In November 2003 the San Francisco Chronicle titled an article about Israeli weapons sales ‘Israel’s weapons exports skyrocket, making it friends and money’.[1] On the face of it, this statement seems true. Israel is now the world’s number three arms exporter and delivers weapons to an increased number of states.[2] Israel’s arms industry is indeed making it money, but friends?

While Israel’s market share in the global defence industry is increasing and currently stands at 10 to 12%[3], Israel’s image is in the world is not faring too well. Traditionally, Israeli foreign policy and the Israeli defence industry are highly interwoven and until the mid- to late 80s the defence industry was one of the primary tools of Israeli foreign policy. But then the relationship between the two was reversed and the arms industry had to be aided by the foreign policy establishment. Instead of arms, Jerusalem under Prime Minister Rabin used the peace process as its primary foreign policy tool.

This strategy seemed successful and the Oslo process proved to be a milestone for Israel’s foreign relations. It seemed as if it was finally able to shed its pariah status and become an internationally accepted state. Not the defence ministry but the foreign ministry now became the second most important player after the Prime Minister in Israel’s foreign policy making.

However, with the outbreak of the second Intifada or al-Aqsa Intifada in October 2000 this process was reversed. Since then, with the peace process in deep freeze and few international successes in the political field, arms deals again figure more prominently in Israel’s foreign policy.

This paper is going to give a short overview over the development of the Israeli arms industry, then to focus on the changes that took place in it and in Israel’s foreign policy from the mid-80s onwards and finally to argue that a return to the pre-Oslo period when arms deals were more important than the peace process is not possible anymore, as not only the international climate but also the make-up of the global and of the Israeli arms industry has changed. Yet, with the peace process ostensibly dead, which part in Israel’s foreign policy is arms diplomacy going to play?

History

Israeli foreign policy and the Israeli defence industry are highly interwoven. The big three of the Israeli defence industry, Israel Military Industries (IMI), Israel Aircraft Industries (IAI) and Israel Shipyards, supplemented by the research branch of the Defence Ministry, RAFAEL, were all established by the state and state owned. Only Israel Shipyards has been privatised so far.

With the experience of the French arms embargo in the wake of the 1967 Six-Days-War and the dependence on an US airlift with weapons supplies during the 1973 Yom-Kippur War, the decision was taken to develop and produce more weapons systems in Israel, and thus increase the indigenous share of the Israel Defence Forces’ (IDF) material.

Most of the new products were procured by the IDF directly. However, surplus material, licenses or cooperations were used by the Israeli government to reach foreign policy objectives. Aharon Klieman described this as ‘arms sales as diplomacy’.[4]

One of the main foreign policy objectives of Israel is to safeguard the Jewish Diaspora. Thus, one group of states Israel focused on with its arms diplomacy where states with large Jewish communities, such as South Africa or Argentina. Arms sales and cooperation with them continued despite international sanctions in the case of South Africa, or the objection of Israel’s main patron the US in the case of Argentina even during the Falklands War. Allegedly, South Africa partly financed the development of Israel’s Jericho IRBM[5], and reportedly, Israel sold Argentina Dagger fighter jets during the 1982 war. Israel in these cases tried to establish itself as reliable partner even in times of international sanctions or restrictions against the client state. Foreign Minister Yitzhak Shamir also argued at the time that the arms deals with Argentina were helping to prevent that Argentinean Jews became desaparacedos under the military junta.[6]

South Africa was of additional importance for Israel’s nuclear program. Despite the secrecy shrouding the contacts, speculations and some evidence in form of satellite images and radiation levels surfaced on the joint development and testing of nuclear weapons in the early eighties.[7] South African Uranium, but especially the testing would have been crucial for Israel, as its small size does not allow to detonate nuclear devices on its own territory.

