The U.S. president announced an end to annual military aid to Israel on the morning of November 3, Election Day, which the Republicans lost in a landslide. The fate of the $38 billion memorandum will now be decided by a Democratic-controlled Congress, while Netanyahu, left without a majority in the Knesset, must explain to his own generals why they learned the biggest news about their country's defense budget from American television.
On the morning of November 3, 2026, just as polling places were opening across America, Donald Trump phoned in live to a conservative cable network's morning show. Between musings on immigration, the Strait of Hormuz and the Federal Reserve's interest rate, he casually dismantled one of the load-bearing pillars of U.S. Middle East policy. "Bibi Netanyahu and I made a deal: we give Israel $4 billion a year, and a few months ago we agreed that we're ending it," the president said. The hosts asked three times what exactly he meant: cash, arms deliveries or loans. Trump answered with disarming bluntness: call it whatever you want, military aid, cash, even barter.
Within hours, the Republicans had lost both chambers of Congress.
In that same broadcast, Trump called Michigan Senate candidate Abdul El-Sayed "crazy." By the president's own admission, El-Sayed was the man he had in mind when he set out to strip the Democrats of their best card. El-Sayed won with about 52.5 percent to Republican Mike Rogers's 45.6 and will become the first Muslim in the history of the U.S. Senate. The next morning he welcomed the president's decision and called for going further by ending arms sales to Israel as well.
This one episode contains the whole story. The president gave up a position that administrations of both parties had held for half a century, got zero votes in return, and handed the new Congress a ready-made precedent. I would not rush to call this a rupture of the U.S.-Israeli alliance. No one is dissolving the alliance. What is changing is the bookkeeping, and it is changing so carelessly that the consequences of that carelessness will outweigh the billions saved.
A Check You Can't Tear Up Over the Phone
Let us start with the document Trump canceled in a phone call. In September 2016, the Barack Obama administration signed a ten-year memorandum of understanding with Israel covering fiscal years 2019–2028. The total is $38 billion, the largest military aid package in U.S. history. Of that, $33 billion goes to Foreign Military Financing (FMF), which means $3.3 billion a year for the purchase of American weapons. Another $5 billion goes to joint missile defense programs, at $500 million a year. Trump rounded $3.8 billion up to four.
The memorandum is not an international treaty. Legally, it is a political commitment by the executive branch, and Congress appropriates the actual money each year. In 2020, lawmakers wrote the memorandum's benchmarks into the United States-Israel Security Assistance Authorization Act, which was folded into the defense bill for fiscal year 2021: no less than $3.3 billion a year through 2028. A law cannot be repealed by calling into a TV studio.
One detail is rarely recalled even in Washington. Israel is the only recipient of U.S. military aid that receives its FMF funds in a lump sum, within 30 days of the budget's enactment, deposited into an interest-bearing account at the Federal Reserve Bank of New York. The second privilege is so-called cash-flow financing. Israel's Ministry of Defense may sign multiyear contracts with American manufacturers and pay for them with future years' tranches. That is exactly how the 2024 orders for a third squadron of F-35I Adir jets and for 25 F-15IA fighters were structured.
The conclusion is simple. American money is already written into payment schedules through the end of the decade. A sudden halt to aid in December 2026 would leave Israel two options: pay for these contracts out of its own budget or break them. Even before Trump's statement, Israel's commission on defense requirements had warned that without a new package, the costs of contracts already signed, including the F-35, would fall on the national budget.
U.S. fiscal year 2027 began on October 1. The words "by the end of this year" mean the president intends to shut off the flow of money in the middle of a budget cycle. He has offered no bill, no executive order and not even a memo. As of November 5, no mechanism has been disclosed. Israeli military sources expressed surprise. The Foreign Ministry referred all questions to the Prime Minister's Office, and the office itself remained silent.
There are precedents for weaning an ally off the American payroll, and all of them took years. Economic aid to Taiwan began in 1951 and was wound down in 1965, once the island no longer needed it. That took a decade and a half and roughly $1.5 billion. In July 1996, Netanyahu himself told a joint session of Congress that Israel would give up civilian aid. That aid was phased down over more than ten years, and part of it shifted into military aid. Trump, by contrast, proposes to squeeze a comparable operation into eight weeks.
