IAI’s discussions in Germany follow a period of major export activity for Israeli defence companies, including Elbit Systems’ 2.3 billion dollar deal with an unnamed customer and a record 25 billion dollar orders backlog. IAI’s 3.5 billion dollar sale of Arrow 3 to Germany in 2023 remains the largest defence deal in Israel’s history.
Germany fears that its current supply of Arrow 3 interceptors will be insufficient given the threat posed by Russia. Each interceptor, the most expensive in Israel’s multi layered defence system, is valued at about 2 million dollars.
Follow on acquisitions after strategic defence deals are not new for IAI. In April 2017, India signed a 1.6 billion dollar contract for the Barak 8 system and a month later procured the naval version of the interceptors for an additional 630 million dollars.
Germany’s Arrow 3 procurement is part of a regional air defence strategy that extends beyond its borders. This approach has grown more urgent as the Russia Ukraine war approaches its fourth year and shows signs of escalation and expansion.
Last week, Polish army chief of staff General Wies?aw Kukula said that Russia is preparing for war with Poland. “(Russia) has begun the phase of preparing for war,” he said in an interview with Polskie Radio. “They are building conditions around us that could lead to potential aggression on Polish territory.”
The second deal under negotiation concerns Germany’s use of the Heron TP drone. Since January 2019, the “Red Baron” squadron at Tel Nof base has trained German operators on the IAI manufactured platform under a nine year, 900 million euro agreement. The deal included the lease of seven drones and a further 170 million euros for airport and airspace use.
The agreement is entering its seventh year, requiring Berlin to decide on its continuation. A senior defence official told “Globes” that it is difficult to imagine Germany ending the use of Heron TP, given its battlefield record and the investment already made in operator training.
In September, “Bloomberg” reported that Germany plans to procure three Heron drones for 1 billion euros, although the deal remains open and will require Bundestag approval. It is expected that Germany will opt for one large deal or a series of agreements, while the “Red Baron” programme may undergo some changes.
The current Gaza ceasefire has created a more favourable environment for German Israeli defence cooperation. This is reflected in the German government’s decision to lift the partial arms embargo imposed on 8 August by Chancellor Friedrich Merz.
Data from the Stockholm International Peace Research Institute shows that between 2020 and 2024 Germany ranked second among arms suppliers to Israel with 33 percent, behind the United States with 66 percent. SIBAT figures indicate Israeli defence exports reached a record 14.795 billion dollars in 2024, up 11.7 percent from 2023, with Europe’s share rising from 35 percent to 54 percent.
Data published by “Politico” revealed that Germany’s defence procurement plans for its 2026 budget amount to 377 billion euros, or 437 billion euros in total expenditure. Even a modest expansion of Israeli exports to Germany could therefore create significant revenue potential for Israeli defence industries.
Source: Globes.