The other group of states Israel used ‘arms diplomacy’ with were states of strategic or other significance to it, with whom Jerusalem did not have diplomatic relations. There were quite a few in this group, as many countries had never established relations with the Jewish state or severed them following the Six-Days-War or the Yom-Kippur War. Israel aided India in its conflicts with China in 1962 and Pakistan in 1965, and then later had secret arms relations with China from the mid-70s onwards. Yet, while the deals were a significant achievement given the outward hostility of both states towards Israel, they failed to yield any major results.

Israel was more successful in its cooperation with Singapore. After the city state’s independence in 1965 Israel helped to train and equip its armed forces. The first tangible political result was Singapore’s decision to abstain in the UN General Assembly vote condemning Israel for acts of aggression after the 1967 war.[8] Full diplomatic relations were established in 1968 which was an important achievement Jewish state amid a wave of developing states severing diplomatic ties.

Arms deals with the Marxist regime in Ethiopia paved the way to the emigration of the Falashan or Falashmura Jews to Israel in 1985 despite the fact that Ethiopia had broken off relations with Israel in 1973 together with eighteen other African states.[9]

With the IDF procuring less Israeli produce following the severe monetary crisis in Israel in the early 80s and also the increased US grants to be spent on American military equipment, the Israeli defence industry needed to market its products more aggressively.[10]

Thus, by the mid-80s the relationship between diplomacy and arms deals started to reverse. Instead of arms sales supporting foreign policy objectives, diplomats began to try to produce conducive conditions for arms deals. Admittedly, arms deals had helped to create links to states with which Israel did not have diplomatic relations or to improve and cement relations with states with a considerable Jewish community. However, they did not get Israel out of its international isolation. In fact, its controversial contacts with the military junta in Argentina or the Apartheid regime in South Africa probably only deepened Israel’s isolation.

The end of the Cold War and the beginning of Oslo

Thus not arms, but the beginning of the Oslo-process marked the breakthrough for Israel in the diplomatic arena. The Middle East Peace Process opened the possibility of diplomatic relations with countries formerly inaccessible to the Jewish State. The peace treaty with Egypt did not have a similar effect, as it was not accepted in the Arab world and only drove Egypt into isolation.

After the Madrid Conference in 1991 and even more so after the signing of the Declaration of Principles by Yassir Arafat and Yitzhak Rabin in 1993, Israel was no longer an outcast in its region or for the Non-Aligned Movement. It opened trade offices in Qatar and Oman, liaison offices in Morocco and Tunisia. A peace treaty with Jordan was concluded in 1994. Five years later full diplomatic relations with Mauritania were established. Relations to China became official and those to India or were upgraded to full diplomatic relations. Similarly, Turkey, which had maintained consular relations with Israel before, elevated them to ambassadorial level by the end of 1991, shortly after the Madrid Conference. South Korea opened a resident embassy in Tel Aviv in 1993.

The groundwork for relations with China, India, Turkey and other countries had been laid in arms deals preceding official diplomatic relationships. However, Israel could only cash in diplomatically after the Peace Process for the Middle East had begun.

Now, after the extension of diplomatic relations, Israel’s arms deals started to take off, not the other way around. The Peace Process opened the way to increase sales from $1.7 billion per annum in the early 90s to $3.5 billion per annum in the late-1990s.[11] This increase was additionally aided by the end of the Cold War. First, it opened the markets of former Soviet clients which often sought to modernise their military equipment. Second, Israel had considerable experience not only in upgrading weapons systems in general, but also in upgrading Soviet material captured from its Arab adversaries.

