Prime Minister Ehud Olmert on Sunday welcomed an "important and significant improvement" in the amount of American military aid to Israel, which aims to calm fears over an impending major U.S. weapons sale to Saudi Arabia.

Sources in Jerusalem told Haaretz over the weekend that Washington is prepared to increase military aid to Israel in order to ease the defense establishment's concern over the proposed American weapons sale to Riyadh.

Olmert added that Israel appreciates Washington wishes to boost moderate Arab states through weapons sales.

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"We understand the United States' need to assist the
moderate Arab states, which are standing in one front with the United States and us in the struggle against Iran," Olmert said, referring to Tehran's nuclear program.

The prime minister that said he and U.S. President George W. Bush, in talks at the White House last month, agreed Israel would receive $30 billion in U.S. military aid over the next decade, averaging $3 billion a year.

"This is an increase of 25 percent for the military aid to Israel from the United States. I think this is a significant and important improvement of the defense aid to Israel," Olmert told reporters.

According to the New York Times and the Washington Post, the proposed package of advanced weaponry for Saudi Arabia is expected to eventually total $20 billion. It reportedly includes advanced satellite-guided bombs, upgrades to its fighter jets and new naval vessels. It has reportedly raised concerns in Israel and among its supporters in Congress.

Senior officials who described the package Friday said they believed the administration had resolved those concerns, in part by promising Israel $30.4 billion in military aid over the next decade, a significant increase over what Israel has received in the past 10 years.

In addition to promising an increase in military aid, the Pentagon is also asking the Saudis to accept restrictions on the range, size and location of the satellite-guided bombs, including a commitment not to store the weapons at air bases located nearby Israeli territory, the officials said.

The package and the possible steps to allay Israel's concerns were described to Congress this week, as the administration aimed to test the reaction on Capitol Hill before entering into final negotiations with Saudi officials.

The Saudis had requested that Congress be told about the planned sale, the officials said, in an effort to avoid the kind of bruising fight that occurred on Capitol Hill in the 1980s over proposed arms sales to the kingdom.

Security officials in Jerusalem called the increase in military aid "an unusual achievement." They added that the increase was the primary objective during Prime Minister Ehud Olmert's most recent visit to the U.S. last month.

"In Olmert's meeting with President Bush in Washington, the president agreed to increase military aid by 25 percent to $3 billion per annum for the next 10 years," one diplomatic source reported.

The final details about the new aid package to Israel will be worked out during the visit by U.S. Under Secretary of State for Political Affairs Nicholas Burns to the region, diplomatic sources said, adding that his visit is slated for mid-August. They said Egypt is also expected to receive additional military aid.

Israel and the U.S. still need to determine how much of the military aid Israel will be allowed to change into shekels, in order to purchase locally manufactured defense systems. Currently, Israel is permitted to funnel 26.75 percent of U.S. military aid toward internal weapons deals.

A senior official in the Bush administration said the sizable increase was a result of Israel's need to replace equipment expended during the Second Lebanon War last summer, as well as to maintain its advantage in advanced weaponry in the face of other regional countries' modernizing their forces.

Israeli officials have made specific requests aimed at eliminating concerns that satellite-guided bombs sold to the Saudis could be used against its territory, administration officials said.

Their major concern is not a full-scale Saudi attack, but the possibility that a rogue pilot armed with one of the bombs could attack on his own or that the Saudi government could one day be overthrown and the weapons could fall into the hands of a more radical regime, U.S. officials explained.