Israel Seeks German Arms-Aid Deal

1B Euro Package To Include Surface Ships, Submarines

By barbara opall-rome
Published: 18 January 2010
Courtesy of Defense News

TEL AVIV - Germany and Israel are intensifying negotiations over a nearly 1 billion euro ($1.45 billion) naval procurement package, a considerable portion of which Israel hopes to fund from a combination of German and U.S. aid.

The Israeli-proposed arms-aid deal - to be discussed Jan. 18 in Berlin at a special joint meeting of the German and Israeli cabinets - involves an additional Dolphin diesel-electric submarine, torpedoes and two German-built warships.

The ships - stretched, 2,200-ton versions of the Meko A-100 - are the Israel Navy's preferred alternative to the U.S.-built Littoral Combat Ship (LCS), which the service rejected last year as unaffordable because of cost growth. At first, Israel lobbied to build the German ships under license at home, with the Israeli Treasury footing initial costs to establish a local warship-building industry.

But under the latest incarnation of the deal, Israel is proposing to build the ships in Germany, where they will be outfitted with Israeli radar and a comprehensive combat weapons suite. ThyssenKrupp Marine Systems (TKMS), the Hamburg-based consortium building submarines for the Israeli Navy, is to be prime contractor, with Israel Aerospace Industries (IAI) the likely lead integrator.

The proposed acquisition, Israeli defense and industry sources here say, depends not only on significant German funding, but on Washington's permission to use annual military aid to pay for raw materials, subsystems and engine parts destined for the non-U.S. ships.

Altogether, U.S.-produced content could reach $200 million for the estimated $650 million, two-ship program, which the Navy hopes to fund with Foreign Military Financing (FMF). In parallel, the program will draw on so-called U.S. Offshore Procurement funding - the portion of annual aid authorized for conversion into local shekels - to outfit the ships with Israeli technologies.

Hitting Germany Up for One-Third

Israel has asked Germany to finance one-third of the new surface-undersea package under terms similar to a 2005 deal that allowed Israel to acquire two new air-independent propulsion Dolphins for only two-thirds of the 1 billion euro program.

Both submarines contracted under the 2005 deal are still under construction in Germany, with first deliveries planned for 2012. They will join Israel's three-Dolphin fleet, operational since 2001; two of the Dolphins were fully funded by Germany, and costs for the third were shared evenly by the two countries.

The Israel Navy formally submitted its request for the new submarine-surface ship package last autumn, and representatives from the two countries have been meeting to hammer out details at the working level ever since. Berlin's consent to elevate the matter for discussion this week by Chancellor Angela Merkel and Prime Minister Benjamin Netanyahu and their respective defense ministers indicates progress toward reaching some kind of agreement, Israeli sources here said.

"The fact that it's an agenda item in the context of expanded bilateral security ties is a good sign. But we don't know what kind of support to expect," said an officer on the Israel Defense Forces General Staff.

"They could agree in principle to all of it, part of it or none of it. We'll just have to wait and see," the officer said of the proposed arms-aid package. "Despite the unknowns, one thing is clear: Without assistance funding, there will be no program."

Retired Vice Adm. Yedidya Ya'ari, a former commander of the Israel Navy and chief executive of Rafael, said he and many of his colleagues in the Israeli industry are hoping for a positive outcome in ongoing Israeli-German negotiations.

When asked about the suitability of the Meko design, considerably smaller than the LCS or an LPD-type platform pursued in recent years, he replied: "What's most important is improving operational capabilities. These days, performance is determined less by platforms and more by combat systems and enabling technologies."

An Israeli MoD source said it was "highly unlikely" that firm conclusions would emerge from the Jan. 18 joint session.

"When you're dealing with complex political, financial and industrial-base issues, it's going to take time," the source said. "At this stage, we're hoping for clarifications, and not necessarily conclusions."

Shimon Stein, a former Israeli ambassador to Germany who was heavily involved in negotiations leading up to the 2005 submarine deal, declined to discuss specifics of the new Israeli-proposed package. In general, however, he said the prospect of new Israeli orders would benefit a German shipbuilding industry hard-hit by economic crisis.

Similarly, he said the Merkel-led government has demonstrated political goodwill toward Israel in numerous areas, including its condemnation of Iran's nuclear weapons drive and mediating efforts to secure the release of an Israeli soldier held in the Hamas-controlled Gaza Strip.

"Merkel is positively disposed to Israel's security needs and will be understanding of the escalating threat situation," Stein said.

Nevertheless, experts here say the extent to which the Merkel government is willing or able to accommodate Israeli financing requests remain unclear.

Several key Israeli ministers will accompany Netanyahu to the cabinet meeting in Berlin, each with a staff of experts prepared to address specific issues that may arise in bilateral efforts to upgrade political, economic and security ties. This week's summit follows a joint meeting in Jerusalem of the Israeli and German cabinets held in 2008 to mark Israel's 60th year of statehood.

Aside from the proposed arms-aid package, the two governments are expected to discuss nonproliferation initiatives and new bilateral as well as international means of rolling back Iran's nuclear program. The two governments also will attempt to clarify and, where possible, harmonize respective policies regarding Lebanon, Syria, the West Bank and Gaza, including Israel's perceived use of disproportionate force in its Cast Lead anti-rocket campaign early last year.

Related Information:

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