Negotiations on a new U.S. military aid package for Israel have stalled over how much the annual grant should be.

At the latest round of talks in Jerusalem a week ago, the Americans agreed to increase the aid by no more than $400 million a year, a senior Israeli official said. Israel, however, is expecting an additional $1-2 billion per year.

An Israeli official said the impasse is a result of Prime Minister Benjamin Netanyahu’s “unsuccessful navigation” vis-à-vis the White House. He said Israel could have obtained a bigger aid package had Netanyahu agreed to negotiate the deal when U.S. President Barack Obama offered to do so, in April and again in July last year.

Under the military aid package signed by Israel and the United States in 2007, the Americans undertook to give Israel $30 billion over 10 years, i.e. an average of $3 billion a year. The current aid package will expire at the end of 2018. Since November, following Netanyahu’s meeting with Obama at the White House, Israeli and U.S. teams have been negotiating a new package to set the annual grant Israel would receive until the end of 2028.

The Prime Minister’s Office has denied this report.

Before the talks began, the defense establishment expected a dramatic increase in U.S. assistance of up to $5 billion a year, or $50 billion over a decade.

At the opening of the talks, speaking at the Knesset Foreign Affairs and Defense Committee, Netanyahu said he was interested in increasing the aid by more than $1 billion on average every year (making the budget $40 billion or more over a decade).

However, in the three rounds of talks over recent months, it appeared that the Americans have been offering far less than the Israelis expected.

Open gallery view U.S. National Security Adviser Susan Rice, left, with Defense Minister Ya'alon in Washington, in December 2015. Credit: Ariel Hermoni / Israel Defense Ministry

A senior Israeli official, who asked to remain anonymous due to the issue’s sensitivity, said the Americans claimed they were under budgetary restrictions. They also said some of Israel’s demands, especially regarding aircraft armament stocks, were exaggerated.

The official said that the last round of talks in Jerusalem, on February 4-6, ended with no agreement. The Americans were ready to increase the aid by only $400 million – from an average of $3 billion a year in the current agreement to an average of $3.4 billion a year in the new one, he said.

The differences between the Israeli and U.S. positions led Netanyahu to say in last Sunday’s cabinet meeting that if Israel’s security needs would not be met, he would not sign a deal and would instead wait for the next president to take office in January 2017.

Netanyahu’s statement was reported in Haaretz and enraged the White House. Senior U.S. officials warned Israel that it would not get a better deal with the next president, and that the prime minister had better sign the agreement now.

Netanyahu and his people understood from the sharp American reaction that they had made a mistake. The official said Israel’s ambassador in Washington, Ron Dermer, advised Netanyahu last week that despite the differences, it was in Israel’s interest to sign the agreement during Obama’s term and not to wait for the next president.

Netanyahu last week conveyed to the White House both in public statements and in back channels that he was interested in reaching an agreement, but would like a bigger aid deal. At Netanyahu’s request, Mossad chief Yossi Cohen contacted U.S. National Security Advisor Susan Rice and tried to convince her of the need to increase the military aid by more than the Americans were offering.

Open gallery view Mr. Ya'alon goes to Washington: The Israeli defense minister greets his U.S. counterpart, Ashton Carter, last Wednesday. Credit: Ariel Hermoni/Defense Ministry

Another Israeli official said that U.S. ambassador in Israel Dan Shapiro said the negotiations between the teams had run its course and the disagreements must now be settled by the leaders.

At the beginning of March, Defense Minister Moshe Ya’alon will visit Washington and meet his American colleague, Ashton Carter. Two weeks later, Netanyahu is set to visit Washington, where he is expected to meet Obama. The military aid package will be discussed during both visits.

The official said Ya’alon and Netanyahu could achieve a larger increase in the military aid during their visits. He said there's a chance Obama will agree to increase the aid by another $300 million, to an average of $3.7 billion a year. “But I don’t believe we can get to $4 billion,” he added.

The first official said the current situation is the result of Netanyahu’s insistence not to open negotiations with the White House until after the U.S. Congress had voted on the nuclear agreement with Iran at the end of September.

In April 2015, after Iran and the powers had reached a framework agreement on the nuclear program, Obama offered to open talks immediately on a defense aid package for the next decade, but Netanyahu refused.

In July, after the agreement with Iran had been signed, Obama again proposed to Netanyahu beginning negotiations on the new military aid deal, but Netanyahu again turned him down.

Open gallery view Benjamin Netanyahu, right, shakes hands with House Speaker John Boehner, a good Republican buddy, in Congress (March 3, 2015) Credit: Bloomberg

The reason given for Netanyahu’s refusal at the time was his desire to foil the nuclear agreement by enlisting Congress against it. Netanyahu argued that if he started talks then, he would be signaling to Congress that he had accepted the nuclear agreement and thus lose the chance of thwarting it. Instead of opening talks with the White House, Netanyahu sent Dermer on an aggressive campaign in the Senate and House of Representatives against the nuclear agreement.

“The situation we’re in is the result of Netanyahu’s unsuccessful navigation,” the official said. “His whole tactic collapsed. Nobody criticized his objection to the agreement with Iran and the struggle he conducted, but the question was whether to start the talks before the Congress agreement. Netanyahu didn’t enable that and now we’re getting less than we could have, and Israel’s security interest is harmed.”

The White House said, “Given the sensitivity of the negotiations, we prefer not to read out what is going on in the discussions, including what may or may not have been offered.”

The Prime Minister’s Office stated in response, “This report is riddled with mistakes, both in facts and in interpretations. The Israeli team is continuing to work with the American team with the intention of reaching an agreement.”