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Israel arms exports increase in 2012

Israel's military equipment exports for 2012 reached USD7 billion, according to preliminary estimates by the Ministry of Defence (MoD). The final figures are not expected until March, but if they are accurate, this represents a 20% increase over 2011 numbers local media reports said on 10 January.
The country's defence exports have been increasing steadily over the past several years. The value of military hardware sold abroad was USD6.3 billion in 2008, rising to USD6.7 billion in 2009 and USD7.2 billion in 2010. The United States and Europe have long been the country's top customers for arms, followed by Southeast Asia and South America.
The MoD has said its goal is to reach USD10 billion worth of weapons exports per year. Officials have said they hope to achieve this goal by increasing investment and aid to small and medium-sized companies.
At the same time, the country's defence procurement numbers have stagnated. Israel went from spending USD1.88 billion on its military in 2009, to USD1.85 billion in 2010, USD1.79 billion in 2011 and USD1.88 billion in 2012.

New customers
Threatened by a possible drop in exports due to the global financial crisis and the withdrawal of US military forces from Afghanistan, Israel began looking to new export markets such as South Korea in 2011.
Following the 2010 artillery attack on Yeonpyeong Island by North Korea, the South Korean military issued an urgent operational requirement (UOR) to Rafael Advanced Defence Systems for its Spike Non-Line-of-Sight (NLOS) anti-tank guided missile systems.
Only one year earlier, Rafael had opened a new marketing office in Bangkok to service South Korea and Vietnam. The company has also been in talks with South Korean aerospace and defence company LIG Nex1 and with Samsung Thales over the possible establishment of joint ventures. Israeli MoD officials have estimated that sales to South Korea could reach some USD500 million annually.
Another emerging market is South America, where Israeli companies have experienced steady sales amounting to about USD500 million annually.
Brazil signed a confidentiality agreement with Israel in 2010 under which it cannot transfer classified technology to a third party. This agreement paved the way for Israeli companies to begin offering some of their most advanced systems to Brazil, with Elbit subsequently securing two large deals in Brazil. These deals comprised a contract awarded in January 2011 to supply Hermes 450 UAVs to the Brazilian Air Force and another USD260 million contract to supply 30 mm unmanned turrets to the Brazilian Army in September 2012.
Prior to this, in May 2010, IAI won a deal that could total USD350 million to supply Heron UAVs to the Brazilian Federal Police.
Aother potential market where talks are ongoing is Colombia, which has expressed interest in purchasing Israel's Merkava Mk 4 main battle tank (MBT), authorised for export in 2010.
Israel has also found an unexpected trading partner in Russia, which signed a three-year USD400 million deal with IAI in late 2010 to establish independent UAV production facilities in Russia. Talks with Moscow are ongoing regarding future deals, including future soldier systems equipment.

New capabilities
The Israeli MoD is also seeking new ways to increase industrial capabilities for export. To this end, the government recently allocated USD150 million to be invested in space research and development to enable Israel to win some of the estimated USD250 billion spent on space programmes worldwide every year.
The Israeli government is also now considering offering Israel Shipyards Ltd a contract to build two new future missile ships for the Israel Navy. If Israel Shipyards wins the deal, it would have to create new industrial capabilities that would turn the company into a significant force in the global shipbuilding industry.
ANALYSIS
Israeli defence companies depend on exports; only about 25 per cent of their products have been sold to the domestic market in the latter years of the 2000s. The Ministry of Industry, Trade and Labor said in June 2009 that Israel exports 70 per cent of defence products manufactured in the country. Meanwhile, Israel looks to the United States for 95 per cent of its imported materiel, and the European Union makes up the majority of the remaining five per cent.

Copyright © IHS Global Limited, 2013

  

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