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Monday, April 4, 2011

Israel weapons exports top $7.3b in 2010

Exports expected to tie with 2009's all-time high, but officials caution that harder times are ahead, according to Defense Ministry official.
Israel's defense exports exceeded $7.3 billion in 2010, according to provisional calculations of new orders from defense companies. The final figure will probably reach $7.4 billion, the all-time high reached in 2009, according to Defense News, quoting Defense Ministry officials on Monday. The officials cautioned, however, that Israel's defense industries face harder times ahead.

A senior Defense Ministry official told Defense News that the final calculation of new contracts signed by defense companies last year would be completed in April, following thorough checks by SIBAT Ministry of Defense Foreign Defense Assistance and Defense Export Organization and the Israel Export and International Cooperation Institute.

Provisional calculations made in mid-March found that the value of new contracts in 2010 reached $7.3 billion, but that the amount would probably rise to reach the record set in 2009, when the calculations for support and follow-up contracts are completed.

The official said that, for two consecutive years, Israel has passed the $7 billion threshold, and that Israel is very proud to be a member of the premier league of exporters of defense products.

As in previous years, 80% of Israeli defense production was exported. The official said that, for a small country under constant threat, such as Israel, exports were critical for the existence of the industrial establishment, maintaining the strength of the IDF, and creating diplomatic relations through arms sales and defense cooperation.

Israel's defense exports have been rising for the past five years: from $3.5 billion in new orders in 2005; $4.9 billion in 2006; $5.6 billion in 2007, and $6.6 billion in 2008.

However, Ministry of Defense officials say that this trend will likely stall in the coming years. The reasons include steep budget cuts in Western European countries, a halt in exports to Turkey, continued restrictions on most defense exports to China, and rising competition from US and European defense industries in the Indian market, one of the largest target markets of Israeli defense companies. Another important reason is the erosion of opportunities to supply arms to US and NATO forces in Iraq and Afghanistan, as Western forces reduce their presence in the two arenas.

The senior Defense Ministry official said that, in recent years, India and North America were Israel's largest defense trading partners. He added that Israel does not expect this to change in 2011 or 2012, but that Israel would have to work harder to keep its market share.

Defense News says that Israel's growing diplomatic isolation is also having a chilling effect on its defense exports. At a conference on the licensing of defense exports held in Jerusalem on March 15, a SIBAT official said that the combination of increasing competition, budget constraints, and political factors were liable to affect SIBAT's efforts to maintain Israel's defense exports at a level of $7 billion a year in the coming years.

The official said, "We're studying the map to identify new target markets, and markets that are currently considered as marginal, but which have the potential of becoming important trading partners."

In a recent study, SIBAT identified Russia, Eastern Europe, Kazakhstan, Azerbaijan, and four Latin American countries as markets that should be fostered to become important trading partners. Subscribe to our Newsletter to receive news updates directly to your email

With an arsenal ranging from the Uzi to attack drones and airborne early warning
systems, Israel has quietly transformed itself into one of the world's top defense
Defense News has ranked Israel as No. 3 based on 2002 contracts, and an Israeli expert
told The Associated Press the country was now considered to be in the top five.
Growing sales to Turkey and India, two major new markets for Israel, have driven the
The country's success as a weapons exporter comes against the backdrop of three years
of Israeli-Palestinian violence that has stifled Israel's economic development and
deepened its isolation.
Until this summer, Israel's Defense Ministry refused to publish statistics on arms sales,
although some figures had been provided in background briefings. The subject remains
sensitive, especially because of some critics' charges that Israel passes on American
military technology to third countries.
Defense Ministry figures show Israeli weapons export contracts were worth $4.1 billion
in 2002 -- up from $2.6 billion the previous year. Israel's overall exports are around $30

In June, Defense News ranked Israel 3rd in defense exports, behind only the U.S. and
Russia. The magazine, a U.S. weekly specializing in military issues, said those
countries had defense exports of $13.2 billion and $4.4 billion, respectively.
But there is no consensus on the exact numbers, in part because some countries use
contracts for their totals and others use actual deliveries.
Efraim Inbar of Tel Aviv's BESA Center for Strategic Studies estimated that the top
five defense exporters -- not necessarily in this order -- were now the United States,
Russia, France, Britain and Israel.
Richard Grimmett of the Congressional Research Service in Washington, applying a
strict standard, credits Israel in his latest annual report with contracts of only $1 billion
in 2002, placing it eighth -- although if Israel's figures were accepted, here, too, it
would be third behind the United States and Russia.
Grimmett could not explain the discrepancy but said that "definitions count and
countries have different ways of tabulations... We don't count letters of intent or

memoranda of agreement."
A major reason for Israel's recent surge was a $700 million deal to upgrade Turkish
tanks, according to Barbara Opall-Rome, Tel Aviv correspondent of Defense News.
In addition to India and Turkey, other large markets for Israeli weapons systems include
the United States, Singapore and Sri Lanka.
Some Israeli weapons have gone to controversial buyers -- the Pinochet regime in
Chile, for example, or Li Peng's China in the wake of the Tiananmen Square Massacre
in 1989.
Today, Defense Ministry spokeswoman Rachel Niedak-Ashkenazi says, a
parliamentary committee must give its approval for all Israeli weapons transfers, and
the Defense Ministry prevents weapons systems from going to countries with checkered
political records.
Some 200 arms manufacturers operate in Israel, but five companies -- the state-owned
Israel Aircraft Industries, or IAI, Israel Military Industries and Rafael, and privately
held Elbit and Elrisa -- account for about 90 percent of all foreign sales.
Israeli and foreign analysts say Israel's evolution into a big time arms exporter reflects
the lessons learned from fighting five wars in 55 years, and the close working relations
between the Israel Defense Forces and Israeli defense industries. It also comes from

knowing what to sell and where to sell it.
Israel has also benefited from its ties to the United States and access to U.S. technology.
Much of Israeli avionics is based on U.S. know-how.
Missiles, pilotless aircraft and the upgrading of existing weapons systems are special
areas of strength for the Israeli defense industry.
Israel Aircraft Industries had $2.1 billion in defense sales in 2002, 75 percent of them
exports. Israeli and foreign media have reported that India accounts for at least 50
percent of its foreign sales.
In September, India agreed to purchase four PHALCON airborne early warning
systems, which consist of IAI avionics fitted onto Russian Ilyushin airliners. The deal,
worth an estimated $1 billion, will come into force when final details are worked out.
IAI is also angling to sell India the Arrow missile defense system, which it is
developing together with the Chicago-based Boeing Company.
Because of Boeing's participation, the U.S. government will have to give its permission
for any Arrow deal to go through.
This worries some Israeli defense officials. In 2000, the United States vetoed an
intended $2 billion PHALCON sale to China, ostensibly because of American fears of
an increased threat to Taiwan and to U.S. pilots in the event of war with China.
The deals may have even broader strategic value, said Yitzhak Shichor, an Asian expert
at Israel's University of Haifa.

"India has close relations with Iran, which Israel sees as a nuclear threat," Shichor said.
"The diplomatic leverage accruing to Israel from the Indian weapons sales could help it
in this area."
Shichor said the same process may also be at work in Turkey.
Israeli weapons sales there have amounted to $3 billion since 1996, including
modernization of U.S-made F-4 and F-5 jet fighters and co-production of air-to-ground
Shichor noted that the Israeli air force regularly trains over Turkish airspace, and Israeli
and Turkish intelligence services share information about military developments in
Syria and Iran.
"Turkey is very important to Israel's interests," he said. "Weapons sales have helped to

warm the relationship."

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