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He explored the strategic reasoning behind the aid, asserting that it parallels the "needs of American arms exporters" and the role "Israel could play in advancing U.S. strategic interests in the region."

Approximately a third of the entire U.S. foreign aid budget goes to Israel, "even though Israel comprises just...one-thousandth of the world's total population, and already has one of the world's higher per capita incomes."

The economy would have collapsed in 1973 due to the balance of payments problem following the Yom Kippur War. Today it is still important to shoulder the economy from external shocks such as the Persian Gulf War and the massive flow of Russian immigrants to Israel in the past few years. If the aid were reduced or eliminated, a sharp reduction in government spending would be required. Sussman adds: "The $1.5 billion in emergency aid allocated to Israel in the mid-1980s was responsible for helping to stabilize the Israeli economy and stifle hyperinflation."6

In fact, American defense and aerospace firms reap substantial benefits from U.S. aid to Israel, for it guarantees them a $1.35 billion captive market each year. Out of $1.8 billion in grants, then, Israel receives about $450 million in cash that can be converted into Israeli currency and used either to purchase Israeli-made military products or develop weapons (such as the Arrow anti-missile system). Steven L. Spiegel, a professor at the University of California in Los Angeles, points out that Israel performs invaluable services by testing and developing weapon systems for the United States, improving American-made equipment, and providing crucial intelligence information.11 Moreover, Spiegel argues that Israel's use of American-made arms not only saves the United States money but earns it more: For example, after Israel's much advertised successes with U.S. weaponry in the 1969-70 War of Attrition and the 1982 war in Lebanon, U.S. arms sales worldwide in 1972-82 nearly tripled, from about $6.8 to $19.6 billion in constant 1982 dollars.12 And while of course it does not wish for wars to occur, the United States gains valuable information by seeing its arms perform against those of Israel's enemies, lessons that "cannot be purchased, developed, or simulated."13

Israeli research and development of weapons systems is often co-financed by the US. Joint military projects have been set up, such as the development of the Arrow Missile System, which has been operational since 2000.

In August 2007, a new Memorandum of Understanding (MOU) on military aid was signed between Israel and the US. This MOU guarantees Israel $30 billion in military aid via FMF over the next decade.