The announcement was made by Condoleezza Rice, the US secretary of state, who met with the foreign ministers of GCC countries, Egypt and Jordan.
Washington argues that the aid is meant to counter threats from Syria, Iran, Hezbollah and al-Qaeda and is needed to contribute to stability in the region.
Will it really promote the defensive capabilities of US allies in the region?
Inside Story investigates.
Watch this episode of Inside Story here:
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