An IDC Analysis


New Delhi, 25 July 2002

A closer look at Israeli weapons industry

The American reaction to the proposed sale of the Arrow, a sophisticated missile defense system, from Israel has brought the Israeli Weapons Industry into focus of the world media. American officials have been quoted as saying, “the sale of the Arrow Weapon System could exacerbate friction between India and Pakistan and provide other nations ( China N Korea ) with a justification to peddle missile technology.” 

The Arrow Weapon System allows Israel to defend against short-range and medium-range ballistic missiles. Because the programme was developed in partnership with the United States , their approval is required for sales to other countries. Israel has said it would like to sell it to India and Turkey

An Arrow sale may violate the 1987 Missile Technology Control Regime (MTCR), an agreement among more than 30 countries ( India and Israel are not signatories to it) that seeks to limit the spread of missile technology. Backers of the proposed Israeli sale, including supporters in the Pentagon, cite US allegiance to Israel and President Bush's pledge to enlist US allies in missile defense development. These proponents argue that defense cooperation with India could improve US–India ties. They say it could also reward the Indian government for its retreat from confrontation with Pakistan over the disputed territory of Kashmir

There have been instances in the past when Israel has sold/transferred weaponry to countries (eg China ) not favoured by US but each case had its background and cogent reasons for getting a go-by. Before we examine those cases, it will be in order to take a look at the Israeli weapons industry, its fast-track growth, strengths and constraints.

With its tourist industry all but shuttered by a 21-month Palestinian uprising and high-tech in a slump, the Jewish state at present has come to depend deeply on the foreign currency earnings of its weapons industry, now the world's 10th largest. At various arms trade fairs around the world, Israel shows the world's military shoppers fruits of its high-tech arms industry, including its Merkava tank, unmanned spy planes and the sophisticated missile defense system. 

An Israeli Searcher UAV (Unmanned Air Vehicle) system was among the high-tech arms on display for military shoppers at the recent Eurosatory 2002 exhibition in Paris . Deftly marketed missiles, radar and other products from Israeli companies now compete with those of top-tier arms producers including the United States , reaping about $2 billion of a $27 billion yearly worldwide market. The less known fact is that tens of billions of US dollars and transfers of American military technology have helped create and nurture Israel 's industry, in effect subsidizing it.

No other country receives as much US aid or freedom to plough it into its own export industries as Israel . The benefits that US gets from its 50-year partnership with Israel are –– political leverage, a proving ground for new weapons and intelligence cooperation. This relationship is somewhat similar to what existed between India and the erstwhile Soviet Union . Transfers of US technology and funds could also be termed as good for both countries’ economies, akin to post-World War II assistance for Europe and Japan (Marshal Plan). Luring Jewish emigres from the former Soviet weapons industry has also helped Israel .

Extent of US Aid   

Since 1976, Israel has received more US assistance than any other country, with the largest aid flows beginning after Israel and Egypt made peace in 1979. Washington currently gives Israel about $3 billion per year, two-thirds of it in military grants. As US civilian aid is phased out at Israel 's request, military grants are expected to reach $2.4 billion by 2007. Alone among US aid recipients, Israel is allowed to use about a quarter of its military aid to develop its own arms production rather than for flat-out purchases of US arms.
Other aid recipients wishing the same must seek State Department approval, a difficult process well known to
India . Though Israel is the wealthiest country to receive US aid
–– with a per capita income higher than Greece or Spain –– the largesse triggers little opposition in Congress or among the US electorate thanks to the powerful Jew lobby. Elsewhere, it can provoke deep resentment. To many of the world's Muslims, it places the US on the Israeli side of its conflicts with Arabs as it did to India vis-à-vis Pakistan till 1998.

Growing Competition 

A review of arms sales announcements shows that US and Israeli companies now compete directly in missiles, aircraft electronics, precision bomb guidance systems and unmanned aerial vehicles.

  • In March 2002, US-based Raytheon Corp won a hard-fought battle with Israel 's Elisra Electronic Systems, edging them out of a $200-million contract to outfit Greek Air Force F-16s with radar jamming equipment.

  • Last year, the French government selected an airborne drone built by Israel Aircraft Industries over the Predator, made by General Atomics of San Diego .

  • A group of Israeli firms, including Israel Aircraft Industries and Elbit Systems, won a $25-million contract in 1998 to upgrade Turkey 's fleet of 28 F-5 fighter jets, beating out Northrop Grumman, the planes' original US manufacturer.

  • Last summer, Israel 's Rafael won a bid competition to sell anti-tank missiles worth at least $288 million to the Netherlands and Finland . Raytheon lost the bid. Rafael and Raytheon are competing for sales in Britain , Poland and elsewhere also.

  • Rafael also sells a new air-to-air missile called the Derby , which competes directly with similar missiles sold by Raytheon. The bomb-guidance kit it developed, called Spice, will compete with Boeing's Joint Direct Attack Munition.  

There is no doubt Israel is afforded special latitude to develop and export equipment made with US help. The American and Israeli companies are not just competitors. Israeli firms often team up with US counterparts, trading technology for lobbying access to the US military. The fact remains that the Israelis would not be where they are today if they did not have the Americans behind them. 

Exercising US Control  

Yet along with some freedom to compete, the US administration still has considerable control over the sale/transfer of Israeli made armament. There have been times when Israeli weapons moved to countries off-limits to American companies such as China . Last year, a US surveillance plane flying along China 's coast was threatened by Chinese fighter jets armed with Israeli missiles. Had the Chinese fighter pilot been given the order to fire, they could have brought down the US plane with Israeli Python III missiles.

US technology given to the Israelis in the form of the Sidewinder missile was used in the development of the Python. Another instance is China ’s new J-10 jet fighter that may be unveiled as early as this year. Experts say it is modeled on Israel 's Lavi. The Lavi, now discontinued, was based on the US F-16 and built with $1.3 billion in aid from Washington

However, in 2000, Israel bowed to US pressure and cancelled the sale to China of its AWACS-style airborne early warning radar planes. India has had similar experiences and has been told by Israeli authorities that they don't sell systems that upset the Pentagon. And the latter’s stand is, “Generally speaking, we're not in favor of such capable weapons systems being proliferated to a variety of nations around the world."

We in India have to face the bitter reality that howsoever close relations we may develop with Israel , militarily critical hardware and technologies cannot flow from them without US consent. Israel is too closely linked to US and owes so greatly to that country for its existence and survival for over five decades, that it is but a puppet with invisible strings. Whether US will give a go-ahead to the 'Arrow' system sale to India or not, depends on what its Secretary of State Colin Powell has to tell the Indian government during his upcoming trip to New Delhi

IDC perceive there will be an American ‘tat’ for an Indian ‘tit’ !

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