Where the American Billions Actually Go
Follow the money, and the picture changes dramatically. Aid to Israel is first and foremost a government procurement order for the American defense industry, routed through an Israeli account. FMF funds are spent on products from Lockheed Martin, Boeing, RTX and hundreds of their subcontractors. Trump acknowledged as much in the same interview, praising these companies for building new capacity to produce Tomahawk missiles, Patriot systems and THAAD interceptors.
The key detail lies in a mechanism known as off-shore procurement. Previous memorandums allowed Israel to spend about a quarter of the American money in shekels, on its own industry. No other country enjoyed such a privilege. The 2016 memorandum phases it out step by step, from $815 million a year through 2024 down to zero by fiscal year 2028. In 2027, less than 8 percent of the funds can be spent outside the United States. In 2028, none can.
The result is curious. Israel's defense industry was weaned off the American subsidy back under Obama. By the end of the memorandum's term, what remains of the aid has become pure financing for American factories that merely passes through Tel Aviv. An abrupt cutoff would hurt the shareholders of Lockheed Martin and Boeing, unless Israel pays for the same aircraft with its own money. Trump is relaxed about this. "They can buy whatever they want. Europe can too," he said in response to a question about arms sales.
The missile defense program is even more complicated. Its $500 million a year goes to the joint development and production of Iron Dome, David's Sling and Arrow 3. Tamir interceptors for Iron Dome are assembled by a Rafael–Raytheon joint venture in the small town of Camden, Arkansas, and Boeing produces components for Arrow 3. Cutting this line would hit jobs in the American heartland, where the Republicans were trying to hold on to voters. American analysts have already pointed out that missile defense and counter-drone programs cannot be quickly shifted from grant aid to ordinary commercial sales.
Finally, the annual $3.8 billion is only the base rate. Wars are funded separately. According to the Congressional Research Service, total military aid to Israel, including missile defense programs, reached roughly $12.5 billion in fiscal year 2024. Most of the increase came from an $8.7 billion emergency package in April 2024. Researchers at Brown University counted $21.7 billion in weapons aid since the start of the Gaza war. According to SIPRI, the United States accounted for 69 percent of major arms deliveries to Israel in 2019–2023.
Trump's statement does not touch these levers at all. The president added a caveat: "We'll help Israel if it needs it." In budget terms, that means the regular subscription is canceled while emergency tranches stay at the White House's discretion. For Israel, this is a shift from guaranteed income to the goodwill of a particular president and a particular Congress. That is precisely the kind of dependence Netanyahu had promised to escape.
The Morning Call That Didn't Save the Senate
Trump made no secret of why he did it. The host fed him the line: the left had turned the relationship with Israel into a weapon against Republican candidates, and the president was taking that argument off the table. Trump eagerly agreed, calling the $4 billion his opponents' "best argument" and "too easy a target."
The target had indeed become easy. A Quinnipiac University poll of 1,165 registered voters, conducted June 18–22, 2026, found that 48 percent believe U.S. support for Israel is excessive. That is a record since 2017, when the question was first asked. A year earlier, in June 2025, the figure was 42 percent. It reached 66 percent among Democrats, 55 percent among independents and 20 percent among Republicans. In the same poll, 60 percent of respondents said the U.S.-Israeli war with Iran had not been worth it, and Trump's own approval rating fell to 38 percent.
The war began with joint U.S. and Israeli strikes on Iran on February 28. It lasted 108 days, until an interim memorandum was signed in June with Pakistani mediation, and it never fully ended. On the eve of the election, U.S. aircraft destroyed an Iranian air defense site that, according to Trump, had been under construction for two months in plain sight of the Americans. For voters watching gas prices, the Israel issue and the Iran war merged into a single line of expenses.
The White House's calculation apparently targeted two audiences. The first was the Democrats' progressive wing, for which aid to Israel had become a symbol of misplaced priorities. The second was the isolationists within the MAGA movement, who have long asked why American taxpayers are paying for someone else's defense. The statement was supposed to close both gaps in one move.
It worked on neither front. According to projections by the major networks, Democrats are winning about 258 House seats, more than they have held since 1993. They are also winning a solid Senate majority, flipping seats in Kansas, where a Democrat had not won a Senate race since 1932, as well as in Texas, Iowa, Ohio, Maine, North Carolina and South Carolina. That same day, Vice President JD Vance blamed the defeat on the Iran war. In Michigan, the most expensive Senate campaign in the state's history cost more than $243 million and ended in victory for El-Sayed.
