Israel Must Expand Defense Spending and Reassess Its US Strategic Alliance

The Knesset will be asked in a special session this month to approve an increase in the defense budget for urgent weapons procurement, raising the allocation from NIS 70 billion to NIS 90 billion (approximately $20 billion to $25 billion).

The move will lift Israel’s annual defense budget to roughly NIS 184 billion (about $61 billion). The long‑term military build‑up plan has risen by some NIS 50 billion ($17 billion) in a single year, and the defense budget is projected to double again over the coming decade.

No comprehensive funding source has yet been identified for these massive outlays, meaning the government will likely need to trim other ministry budgets and introduce new taxes.

There is no alternative. The conflict with Iran and its proxies shows no sign of ending; 2027 is expected to bring continued fighting on multiple fronts against Iran, Hamas, Hezbollah and the Houthis.

The eastern border and the West Bank remain volatile, and Turkey’s posture toward Israel is increasingly assertive. Unforeseen instabilities could emerge at any time.

Israel must prepare for this security environment, regardless of which government takes office in Jerusalem this autumn.

Consequently, Israeli citizens will have to shoulder a heavier financial burden, especially as the country moves toward a more self‑reliant defense industry.

How Decades of Misguided Defense Policies Left Israel Unprepared

Israel was caught off guard by Hamas in 2023 after two decades of military downsizing and flawed defense strategies.

In 2013, then‑IDF Chief of Staff Lieutenant General Benny Gantz launched a multi‑year plan that cut funding, downgraded ground forces and emphasized air, cyber, intelligence, special operations and long‑range precision strikes.

Gantz and Defense Minister Ehud Barak viewed the reduced maneuverability of ground forces as acceptable, assuming the IDF would not need to fight a conventional army or conduct large‑scale ground operations.

His successors—Chief of Staff Gadi Eisenkot, Defense Ministers Moshe Ya’alon and Avigdor Liberman—continued these problematic policies.

The result was an IDF that was ideologically, doctrinally and logistically ill‑prepared for prolonged high‑intensity warfare against entrenched jihadist adversaries.

The price of this unpreparedness has been staggering: three years of fighting since late 2023 have cost roughly NIS 400 billion ($134 billion) in direct military expenditures, with Arrow missile interceptions alone exceeding $1 billion.

These figures exclude the medical and rehabilitative costs for 15,000 wounded soldiers, many facing long‑term care, trauma and mental‑health challenges, as well as the needs of 2,000 bereaved families.

They also omit the expense of supporting displaced Israelis in the Negev and Galilee and rebuilding destroyed communities. The total burden on Israeli society is enormous.

Israel has recognized the need for a larger military and a more independent defense‑industrial base, viewing the latter as protection against embargoes such as the 2024 U.S. delay on 2,000‑pound bomb deliveries.

In December 2025, Prime Minister Benjamin Netanyahu announced a NIS 350 billion ($110 billion) investment over the next decade to develop an indigenous arms industry. That commitment has since risen to NIS 400 billion ($133 billion).

This year, Elbit secured two contracts worth about NIS 1 billion: one for heavy aerial munitions and another to build a national raw‑materials facility, a move highlighted by current IDF Chief of Staff Lieutenant General Eyal Zamir as a key lesson from the war.

Rafel has signed agreements to expand Iron Dome production, while Israel Aerospace Industries will ramp up Arrow interceptor output.

Israel is also investing heavily in domestically produced systems such as the Roem artillery piece, the Barak tank, the Namer armored personnel carrier and the Eitan wheeled combat vehicle.

The navy is pursuing a “blue‑and‑white” shipbuilding program to reduce reliance on foreign yards, including the construction of five Reshef‑class missile ships at Israel Shipyards at a cost of NIS 2.8 billion ($780 million).

To diversify suppliers, Israel is partnering with India for joint production and importing components from the Far East, thereby lessening dependence on the United States. Elbit and IAI now co‑produce the Hermes and Heron UAVs in India, respectively.

Technological superiority remains a priority. A case in point is the Iron Beam laser air‑defense system, for which Israel has signed an initial $500 million contract with Elbit and Rafel. Successful testing could drive total spending above $2 billion.

Overall, defense spending as a share of GDP has surged from 4.5 % in 2023 to 8.8 %—the world’s second‑highest ratio.

Alongside these heavy outlays, Israel must reshape its security relationship with the U.S. to emphasize reciprocal production rather than one‑way aid.

Israel’s 10‑year security memorandum of understanding with the United States, which allocates congressional funds for Israeli purchases, expires in 2028 and will not be renewed unchanged.

A new accord should shift from unilateral reliance on American assistance to a mutually beneficial production partnership.

The emerging framework is reflected in the FY2027 U.S. National Defense Authorization Act, which creates the “U.S.–Israel Defense Technology Cooperation Initiative” to collaborate on artificial intelligence, quantum computing, directed‑energy weapons and autonomous systems.

Dr. Raphael BenLevi of the Misgav Institute has drafted a comprehensive blueprint for post‑aid strategic‑industrial cooperation. After consulting extensively with officials in both countries’ defense establishments and industry leaders, he proposes concrete language for a new MOU and Letter of Intent.

BenLevi’s proposal envisions a gradual phase‑out of Foreign Military Financing, joint weapon development and production, co‑development of next‑generation technologies, integrated war‑fighting concepts, enhanced intelligence sharing, a limited U.S. military presence in Israel, regional cooperation and Israeli contributions to broader U.S. global interests.

This approach will increase Israel’s strategic value to the United States while reducing its exposure to boycotts and political pressure during critical decisions.

The Jewish Institute for National Security of America (JINSA) echoes this view. In a recent report titled “Shifting the Center of Gravity: Transforming the US‑Israel Security Partnership,” JINSA argues that deeper military, technological and economic cooperation will make America safer abroad, more prosperous at home and better positioned against adversaries.

JINSA recommends extending an additional aid MOU to sustain $3.8 billion in annual U.S. assistance through FY2038, coupled with initiatives that deepen operational and strategic integration between the two militaries.

It proposes granting Israel “Model Ally” status, which would create a framework for joint research and development, co‑production and reciprocal offsets, arguing that integrated defense industries would bolster both nations’ industrial bases and supply chains.

JINSA also advocates a larger U.S. military footprint in Israel, including a permanent air‑force presence at Uvda Air Base, a forward CENTCOM headquarters for regional planning, expansion of prepositioned U.S. weapons stocks and even a limited mutual‑defense treaty with a narrow activation threshold.

Israel’s wartime economy and high‑tech capabilities make such a transition both realistic for Israel and advantageous for the United States—something that would have been unthinkable only a few years ago.

The writer is a senior fellow at the Misgav Institute for National Security & Zionist Strategy. The opinions expressed are his own. His columns on diplomacy, defense, politics and Jewish affairs over the past three decades are available at davidmweinberg.com

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