Israel, U.S. Formally Sign New Defense Aid Agreement

U.S. to transfer $30 billion to Israel over 10 years; 26 percent can be spent on Israeli companies' products.

Israel and the United States signed Thursday a Memorandum of Understanding on the new American defense package for Israel. Under the new aid agreement, the U.S. will transfer $30 billion to Israel over 10 years, compared with $24 billion over the past decade.

The aid deal signed at represents a 25 percent rise in U.S. military aid to Israel.

Israel is slated to receive the first pay out in October 2008, amounting to $2.55 billion. That sum will grow each year by $150 million, until it reaches $3.1 billion in 2011.

In addition, the agreement permits Israel to convert into shekels 26.3 percent of the aid money, thereby enabling it to procure defense equipment from Israeli companies. The rest of the aid must be used to purchase equipment from American military industries.

The agreement was signed in Jerusalem by U.S. Under Secretary of State for Political Affairs R. Nicholas Burns and Foreign Ministry Director General Aharon Abramovich. Burns then met with Foreign Minister Tzipi Livni.

"There is an axis of cooperation between Iran, Syria, Hezbollah, Islamic Jihad and Hamas that is responsible for the violence in the region," said Burns at a press conference following the signing. "A strong and secure Israel is an American interest."

According to the memorandum on the accord, an annual review will be conducted into the manner in which Israel is spending the military assistance.

Israeli negotiators tried to step up the percentage of aid that could be used for procurement from local companies, without success.

Prime Minister Ehud Olmert met Wednesday with Burns, in preparation for Thursday's signing.

Olmert asked Burns to thank U.S. President George W. Bush and Secretary of State Condoleezza Rice for their efforts in transforming the understandings with Olmert, reached during his last visit to Washington, into a binding agreement.

"The aid agreement with the U.S. is an important and significant component for Israel, and proves once again the depth of the relationship between the two countries and the United States' commitment to Israel's security, and to preserving its qualitative advantage over other countries in the Middle East," Olmert said.

Burns met Thursday morning with Bank of Israel Governor Stanley Fischer, who headed the Israeli team in negotiations with the U.S.

Burns also met Wednesday with Transportation Minister Shaul Mofaz, who oversees the strategic dialogue with the U.S. Mofaz and Burns agreed to hold a strategic dialogue in mid-October on Iran and Lebanon.

The United States is also proposing a large weapons package to Saudi Arabia, which has historically been an Israeli enemy but has indicated a willingness to attend a U.S.-backed peace conference with Israel in the fall.

Olmert has said he understands the U.S. need to bolster Saudi Arabia in facing Iran. "The increase in military aid to Israel would guarantee its strategic superiority," Olmert has said, despite upgrades to other Arab countries in the region.