TEL AVIV, ISRAEL – Israel’s US$3.5-billion sale of its Arrow 3 missile defense system to Germany, sparked by security fears after Russia’s Ukraine invasion, is the biggest yet for the small country’s outsized arms sector.
With its armed forces steeled by a tragic history of war, Israel is now the ninth largest exporter of military equipment and technology, according to the Stockholm International Peace Research Institute.
Israeli arms exports reached a new record of $12.5 billion dollars last year, double the amount from three years earlier, says its defense ministry.
Israel’s fears of attacks have led it, together with its top ally the United States, to develop hi-tech systems designed to knock incoming rockets and missiles out of the sky.
Berlin’s purchase of Arrow 3 had to be approved by Washington because the system was jointly developed by Israel Aerospace Industries (IAI) and US aerospace giant Boeing.
The system aims to shield Germany and its neighbors from ballistic missiles that can carry nuclear warheads by intercepting them as far as 2,400 kilometers (almost 1,500 miles) away, outside the atmosphere.
Israel, a country of nine million people, has fought multiple wars with Arab states since its foundation in 1948 in what was then Palestine.
Its army now occupies the West Bank and blockades the Gaza Strip.
As Israel marks a half-century since the 1973 Arab-Israeli war, its arms industry is earning billions, much of it now driven by the sharply heightened tensions between NATO and Russia.
Europe always a priority
“The war in Ukraine created a demand for military systems all over the world,” said Uzi Rubin, considered the father of Israel’s missile defense program.
“This is a situation that benefits all Western defense industries – European and US as well as Israel’s,” added Rubin, an expert at the Jerusalem Institute for Strategy and Security.
While Israeli arms sales have been fueled by the Ukraine war, Israel has refrained from selling weapons to that country in an apparent effort to avoid antagonizing Russia.
In another major contract, newly minted NATO member Finland was quick to announce plans to buy an Israeli defense system against aircraft, rockets and missiles, for 316 million euros.
“The war in Ukraine is likely to further increase European demand for systems that Israel already has a strong position in,” said Elliot Chapman, Middle East and North Africa analyst for British open-source defense intelligence company Janes.
“Europe has long been a priority for Israeli exports,” he added.
“That said, European countries are keener than ever to keep capabilities and funding in their borders,” he said, citing EU concerns about an over-reliance on defence equipment made elsewhere.
French President Emmanuel Macron in particular has argued Europe must maintain its “strategic autonomy”.
Since its foundation, Israel has received lavish US military aid – more than $125 billion, according to a US State Department report from 2021.
This has helped it build “one of the world’s most capable, effective militaries and turned the Israeli military industry and technology sector into one of the largest exporters of military capabilities worldwide,” the report said.
Arms race with our enemies
While conflicts have boosted Israeli arms sales, so has the US-brokered peace initiative dubbed the Abraham Accords, under which Israel normalized ties with the United Arab Emirates, Bahrain and Morocco in 2020.
Almost one quarter of Israeli arms sales last year were to those countries.
Despite those diplomatic breakthroughs, and efforts toward a similar deal with Saudi Arabia, Israel remains in a permanent state of heightened military alert against other threats.
“We have always been in an arms race with our enemies, this is something we know how to deal with,” said Yuval Steinitz, the chairman of Rafael, a behemoth of the Israeli defense industry.
The group spends up to five billion shekels (1.2 billion euros) on research and development per year, Steinitz said.
In recent years Israel has become a leader in unmanned aerial vehicles, which have been used on multiple battlefields, including Azerbaijan’s war in 2020 against Armenian forces which has now flared again.
Rubin said “Israel is usually exporting military systems developed for its own defense, based on lessons from its frequent wars and often battle-proven.
“This is appealing to many customers.”