Israel’s major defense firms have European subsidiaries producing components for Israeli weapon systems. The Netanyahu government fears that arms embargoes by the UK, Germany, and other countries will weaken critical equipment supply to Israel. Israel’s deteriorating international standing, combined with various countries’ restrictions on arms exports, could strike a blow at wholly Israeli-owned foreign defense companies.
This situation may result in these companies being unable to export arms to Israel.
Israeli newspaper Haaretz published a detailed report on the arms embargo. In recent months, many countries have taken both public and covert measures to avoid appearing to “assist” Israel, accused of committing genocide in Gaza.
The UK canceled 30 export licenses and implemented changes to complicate future defense exports to Israel.
Germany, a significant exporter to Israel (especially submarines and corvettes), effectively restricted defense exports. While Berlin denied news of a complete halt in exports, local media reported a dramatic decrease in granted licenses, referring to a one-year delay in Israel’s request for 10,000 tank shells.
On Friday, French President Emmanuel Macron also called for restrictions on arms exports to Israel. According to Haaretz, Israeli defense companies have established numerous subsidiaries in Europe, Asia, and America over the years.
This strategy serves to market their products and meet demands from state customers for localizing the development and production of certain weapon systems through joint ventures with local manufacturers.
For instance, Elbit Systems established a joint facility with Adani Defense in India to produce Hermes 900 unmanned aerial vehicles for both India and Israel. Israel Aerospace Industries formed a joint venture with ST Engineering in Singapore to manufacture and market advanced naval missile systems.
The company announced six months ago, “We are growing,” noting, “Last year, around 10 mergers and acquisitions were approved. These deepen our presence in India, Germany, Italy, South Korea, and Israel, completing the range of products we offer our customers.”
Two of Israel’s major defense companies, IAI and Rafael, are state-owned and wield considerable influence globally. Considering Israel’s worsening international standing, these companies may soon find it challenging to export defense equipment to Israel. Germany’s largest defense export to Israel last year was “probably” 3,000 anti-tank weapons systems, known as Matador (Nutcracker in the Israeli army).
These versatile weapons can target armored vehicles, bunkers, and enemies in buildings. The Matador, designed to produce minimal backblast, is deemed crucial for the “urban warfare” in Gaza. It was manufactured by Dynamit Nobel Defense, acquired by Rafael two decades ago.
While Germany denies halting exports, the current delay in approving tank ammunition supply raises questions about future orders. For example, would a company under Rafael be prohibited from exporting Matadors to Israel? Canada also announced suspending arms exports to Israel. Foreign Minister Melanie Joly stated that 30 licenses were frozen.
Joly said, “Our policy is clear. We will not allow any weapons or weapon parts to be sent to Gaza in any way.” In 2017, Elbit Systems acquired GeoSpectrum Technologies in Canada, which develops marine sonar systems used in Elbit’s Seagull Unmanned Surface Vessels.
While at least one Seagull has been supplied to the Israeli navy, it remains uncertain whether GeoSpectrum, owned by Israel, will be allowed to export defense equipment to Israel in the future.
Although not the most impactful, a significant change was the UK announcing the cancellation and tightening of future defense export licenses. Speaking to Haaretz, Natalie Davidson, an associate professor at Tel Aviv University’s Buchmann Law School, explains that the decision is based on the UK assessing the risk of major violations of international humanitarian law.
Davidson and Dr. Samuel Perlo-Freeman from the Campaign Against the Arms Trade in the UK state that this is not a general ban, but rather a change reflecting concerns about the use of arms and technology sent to Israel being used in Gaza and potentially violating human rights laws.
While headlines focused on the freezing of 30 licenses, the tightening of five Open General Export Licenses (OGELs) is equally significant. Israel, along with Iran, Russia, and Afghanistan, was included on the list of countries where these licenses are not valid. Perlo-Freeman explains that OGELs allow unlimited export of certain low-level components in practice.