Germany has made a preliminary decision to buy Israel’s Arrow 3 air-defense system instead of a rival product manufactured by Lockheed Martin Corp., according to people familiar with the matter. The deal, which is worth $3.5 billion, is the largest-ever defense contract between Israel and Germany.
The Arrow 3 interceptor, manufactured by Israel Aerospace Industries, is designed to intercept and destroy the newest, longer-range threats, especially those carrying weapons of mass destruction. The system is being jointly developed by Israel and the US, and has been successfully tested several times in recent years.
The US State Department notified Israel of its approval for Germany to procure the Arrow 3 system on Thursday, August 17, 2023. Senior officials from the Israeli and German defense ministries will take part in a ceremony to sign a letter of commitment to the deal, which will also include a preliminary payment of $600 million. The full contract will be ready to sign by the end of 2023, after receiving the parliamentary approvals from both countries.
Germany Seeks to Modernize Its Air Defense and Strengthen Its Ties with Israel
The purchase of the Arrow 3 system is part of Germany’s plan to invest significantly in its air defense over the coming years, as the continent faces increasing security challenges from Russia and other actors. Germany has created a dedicated fund worth 100 billion euros to help modernize its armed forces, which critics have said have been severely underfunded in recent years. The investment is in addition to the federal government’s regular annual defense budget of around 50 billion euros.
Chancellor Olaf Scholz discussed the air-defense issue earlier Monday with Israeli Prime Minister Yair Lapid in Berlin and they both gave positive signals about a possible deal at a joint news conference. Scholz said Germany was “very keen to work with Israel on that, including in the area of air defense where Israel has a very effective product with the Arrow 3 system.” Lapid told reporters that Israel “for its part, will play a role in building Germany’s new defense force, mainly in the field of air defense.”
Scholz also said that all of Germany’s new air-defense capabilities will be deployable within the framework of NATO, and that Germany will design its future air defense in such a way that its European neighbors can be involved if desired. He listed allies including Poland, the three Baltic states, the Netherlands, the Czech Republic, Slovakia and the Nordic countries as potential partners.
Israel Hails the Deal as a Historic Milestone and a Boost for Its Economy
Israel’s Defense Minister Benny Gantz praised the deal as a historic milestone and a testament to the strong strategic partnership between Israel and Germany. He said that the Arrow 3 system will provide Germany with “a significant advantage in dealing with current and future threats” and that it will also enhance Israel’s security by creating “a common operational picture” with its ally.
Gantz also said that the deal will have a positive impact on Israel’s economy, as it will create thousands of jobs and generate billions of dollars in revenue for Israeli companies. He said that Israel Aerospace Industries, which is the main contractor for the Arrow 3 system, will work with hundreds of subcontractors from various sectors, including high-tech, cyber, engineering and metal industries.
The deal will also boost Israel’s defense exports, which reached a record high of $9.2 billion in 2022. Israel is one of the world’s leading arms exporters, ranking eighth globally according to the Stockholm International Peace Research Institute. The US is Israel’s largest customer, followed by India, Azerbaijan and Vietnam.
