the ten biggest exporters of arms in the world, American objectives have been achieved, before pointing out that “U.S. companies have lost out on billions of dollars in potential revenue” because of this support.

In contrast, Israel still considers the retention of excessive (weapons) stockpiles a necessity to grant it flexibility in the confrontation of “big threats” in the Middle East. According to the American journal, it argues that the Israeli industries must continue to develop and that American forces are benefiting from Israeli technology and innovations with what they bring in terms of drones, cyber warfare and specialized parts for the Apache helicopter.

The Israeli industry has grown by leaps and bounds since the signing of the latest agreement in 2007 as some Israeli defense companies began competing in the American market. Analysts in Washington for Foreign Policy indicated that Israel opened offices for them in America over the last years, achieving a profit of tens of millions of dollars and competing for American advanced weapons such as Apache helicopters, F-16s and others. The report indicated in this regard that one of the Israeli companies “scored a bit of a coup, beating out several U.S. defense giants” in 2014 to obtain a contract valued at $145 million to install sensor towers along the border with Mexico.

The report turned to the deep rift between Obama and Netanyahu, which came as a result of the nuclear agreement with Iran last year, indicating that it provoked doubts around the possibility of an agreement over military aid during Obama’s term. But “once it became clear Republicans in Congress could not muster enough support to block the nuclear deal with Iran, U.S. and Israeli officials resumed negotiations” last December.

According to Foreign Policy there were four rounds of talks regarding the memorandum of understanding. Officials and experts said that after the slow and frustrating progress of this year, the negotiations had gained momentum and there is “cautious optimism” that a final agreement will be possible before Obama leaves office in January. An official in the administration said to the journal, “We’ve made progress and closed many of the remaining gaps.” He added, “We soon hope to be able to reach a final agreement.”

The American journal explained that the deal for military aid currently on the table, which was signed in 2007 and expires in 2018, provided around $30 million for Israel over the past 10 years. The (current) contract allowed for the occupation by allocating 26.3 percent of the funding to Israel industries; no other ally of the United States is blessed with such a measure. It indicated that the agreement that is being negotiated includes the United States granting Israel between $3.5 billion and $3.7 billion each year for the coming ten years. This is a big increase from what Washington provides now, but is less than $4 billion, the amount which Netanyahu proposed from his side. An expert in the center for international and strategic studies, Jon Alterman, explained that “the political climate 10 years ago during the formation of the last aid package was dramatically different (before Obama entered the White House).” He added in contrast, that “despite political differences, the amount of collaboration between the two countries on counterterrorism and intelligence programs is higher than at any time in history.”

According to the American journal, it is expected that the state of tension which prevails over relations between Obama and Netanyahu will remain until a new president comes to the White House. This means renegotiations around a number of issues without a guarantee of any results before the summer of the coming year, at least. In this regard, Alterman considered that Israel “can’t afford not to have a deal,” due to the necessity for Israel to continue the development of its arsenal and to lay down long term strategic plans.

Former American officials have ruled out the new deal, putting an immediate end to the allocation of American money for the making of Israeli weapons. Rather, it is likely this will be completed in stages over a period of a number of years to allow the Israeli defense sector a smooth transition to self-dependence.

The former expert on terrorism with the U.S. Treasury Department, Jonathan Schanzer, considers the money provided for Israel “a significant sum of money” for a country of its size.