Why Ending Aid Won’t Change Israeli Policy—and What Would

A growing Democratic push to cut financial aid and restrict arms sales to Israel would have little effect on its treatment of the Palestinians; only sweeping economic sanctions and diplomatic pressure could force a genuine shift, a new analysis shows.

The Democratic Shift on Israel Aid

Once a fringe position, ending U.S. financial aid and blocking arms transfers to Israel is now winning significant support inside the Democratic Party. Nearly half of House Democrats voted last month to stop the $3.8 billion in annual military grants, while about 40 percent of the caucus has called for freezing offensive weapons sales until Israel convinces Congress it will not use American bombs to commit war crimes. Prominent centrists like Rahm Emanuel have joined progressives such as Sen. Chris Van Hollen, who wants a full arms freeze until Israel commits to a time-bound plan for a two-state solution.

The momentum is driven by revulsion at the civilian toll in Gaza and the expansion of illegal settlements in the West Bank, but for many advocates the goal is not just moral disengagement—it is to force a radical change in Israeli policy and ultimately resolve the conflict. Primary results, including Abdul El-Sayed’s defeat of a centrist in Michigan’s Senate primary, show that candidates taking a harder line on Israel can win. Yet the discussion often assumes that cutting aid and arms would give Washington decisive leverage. A closer look at Israel’s economy, arms production, and domestic politics suggests that reality is far more complicated.

Why Cutting Financial Aid Won’t Work, and Arms Embargoes Are Limited

The aid Israel doesn’t need

Israel is a wealthy nation: in 2025 it spent about 7.9% of GDP on its military, not counting American aid. The $3.8 billion in annual U.S. grants equals only about 0.6% of its GDP. Losing that money would push defense spending to roughly 8.5% of GDP—a minor fiscal inconvenience, not a policy crisis. Prime Minister Netanyahu has publicly said he would like to “draw down to zero” the financial component of U.S. military cooperation. Some Israeli analysts argue that forgoing U.S. aid would actually give Israel more operational freedom, freeing it from congressional scrutiny. Ending the checks would save U.S. taxpayers money and improve America’s image, but by itself it would not alter Israel’s security strategy or its occupation of Palestinian territories.

The arms embargo’s uneven bite

Israel is far more dependent on the United States for weapons. Between 2021 and 2025, 68% of its imported major arms came from America, and it is wholly reliant on U.S.-made fighter jets—F-15s, F-16s, and F-35s—even for spare parts. A halt to those supplies would ground much of the Israeli air force within weeks, according to former State Department official Josh Paul. However, the most prominent congressional proposal, the Block the Bombs Act, would target only select munitions such as bunker-busters and precision missiles. Israel has domestic substitutes for those and has launched a $110 billion push for “munitions independence,” including expanding production of heavy bombs, artillery shells, and the raw materials needed to make them. Even under a broader aircraft embargo, Israel’s vast domestic arms industry—already the seventh-largest exporter globally—would still give it overwhelming superiority over any Palestinian resistance.

Politics, not just hardware

Hardware constraints do not address the deeper political obstacle: Israeli public opinion has moved sharply away from any accommodation with the Palestinians. A 2025 Gallup poll found only 27% of Israelis supported a two-state solution, and among Jewish Israelis—who dominate politics—just 16% believed peaceful coexistence was possible, down from 46% in 2013. The leading opposition figure, Gadi Eisenkot, has explicitly rejected the two-state formula. Past examples, from Iran’s defiance of crippling sanctions to New Zealand’s refusal to budge when the U.S. suspended its security guarantee over a port ban, show that even democratic states often absorb severe external pressure rather than change core policies. Absent a fundamental shift in Palestinian leadership and Israeli perceptions, an arms embargo is unlikely to produce the Palestinian statehood its backers seek.

What Real Leverage Over Israel Would Require

U.S. policymakers should recognize that aid cuts alone are symbolic. The $3.8 billion annual grant is a tiny fraction of Israel’s GDP and ending it would not constrain military operations in the West Bank or Gaza. The real leverage lies in weapons dependency, but even a broad embargo would leave Israel capable of dominating the Palestinians militarily.
Sanctions that go beyond bombs are the next logical step. The Biden administration’s earlier sanctions on violent settlers could be expanded to cover banks, construction firms, and government agencies that facilitate settlement expansion. Full diplomatic pressure, including letting UN resolutions pass without a U.S. veto, would be needed to alter Israel’s calculus.
Arms export controls would create winners and losers. U.S. defense contractors like those supplying the F-35 program could face immediate revenue losses if fighter jet sales and maintenance are frozen. Meanwhile, Israel’s accelerated push for self-sufficiency could turn it into a formidable competitor in global arms markets, challenging U.S. firms’ market share.
The two-state goal cannot be achieved by coercion alone. Even a maximal pressure campaign would run into the hard political reality of Israeli public opinion, which strongly opposes Palestinian statehood. Any strategy that ignores the need for a credible, peace-oriented Palestinian leadership and a dramatic shift in Israeli attitudes is unlikely to succeed.

Risk & Opportunity Assessment

Commercial Risk	Medium	A broad U.S. arms embargo—especially one that includes fighter jets and spare parts—would immediately erase sales and maintenance contracts for American defense contractors, notably those involved in the F-35, F-15, and F-16 programs. A smaller embargo on select munitions would have a negligible commercial impact.
Competitive Risk	Medium	Israel’s $110 billion investment in munitions independence could allow its already large arms industry to fill gaps left by U.S. restrictions, eventually making Israeli firms more competitive in third-country markets and reducing the long-term export footprint of American defense manufacturers.
Regulatory Risk	High	The Block the Bombs Act and similar legislation could impose new export controls, licensing requirements, and end-use monitoring. A broader shift in U.S. policy might also trigger secondary sanctions or restrictions on countries that facilitate the resale of U.S.-origin components to Israel.
Reputation Risk	Low	For U.S. firms, the reputation risk is modest and tied to association with controversial operations. For Israel, further restrictions would likely deepen its international isolation, but the story’s focus is on U.S. policy levers and their limited effect on Israeli behavior.
Technology Disruption	Low	The arms in question—fighter jets, bombs, artillery—represent established technology. An embargo might accelerate Israeli innovation in drones and domestically produced systems, but the technological disruption to global defense markets would be incremental rather than transformative.
Commercial Opportunity	Medium	Israeli defense firms could capture additional domestic and export demand as the U.S. steps back, while American companies might find new customers for advanced systems that are no longer available to Israel, but the net opportunity is limited and depends on the scope of the embargo.