Deep Tech Diplomacy: Renewing the United States - Israel Memorandum of Understanding in the Age of AI
A case for a reboot of the U.S.-Israel partnership.
I’m Ylli Bajraktari, CEO of the Special Competitive Studies Project. As global competition in AI and deep tech heats up, this newsletter makes the case for a bold reboot of the U.S.-Israel partnership by building on the op-ed I co-authored with Amos Yadlin and Avner Golov. With the current MOU between the two countries expiring in 2028, it’s time to go beyond defense—think joint innovation, smarter R&D, and regional tech alliances. The future of security and innovation power may hinge on what comes next.
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Deep Tech Diplomacy: Renewing the United States - Israel Memorandum of Understanding in the Age of AI
The “Special Relationship”
In 1962, President John F. Kennedy described the “special relationship” between the United States and Israel, “really comparable only to that which it has with Britain over a wide range of world affairs.” Grounded in shared democratic values, cultural affinities, and mutual strategic interests, the relationship focused initially on economic aid, but evolved in the 1960s and 70s to encompass a strong military alliance, and today Israel is a major non-NATO ally.
Under the Clinton Administration, as Israel’s economy grew, the first 10-year U.S.-Israel Memorandum of Understanding in 1998 marked a shift towards primarily military assistance, while phasing out economic aid.
Both countries have clearly benefited not only from this assistance, but also from broader economic and technological ties. 2500 American firms do business in Israel, including 81% of the 430 multinational corporations active there. Many leading U.S. tech companies, including Google, Apple, Meta, Amazon, Microsoft, Intel, IBM, and Cisco, have established R&D centers in Israel, leveraging Israel's talent pool and innovative ecosystem to develop cutting-edge technologies vital for competitive advantage, from AI to quantum computing and biotech. Nvidia is investing more than $500m in a new AI research center, fitted with its newest Blackwell chips, alongside the data processing units including BlueField-3 SuperNIC, Spectrum-X800 and Quantum-X800, which were developed in Israel.
Israeli contracts with over 1,000 American companies cover 48 states, and the United States is home to 88 Israeli-founded unicorns supporting over 60,000 jobs.
In addition, three joint U.S.-Israel research and development foundations established in the 1970s–The Binational Industrial Research and Development Foundation (BIRD); the Binational Science Foundation (BSF); and the Binational Agricultural Research and Development Foundation (BARD) - have directly contributed to U.S. economic growth, innovation, and job creation. Their work has enabled U.S. companies across multiple sectors (AgTech, cybersecurity, energy, AI, and advanced manufacturing) to commercialize breakthrough technologies, many developed with Israeli partners. Every $1 invested in BARD by the United States has generated a $16.50 return.
In essence, the three 10-year memoranda of understanding (MOUs) signed since 1998 have formalized and strengthened areas of cooperation, providing a framework for long-term security assistance and ensuring that Israel has the necessary resources to defend itself, reducing the need for direct U.S. military involvement.
However, the next MOU between the United States and Israel - due for renewal in 2028 - must be updated to reflect a rapidly changing geopolitical landscape. It needs to address the challenges and opportunities of the age of AI. It must reflect the growing importance of innovation power - ‘the ability to invent, adopt, and adapt new technologies’ - which is now an essential element in national security, economic prosperity, and societal cohesion.
Since the 2018 MOU was signed, America’s intensifying techno-economic competition with China has underlined the importance of joint technological development with allies, particularly in deep tech fields. The Abraham Accords also offer new opportunities for multilateral tech cooperation frameworks, which are ever more important as an engine of regional integration and shared prosperity in the aftermath of the latest Middle East conflict.
Actions the U.S. Government Can Take
1. Establish a robust framework for cooperation in critical and emerging technologies
The existing U.S.-Israel Strategic Dialogue on Emerging Technologies, established in 2022, has not yielded significant progress in joint ventures and technological cooperation. This lack of momentum is partly due to the absence of a formal framework, underfunded bilateral programs relative to the needs of deep tech innovation, and insufficient awareness of the risks associated with Chinese technological influence in Israel.
However, existing legislation, such as the Strategic Partnership Act of 2014, can be harnessed to solidify Israel’s position as a key U.S. ally in technology and innovation. This Act already expresses the U.S. policy of strategic cooperation between the two countries on defense, national security, energy, cybersecurity, and more. The Strategic Dialogue identified some of the critical technologies which should form the basis of more extensive formal cooperation, namely AI, quantum, and energy tech, as well as stressing the need for increased coordination on trusted technology ecosystems to allow safe collaboration.
In addition, structuring cooperative activity around three core areas can reorganize and resource the partnership to thrive in a changing geopolitical and technological environment.
2. Organize around three pillars for cooperation
I. National Security and Defense
As a first step, renewal of the security aid MOU signed between the United States. and Israel in 2016 is essential to maintain a qualitative military edge for the United States and its allies. The current MOU supports joint development of technology essential for U.S. national security and defense, such as the “Trophy” Active Protection System installed in M1 Abrams tanks, or the F-35 Lightning II fighter jet’s Helmet Mounted Display System, jointly developed by Israel’s Elbit Systems and U.S.-based Rockwell Collins, which offers unmatched situational awareness for U.S. fighter pilots.
