While many scholars find that security cooperation increases the foreign aid that allies receive from a major power, other studies show that an alliance also has negative effect and its terms can change over time. This article argues that a donor’s security environment impacts its participation in security cooperation and, subsequently, foreign aid allocation to allies. When the security environment is competitive, a donor will concentrate its resources on strengthening its ties with allies. In contrast, when the environment is favorable to a donor, it can use security cooperation as leverage to obtain policy concessions from allies, thus reducing its own foreign aid expenditures. This paper analyzes the aid allocation of three major power donors as well as 72 formal defense pacts and 70 bilateral defense cooperation agreements, and it finds that a favorable security environment allows a donor to reduce its economic contribution to its allies by 19 percent.