After months of negotiating, the United States and Israel have signed a huge, $38 billion deal for military aid to the Jewish state — with some changes from previous pacts between the countries.

The 10-year agreement is the largest in U.S. history, with a significant portion of the money expected to be used to upgrade Israel's air force to Lockheed Martin's F-35 fighter aircraft.



But while the actual memorandum of understanding hasn't been officially released by either country, it has a number of conditions that are different from previous U.S.-Israel aid deals.

Most importantly, it's structured so that more Israeli defense spending goes to U.S. companies. Israel's long-standing special arrangement for funds from the United States previously allowed Israel to spend 26 percent of the money in Israel — on Israeli-made defense products. But that provision is being phased out over the first five years of the deal.



Sources on Capitol Hill with knowledge of the agreement said the deal states that Israel can't lobby Congress for more money unless a war breaks out. It says that funds for missile defense are included in the $38 billion — previously, that money was negotiated separately. And it states that Israel can't use any of the U.S.-provided funds for fuel, meaning more of the aid comes back to U.S. defense manufacturers.

The U.S. State Department referred an inquiry from CNBC to the White House, which said it would not comment on the deal beyond a fact sheet it released online. That document notes that the new agreement for $3.8 billion per year compares with the previous annual allotment of $3.1 billion, and it refers to the new pact as an increase "by every measure."