US to edge Israel out of international arms market

Author: 
By Tim Kennedy
Publication Date: 
Thu, 2001-04-26 03:18

Israel is concerned that American arms manufacturers will soon pressure the Bush administration to ban Israeli weapons sales to India and to many other countries that are fertile market for new military technology. Competing arms manufacturers say Israeli observers, and not actual national security concerns were behind a similar campaign to stop the sale of Israel’s Phalcon advance radar system to China last summer.


 According to, a Jewish weekly published in New York, Israeli Defense Minister Binyamin Ben-Eliezer last week summoned some 60 executives, representing all the major arms manufacturers in the country, to visit his Jerusalem office for a rare meeting. At the meeting, says, Ben-Eliezer sounded alarm bells that exports to India might be banned until sanctions against India and Pakistan are removed and American products can compete on the sub-continent.


Israeli analysts believe that the remaining sanctions placed by Washington on India, along with Pakistan, after the 1998 nuclear tests there, are about to be removed. This may spell trouble to the Indian-Israeli arms honeymoon. In many cases Israeli companies cooperate with their American counterparts in the development and manufacture of weapons systems.


Where American technology is involved, the United States has veto power over sales to third nations. But even systems that, like the Phalcon, are developed in Israel without any American involvement are subject to some pressure, Israeli industry sources say. Some of this pressure may have nothing to do with strategic or security issues, and it may not even be exerted directly by Washington. Some time ago, Israel was trying to sell its Kfir fighter planes to Taiwan, but Taipei preferred the American made F-16. The bitter joke among Israelis was that they would lose the contract “even if we offered the Kfir for free, and the F-16 was sold without an engine.” To countries like Taiwan, the long-term strategic cooperation with the United States is sometimes more important than anything else.


Born of its own defense needs, the arms industry is one of Israel’s largest exporters. These days, defense industries produce more arms than the military can buy so Israel exports nearly 70% of its weapon systems. This is a mirror image of the situation in the United States, where the military buys 70% of American-made arms. Last year Israel signed contracts worth $2.38 billion in arms exports.


The number would be much higher but for some major cancellations of signed contracts, of which the Phalcon was only the most publicized. Israel’s defense industry sees in India, along with other Asian markets, a huge potential for future sales. According to an industry source, the Indian military, based largely on old, Soviet weapons, is a perfect fit for the Israelis, who excel in refurbishing and modernizing such forces. “India is a huge target market to all arms manufacturers in the world,” a senior Israeli defense official tells. “They arm themselves fast and their defense budgets are growing. They will buy from us what they can’t buy anywhere else.”


Since the two nations renewed diplomatic relations in the early 1990s, India has increased steadily its ties with Israeli arms makers, and in the next four years Israel hopes to reach $2 billion in arms sales there. Israel Aircraft Industries, for instance, has recently displayed its Lahav in a Bangalore, India, air show, hoping to win a huge contract to revamp India’s air force with this super modern assault helicopter built on an old Russian Mig product. It also signed an agreement-in-principle for the sale of unarmed aerial vehicles, which may be worth $300 million. Another contract, worth $270 million, may bring the Barak sea-to-sea missile to India’s military. After much arm-twisting in Washington on the eve of the Camp David talks, then-Prime Minister Ehud Barak announced the cancellation of the contract to sell the Phalcon to China.


The loss of the Phalcon deal was so traumatic that top advisers to Prime Minister Sharon pressured him to raise the matter again on his visit to Washington last month. After a debate, in which other advisers cautioned against reopening a can of worms, Sharon mentioned the issue in his meeting with National Security Adviser Condoleezza Rice, who reportedly cut him off quickly with the advice,


“Don’t go there.” Most American observers insist it was a mistake for Israel to sign the contract with China criticism made sharper by this week’s diplomatic confrontation between the United States and China over a downed US surveillance plane. Even Marvin Klemow, IAI’s chief Washington lobbyist, disagreed with some of his industry colleagues in Israel. “It was American policy, led by Congress,” that led to the cancellation of the Phalcon, he tells, and not pressure from rival arms manufacturers.


Israelis point to a recent Asian trip by Russia’s President Vladimir Putin in which, according to published reports, he offered to sell China a Russian IL-50 plane, equipped, most likely by a French company, with unspecified “Western technology” on a par with the Phalcon.


“So the Chinese will get their system,” an Israeli source tells, “and the Americans will not be able to know how it works, as they could with the Israeli Phalcon.”

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