The political cost of the mistake is not measured in seats. Trump publicly adopted his opponents' framing that aid to Israel is a burden to be shed so as not to lose elections. Just last week, this same Republican president openly backed Netanyahu in the Israeli election. Now he has legitimized his critics' central argument himself. Come January, Hakeem Jeffries will in all likelihood become Speaker of the House, and Chuck Schumer will become Senate majority leader. Both are traditional supporters of Israel. Beneath them, however, will sit a caucus with a record number of left-wing radicals, who can now cite Trump himself.
Netanyahu Proposed It Himself, and Became Its Hostage
According to Trump, the idea came from the Israeli prime minister. "He brought it up himself," the president said twice. On this point, Trump appears to be telling the truth.
The timeline is clear. On December 29, 2025, Netanyahu flew to Mar-a-Lago and, by his own account, proposed to Trump a gradual phase-out of military aid. On January 9, 2026, he stated the goal publicly in an interview with a British weekly: to bring American military aid down to zero within ten years. According to the American press, Trump was initially puzzled and did not understand why a recipient would turn down money. On May 10, Netanyahu went further on American television and pledged to take the financial component to zero. On June 1, he sent a letter to Republican Congressman Marlin Stutzman endorsing his resolution on a new memorandum: "The time has come to move from being an aid recipient to being a partner." That same week, according to Israel's Ministry of Defense and Secretary of State Marco Rubio, formal negotiations on a new memorandum began.
Netanyahu's motives are easy to see. The first is political. He wants to deflect the charge that Israel is draining the U.S. Treasury, and he wants to stop depending on the goodwill of a Congress where support for Israel is eroding in both parties. The second motive is trade. As early as January, Israeli government sources acknowledged a link between the aid issue and an easing of U.S. tariffs. In October, a few weeks before the Knesset election, Netanyahu told an Israeli channel: "If you think we will keep getting what I secured twice, tens of billions of dollars in American aid for the defense budget, get ready and get used to the fact that this won't happen, because America has changed."
The gap between Netanyahu's plan and Trump's statement is the gap between ten years and eight weeks. Israeli media reported in July that even the accelerated version Netanyahu presented in the Oval Office envisioned a new memorandum with about $16 billion in direct aid, plus $5 billion to $10 billion for missile defense. There was no talk of zeroing it out by December 2026.
The timing of the surprise could not have been worse. Israel voted on October 27. According to preliminary results, Likud won 27 seats, Gadi Eisenkot's Yashar party won 21, and Naftali Bennett's alliance won 12. By the count, Netanyahu's bloc is a few seats short of the coveted 61. Eisenkot has vowed not to join a Netanyahu government even at Trump's request, and the ultra-Orthodox parties hold the key to the coalition.
The former chief of the General Staff seized on Trump's statement immediately. "Netanyahu must give answers to the Israeli public this very evening," Eisenkot demanded on November 3. His line of attack is simple. Netanyahu sells himself as the only man capable of dealing with Washington, yet he warned neither the army, nor the Finance Ministry, nor the Foreign Ministry about the decision. Israel's defense, diplomatic and financial establishments are now waiting for the head of government to explain what exactly he promised.
Netanyahu is trapped by his own rhetoric. He cannot contradict Trump, his friend and ally, who publicly backed him in the election. Confirming the timeline would mean admitting that the country's defense budget will take a hit in the middle of coalition negotiations. All he can do is stay silent and wait for Washington to soften the wording.
A $110 Billion Sparta: Can Israel Pick Up Its Own Tab?
Netanyahu's financial arguments look solid. In 2025, Israeli defense exports reached a record $19.2 billion, up 30 percent from the previous record of $14.8 billion in 2024. That was the fifth consecutive record, with exports doubling in five years and quadrupling over a decade. For the first time, government-to-government deals accounted for about $10 billion, and contracts worth more than $100 million each made up 53 percent of the total. Missile and air defense systems accounted for nearly 30 percent of sales. Europe bought $6.9 billion worth of Israeli weapons, and the Asia-Pacific region's share rose from about 23 to 32 percent. Three giants, Israel Aerospace Industries, Rafael and Elbit Systems, concluded roughly 85 percent of all deals.
On December 24, 2025, at an Air Force pilots' graduation ceremony, Netanyahu announced that he and the defense and finance ministers had approved 350 billion shekels over ten years to build an independent military industry. He was utterly candid about the goal: to reduce dependence on anyone, allies included. Estimates of the dollar value vary, and that is telling. The prime minister cited about $110 billion. Defense Minister Israel Katz, who presented the program under the working title "Israel Shield," cited about $95 billion. According to Israeli figures, the plan consists of 250 billion shekels in direct budget increases and 100 billion from other sources.