Israel’s Iron Dome air defense system has also been acquired and co-produced by the United States. Iron Dome was one part of the layered air defense system which - combined with Israel’s allies - successfully thwarted Iran’s unprecedented missile and drone attacks in April and October 2024, intercepting the vast majority of the weapons launched by Iran.
The two countries have institutionalized cyber cooperation to bolster defenses. The United States and Israel formed a joint Cyber Working Group in 2017 to share threat intelligence and coordinate responses to cyberattacks. Intelligence cooperation is also a vital part of the security partnership, and this was the case in Syria and Iraq, where Israeli sources helped map and penetrate ISIS networks, complementing U.S. intelligence.
From tank protection to fighter pilot systems, to homeland security and cybersecurity, Israeli innovations integrated into U.S. platforms give American servicemembers a technological edge that saves lives and improves mission success. To maintain these competitive advantages, the United States. should renew the defense MOU, ensuring continued R&D collaboration on next-generation air defense systems and homeland security.
II. New MOU on Critical and Emerging Technologies
China’s centralized funding and ability to rapidly commercialize products is narrowing America’s lead in critical technologies such as AI, quantum computing and fusion energy. The unveiling of Deepseek’s AI models from China underscores not only the intensity of this contest, but also the need for enhanced cooperation with key U.S. allies to strengthen U.S. and allied competitiveness.
To reflect the new reality of techno-economic competition since 2016 US-Israel Memorandum of Understanding on security assistance, a new, additional MOU should focus on the following:
Joint investment in critical and emerging technologies. Building on the Strategic Dialogue, the MOU should direct funding towards the following five areas at the heart of both the U.S.-China innovation power competition and localized challenges in the Middle East: AI; advanced computing (including quantum); Biotech; food security, and energy security.
Enhance the current three US-Israel binational funds (BIRD, BARD, BSF) for the needs of deep tech Research & Development. The three joint R&D foundations have yielded outsized results since their inception in the 1970s. BSF has supported numerous scientific and technological breakthroughs, including pioneering advances in computer science and robotics. BARD projects have yielded at least $2.7 billion of benefits for the U.S. economy. BIRD - through its work to support industrial R&D between U.S. and Israeli companies - has helped to generate direct and indirect sales of over $10 billion. However, their annual funding (below $40 million) represents just 20% of the average annual allocation received by Israel from the European Union’s Horizon 2020 research and innovation program. Between 2014-2020, Israeli entities secured approximately €1.3 billion in funding across 1,666 grants. Adjusting the budgets of the three binational funds is necessary to achieve and maintain leadership in foundational technologies.
“De-risk” Moonshot projects. Many complex, interdisciplinary scientific challenges, such as producing energy from nuclear fusion, are simultaneously too big for a single academic lab, too complex to manage across multiple labs, and not directly profitable enough to be run by a venture-backed startup. However, there are proven and effective models that should be deployed to maximize private sector involvement in the development and commercialization of high-risk, R&D intensive projects. This is especially important at a time when critical technologies, from AI to microelectronics, are driven not by national strategy but by private sector innovation.
To “de-risk” moonshot projects, a new binational collaborative fund could assume some of the business risks of success, asking only for its funding to be returned in the event of commercial success, rather than also taking a share of a moonshot’s future profits. This is part of the R&D fund model of the Israeli Innovation Authority, and the BIRD model, whereby companies are obliged to repay funding received only if they achieve successful commercialization. BioMade, a U.S. biomanufacturing initiative sponsored by the Department of Defense, also offers valuable lessons to facilitate joint R&D projects. For example, the BioMADE shared IP model could inform a new U.S.-Israel MOU, including provisions for the sharing of intellectual property rights, ensuring that both countries benefit from the innovations resulting from their collaboration. This would incentivize further investment and development in the field. The MOU could also include provisions for the exchange of scientists, researchers, and students between the two countries, fostering knowledge transfer and building a skilled workforce in both countries in critical technology areas, such as energy security and quantum computing.
III. Multilateral Tech Agreements
Finally, a renewed U.S.-Israel tech alliance should provide a sound foundation for strengthening regional multilateral arrangements - including the Abraham Accords and the India - Middle East - Europe Economic Corridor (IMEC). This is essential for two reasons. First, it is a vital counterpoint to the increasing technological, military, diplomatic, and economic cooperation between the Axis of Disruptors. Second, it presents a positive vision for expanded technological cooperation for AI infrastructure growth but also on less sensitive technology fields vital for regional development, such as agriculture, health, and water.
Conclusion
The United States must work closely with its allies and partners to stay ahead in the global technology competition. In a changing political landscape increasingly defined by innovation power, the United States. can take bold steps to evolve its relationship with Israel to meet the needs of the age of AI. A focus on three pillars of cooperation - national security, deep tech, and multilateral engagement - can leverage innovation for regional stability and shared prosperity.