The aid deal signed in a ceremony in Jerusalem represents a 25 percent rise in U.S. military aid to Israel, from a current $2.4 billion each year to $3 billion a year over 10 years.
Nicholas Burns, the U.S. undersecretary of state for political affairs, and Israeli Foreign Minister Director-General Aharon Abramovitz signed the memorandum of understanding on the assistance at a ceremony in Jerusalem.
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The package was meant in part to offset U.S. plans to offer Saudi Arabia advanced weapons and air systems that would greatly improve the Arab country's air force. Israel has said it has no opposition to the U.S. aid to Saudi Arabia, which comes as the United States strengthens moderate Arabs in facing the growing influence of Iran.
"This assistance is not a result of a mercy request of Israel but out of a vital American interest that Israel be strong here," Danny Ayalon, a former Israeli ambassador to the United States, told Israel's Army Radio. "They see Israel not only as a sister country, as a democracy, but also as the most stabilizing force in the Middle East that maintains American interests in the region."
The aid package to Israel was finalized in June in Washington between U.S. President George W. Bush and Israeli Prime Minister Ehud Olmert. Olmert has said the increase in military aid to Israel would guarantee its strategic superiority, despite upgrades to Arab countries in the region.
The U.S. has long-standing commitments to Israel and to Egypt, which in 1979 became the first Arab state to make peace with Israel. Egypt currently gets $1.3 billion a year in military assistance. At the same time, the U.S. is seeking to strengthen other moderate Mideast allies, largely as a counterweight to Iran's growing influence.
The United States and Israel accuse Iran of developing nuclear bombs, a charge Tehran denies. Iran, whose leader has repeatedly called for Israel to be to wiped off the map, is viewed by Israel as its main enemy. Shiite Muslim Iran also concerns the Saudis and other Sunni-led Arab allies of the United States.
Complete coverage is available in FOXNews.com's Mideast Center.