The scale of the burden can also be calculated. Israel's 2026 defense budget is set at 112 billion shekels. Defense accounts for about 16 percent of government spending, roughly $35 billion out of $208 billion. Before October 2023, the defense budget stood at about $20.4 billion. The American $3.8 billion amounts to roughly a tenth of current military spending and less than one percent of GDP. Losing it would be unpleasant and painful, but manageable.
Money, however, cannot buy what the technology base lacks. Israel does not produce fifth-generation fighter jets, their engines, spare parts for the F-35 or heavy aerial bombs in the quantities it needs. The 350-billion-shekel program focuses primarily on munitions. In 2024–2025, Washington, Berlin and London exploited exactly that shortage as leverage by delaying or restricting deliveries. The aircraft and everything inside them will remain American for at least another decade.
This leads to the central paradox. Israel can achieve financial independence quickly, but not technological independence. Having given up grant money, Israel will keep buying the same F-35s from Lockheed Martin, only with its own shekels and without the favorable payment schedule. The dependence remains. Only the American funding disappears. Within the Israeli government, people are already predicting a new war between the Finance Ministry and the Defense Ministry over who will cover the difference.
Too Early for Tehran to Pop the Champagne
Iran's leadership will study every line of this story. Ali Khamenei is dead and Mojtaba Khamenei has taken power. After 108 days of war and a fragile June memorandum, any crack in the U.S.-Israeli alliance looks like a gift to Tehran. The temptation to read Trump's decision as a sign of weakening is great. Giving in to it would be a strategic mistake.
The money is the thinnest thread binding the United States and Israel. Since 2008, U.S. law has required the administration to maintain Israel's qualitative military edge over any of its neighbors, and ending the grants does not repeal that requirement. Since 2021, Israel has fallen under the area of responsibility of U.S. Central Command, which has turned bilateral cooperation into an integrated air defense and intelligence system. In October 2024, Washington deployed a THAAD battery to Israel with American crews. None of these elements depends on who pays for the next batch of bombs.
In the same interview, Trump described the model with a cynicism none of his predecessors would have dared. America has a "helper," he said, and that helper is Israel, because "we're big and they're small." By this logic, ending aid does not take away the American umbrella over Israel. If anything, it does the opposite: Washington keeps its finger on the trigger while the junior partner is asked to pay for the ammunition.
There is a flip side, too. A state that pays for its own defense starts demanding more freedom in how it uses it. This summer, Eisenkot sharply criticized Netanyahu for accepting Trump's demand to limit the operation against Hezbollah to southern Lebanon. Without American money, Washington will find such demands harder to justify on moral grounds. In practice, though, Israel will still depend on American interceptors, intelligence and spare parts. Financial autonomy does not automatically become operational autonomy.
For Tehran, this means one thing. The next strike on Israel will still be repelled by American systems and American pilots. Only the payroll will change.
The View from Baku: An Amicable Divorce That Keeps the Property Intact
For Azerbaijan, this story has direct practical implications. Israel is one of Baku's key partners in military-technical cooperation. According to SIPRI, it accounted for about 69 percent of major arms deliveries to Azerbaijan in 2016–2020. In the other direction, by various estimates, Azerbaijan supplies between a third and 40 percent of Israel's oil imports, which flow through the Baku–Tbilisi–Ceyhan pipeline. Azad Systems, a joint venture with Elbit Systems established back in 2011, produces drones on Azerbaijani soil.
If anything, the shift of Israel's defense industry to an export model benefits Baku. The Israel Shield program needs buyers who are solvent and predictable, and government-to-government deals are becoming the industry's main driver. Azerbaijan pays without American loans and without political strings attached. In this configuration, it becomes a co-production partner rather than a client. Netanyahu's goal of moving "from recipient to partner" was achieved in relations between Baku and Tel Aviv long ago.
The second dimension concerns Washington. Trump is moving allies from grants to contracts everywhere, and the South Caucasus is no exception. The Washington Declaration of August 8, 2025, signed with the participation of Azerbaijani President Ilham Aliyev, was built on a commercial rather than charitable basis. So was the Trump Route for International Peace and Prosperity project. At the same time, the U.S. administration suspended the restrictions of Section 907 of the Freedom Support Act. Baku learned to work with a United States that prefers joint investment to handouts earlier than many others did.
