The House of Representatives is expected Thursday to approve the 2008 foreign aid bill, allocating the $2.4 billion needed to fully fund the last year of an expiring 10-year plan for Israel military assistance but for the first time restricting some Egyptian military funds. The vote comes on the heels of a White House endorsement of a new 10-year package which will increase funds to Israel starting in 2009. The 2008 House legislation requires the US Secretary of State to certify that Egypt is addressing arms smuggling into Gaza, as well as some human rights abuses, before $200 million of a total of $1.3 billion in military aid is given to Egypt. The rest of the aid package to the Arab power has no such restrictions, but the move is seen as a sign of growing American dissatisfaction with Egypt and loosening in the relationship between the two countries. The restriction was proposed before the Hamas takeover of Gaza, which has led to finger-pointing at Egypt for not doing enough to limit the flow of arms into the coastal strip, but the development has lent the measure more urgency. The bill needs to go through the Senate and then be signed by the president, but the increasing clamor over the tunnel issue means the funding restriction is more likely to stand throughout the legislating process. The bill also fully funds the administration's $2.4 billion request for Israel as part of the last year of a 10-year deal agreed on by both sides. Following the visit of Prime Minister Ehud Olmert, the White House also announced agreement in principle on a new 10-year plan to start in 2009. The details are due to be finalized in July when the American negotiating team, headed by US Under Secretary of State Nicholas Burns, visits Israel. "I am strongly committed to Israel's security and viability as a Jewish state, and to the maintenance of its qualitative military edge," US President George W. Bush said in a statement released Tuesday evening. "I am committed to reaching a new ten-year agreement that will give Israel the increased assistance it requires to meet the new threats and challenges it faces." The US has indicated it understands that Israel, coming off of the war with Hizbullah last summer and confronting a Hamas-controlled Gaza Strip, faces increasingly expensive strategic challenges. While Israel has welcomed the White House statement on its aid package, the Egyptians have been less enthusiastic about the restrictions Congress has slapped on its own funding. "I don't think it's a helpful step," one Egyptian diplomat told The Jerusalem Post, criticizing "the assumption that the assistance package is somehow a gift to Egypt without realizing that it benefits both countries." Congress is trying to portray it as friendly advice to a key ally, albeit one that hasn't behaved exactly as the US would like. "While Egypt is a friend and important ally in the war on terror there are concerns about the independence of the judiciary in Egypt, police abuses, and the growing smuggling operation of arms and weapons from Egypt into Gaza," said Rep. Nita Lowey (D-New York), chairwoman of the foreign appropriations subcommittee. "This language is a reminder to a good friend that there are some very real and grave concerns in Congress." But critics of Egypt say that the country is no longer a good friend, with the lack of sufficient action on the tunnels as only the latest example. Other warn that denying funds could further fray relations with a key ally in the Arab world. Though economic aid to Egypt has long faced restrictions this is the first time that military aid - termed by analysts a "sacrosanct" part of the US-Egypt relationship since the Camp David Accords - has been touched. "There's been growing frustration with Egypt in Washington and growing frustration with Washington in Egypt. It seems inevitable that it would work its way into legislation," said Jon Alterman, director of the Middle East Program at the Washington-based Center for Strategic and International Studies. "Both countries feel horribly taken advantage of the other." The upshot, he said, is a reevaluation of the billions in aid America sends to Cairo each year. There are those on Capitol Hill that might have been inclined to fight the $200 million restriction, but they will find it difficult to do so with the smuggling issue as a part of the legislation, according to one observer who tracks the issue. "It's outrageous that they're not doing more," said the observer, who asked not to be identified because of the sensitivity of the issue. "It makes it really hard for anyone to oppose" the $200 million cutoff. The Egyptian diplomat defended his country's action on the tunnel issue, however. "We do more than we would like to advertise," he said, pointing out that Israel wasn't able to fully stop the tunnel smuggling even when it occupied Gaza. "Already Egypt is making its best effort and we'll continue to do that." Israel offers a different assessment. Though the Shin Bet has seen some improvement in Egyptian efforts recently, Israel says there has been a huge increase in the flow of weapons and the like to Gaza since it pulled out. Israeli security officials point, for instance, to a jump from six tons of explosives smuggling into Gaza in 2005 to the 30 tons of explosives smuggled in 2006. Olmert brought up the issue during his talks in Washington this week, with Israeli officials saying they would like to see the US do more to pressure Egypt on this point. The State Department press office could offer no information on the House proposal Wednesday, but earlier State Department Spokesman Sean McCormack did say of the Egyptians that, "They understand that there's more to do in that regard in stopping any smuggling that goes on between Egypt and the Gaza Strip." Alterman said, I don't think the State Department would certify the improvements necessary for aid as of now, unless there's a change, then that money would not go to Egypt this year. Herb Keinon and Yaakov Katz contributed to this story.