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 The allies had been looking to agree on a 10-year military aid
package to extend the current U.S. grants to Israel worth $3 billion
annually, which are due to expire in 2017.
But Prime Minister Benjamin Netanyahu froze those negotiations ahead
of the July deal reached between Iran and world powers, which Israel
deems insufficiently stringent and against which it had lobbied the
U.S. Congress.
"With the nuclear deal now moving ahead, Israel is also moving
ahead, hoping to forge a common policy with the United states to
address the continuing dangers posed by Iran," Ron Dermer, Israel's
ambassador to the United States, said in a Facebook post.
"Discussions over a new Memorandum of Understanding between Israel
and the United States, which had been on hold for some time, resumed
this past week in Washington," he said, using a term for the
defense-aid agreement.
 Netanyahu, who is due to meet President Barack Obama at the White
House next month, warmly received U.S. Marine General Joseph Dunford
and praised him for making Israel the first stop of his first trip
abroad since becoming chairman of the U.S. military's Joint Chiefs
of Staff on Oct. 1.
"That's an expression of the tremendous alliance between Israel and
the United States," Netanyahu said, adding that the alliance was
more important than ever given threats in the region, including from
Iran.
"I think that there's common agreement that we have to stop this
aggression in the region."
"BLUE FLAG" DRILL
Israel also launched, at a southern desert base, a two-week air
force drill with the United States known as "Blue Flag".
The exercise, held twice a year, "creates a multi-national learning
environment, including fictional countries, in which participants
can practice planning and execution of large air force operations,"
the Israeli military said in a statement. It said other countries
were involved, but did not name them.
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Dunford sought to affirm the strength of military ties, which have
weathered past political disputes.
"Through all of the ups and downs in a family relationship, the
military-to-military relationship has remained strong," he said
during a visit to the Defence Ministry in Tel Aviv. "The challenges
that we face, we face together."
The aid package came up during closed-door discussions between the
U.S. general and Israel's Defence Minister Moshe Yaalon, although
not in detail, Dunford's spokesman said.
Dermer said defense-aid discussions would also be pursued during
Yaalon's talks in Washington later this month and at the White House
meeting between Netanyahu and Obama.
Before the suspension, the two sides were close to a new package of
grants worth $3.6 billion to $3.7 billion a year, U.S. and Israeli
officials have said. They have predicted that the amount could rise
further as Israel argues it needs more aid to offset a likely
windfall for Iran in sanctions relief which might be used to finance
anti-Israel guerrillas.
"Israel hopes that the discussions we are now engaged in will
culminate in a long-term agreement that will dramatically upgrade
Israel's ability to defend itself by itself," Dermer said.
(Writing by Dan Williams; Editing by Jeffrey Heller and Gareth
Jones)
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