The third dimension is more worrying. The new Congress that will decide the fate of aid to Israel is different from the previous one. Its progressive Democratic wing, traditionally receptive to the Armenian lobby, is stronger. This same Congress will also gain leverage over the executive branch on Caucasus issues, including the renewal of the Section 907 waiver. Baku should prepare for rhetoric on Capitol Hill over the next two years that is harsher than the White House's.
Finally, there is Iran. Azerbaijan shares a border of nearly 700 kilometers with it, and any resumption of full-scale war would directly threaten the security of the Middle Corridor and Azerbaijan's transport links. Baku's position is unchanged: its territory is not used against its neighbors, and its national interest lies in keeping the conflict from spilling into the South Caucasus. If ending aid even slightly dampens Israel's appetite for acting alone, and Washington retains control over escalation, that is, on balance, good news for Azerbaijan.
Four Scenarios and a Dated Forecast
The first scenario is a literal implementation of the president's words: starting January 1, 2027, Israel receives not a cent. The odds of this are minimal. Money for the current fiscal year is either already in motion or depends on appropriations laws, and contracts backed by future tranches have been signed years in advance. An abrupt cutoff would hit American factories themselves.
The second scenario is a bureaucratic repackaging. Payments under the 2016 memorandum formally continue through 2028, while the White House announces that it will take on no new commitments. Trump gets a headline, Israel gets the money and American industry gets the orders. Given the current administration's style, this looks like the most likely outcome in the coming months.
The third scenario is an accelerated phase-out under a new memorandum. Benchmarks already exist. The Heritage Foundation, which is close to the administration, has proposed raising aid to $4 billion a year in fiscal years 2029–2032, with all funds required to be spent in the United States. Aid would then be cut by $250 million annually until it ends entirely in 2047. According to the Israeli press, Netanyahu's version envisioned smaller sums and a shorter time frame. Under any of these variants, the missile defense programs will last the longest, because jobs in Arkansas and Alabama depend on them.
The fourth scenario emerged on the night of November 4. A Democratic Congress uses Trump's statement as a springboard and moves from the question of grants to the question of conditions on arms sales. The Democratic leadership does not want this. Even hawks such as Senator Richard Blumenthal said this spring that the United States should not object if Israel itself chooses to give up aid. But the progressive flank, which now has El-Sayed as a symbol of victory, will push precisely in this direction. Almost no one on Capitol Hill is defending the money anymore. The next battleground will be Israel's right to buy American weapons without political conditions.
I am framing my forecast so that it can be checked. By December 31, 2026, Congress will not pass a single law rescinding funds already allocated to Israel, and the White House will not publish a legal mechanism for ending the aid. A new memorandum will not be signed before October 1, 2027. By September 30, 2028, when the current memorandum expires, grant financing for procurement in its familiar form will come to an end. Missile defense programs will survive as a separate, smaller line item. Israel will have to learn to pay for its own aircraft, but American taxpayers will keep paying for the interceptors for a long time to come, because those interceptors also protect American bases and American ships in the region.
Finale: The Cash Register Moves, the Warehouse Stays
Thirty years ago, Netanyahu stepped up to the rostrum of Congress and announced that Israel no longer needed American money for its economy. At the time, it was a show of strength. Israel had absorbed a million immigrants from the former Soviet Union and made a leap into high tech, and it could afford a measure of pride. The renunciation stretched over years, was coordinated with Israeli economists and American lawmakers, and was presented as a shared victory.
The current renunciation of military aid began the same way. It ended with a phone call to a morning show. Not a single Israeli general knew about it in advance, and its intended audience, the American voter, simply didn't notice. Trump wanted to take an argument away from the Democrats and instead handed them the initiative. Netanyahu wanted to present himself as the leader who freed his country from dependence. Instead, he must explain to his own military how to fill a hole in the budget in the middle of coalition horse-trading.
The alliance will not collapse because of this. Israel will still fly American aircraft, and American systems will still intercept Iranian missiles over Tel Aviv. In Camden, Arkansas, workers will keep assembling Tamir interceptors, now probably paid for partly in shekels. The cash register is moving from the U.S. Treasury to Israel's Finance Ministry. The warehouse stays in America.
Whoever pays usually gets asked for permission. The owner of the warehouse always does.