The al-Aqsa Intifada

How contingent on the development of the peace process many of the diplomatic advances were Israel had made was shown after the outbreak of the second Intifada in October 2000. Almost all contacts which had been established with the Arab or Muslim world have been lost; Morocco, Tunisia and Oman severed relations, Jordan and Egypt have withdrawn their ambassadors. Even Turkey recalled its ambassador for consultations and relations are visibly strained following the continued Israeli action in the Gaza Strip, despite continued defence contacts.[12]

As of know Israeli arms export seem to be little affected by the diplomatic chill the Jewish state is currently experiencing. Israeli arms exports remain on a high level and in 2003 it ranked third in the list of arms exporting countries, only behind the US and Russia.[13] According to SIBAT, the Foreign Defense Assistance and Defense Export Organization which monitors Israeli defence trade, exports reached $3 billion in 2003. For 2004 a similar level of sales was predicted, amounting to $1.9 billion by July already. While this is down from the peak of $4 billion in 2002, the volume of sales is still considerably higher than the average amount of the early to mid-90s of $1.7 billion a year.[14]

By now, Israel has carved out its niche as provider of subsystems upgrading the performance of weapons systems, of advanced electronics and to a degree of missile technology.[15] The upgrading expertise of Israeli defence companies such as IAI, IMI but also privately owned companies Elbit Defense Systems and Elisra, and make them attractive to countries with limited budgets which are nonetheless striving to modernise their material. Its technological edge on the other hand attracts countries interested to develop indigenous weapons systems or to diversify their weapons supply away from the US or Russia, who are in many areas still dominating the field. This gives Israel a comparative advantage and it successfully competed inter alia for upgrades of Turkish jet fighters and main battle tanks[16],of helicopters and tanks of the Czech Republic, and of Romanian, Croatian and Portuguese jet fighters.[17]

At the same time Israel lacks the leverage suppliers of ready-to-use weapons systems, such as Russia and the US, enjoy, which can also offer more attractive credit lines. Thus, while Israeli defence companies cooperate with India on a number of issues including the sale of Phalcon early warning aircraft, worth an estimated $1 billion, they could not compete with the financial part of a Russian offer regarding the upgrading of MiG-21 and MiG-27 jets.[18] However, IAI provides parts of the avionics needed for this task as a subcontractor to the Russian company.[19]

In some cases defence contracts and contacts played an important role in Israel’s bilateral relations. In India and Turkey for example they go beyond the limited realm of arms supply or development. Israeli pilots train in Turkish airspace while Turkish and Indian anti-insurgency and anti-terrorist units are taught by their Israeli counterparts. However, this again is a case in point: Not arms deals per se, but a similar strategic outlook drive the relations between Israel and Turkey and India respectively. Turkey in the late-90s feared Islamic terror while still fighting the PKK, and India under the Vajpayee government also followed a policy line hostile to Islamic movements. This common perception of an Islamic threat and record of terrorist activity on their territories, provided a fruitful ground for cooperation for the three states.

Hence, two of most highlighted arms deals of the last year, the upgrading of a thousand A-60 battle tanks in the case of Turkey, and the sale of two Phalcon early warning aircraft to India did not cause, but were caused by established diplomatic relations and by existing strategic alliances between Israel and the two states.

Yet, the Israeli arms industry is worried over the future of its contacts with India and Turkey following the change in government of the former and the strains with Turkey over the stalled Middle East peace process. As reported by Globes, for this reason Israeli defence companies are trying to develop markets in traditionally friendly countries such as Canada.[20]

This highlights the importance for the Israeli arms industry to export in order to survive, and diplomacy now often working for sales and not sales for diplomacy. Additionally, devoid of the clear cut block system of the Cold War, the arms market is increasingly a buyers-market as opposed to a sellers-market, with clients being able to choose from a wider range of offers. Joint-Ventures and bidding for contracts as part of an international consortium is also becoming more frequent. IAI teamed up with the Russian maker of helicopters Kamov to, successfully, compete for supplying search and rescue helicopters to South Korea[21], and Elbit Systems joined forces with Boeing and the French Thales Group to deliver Unmanned Aerial Vehicles to Britain. For the same tender, IAI had competed together with Northrop Grumman and lost.[22]

It is unlikely that Israel will be able to return to the era of the 70s when it was able to use arms deals to establish informal relations with outwardly hostile states, because they were in desperate need for arms or technology. Reports of arms deals with Myanmar would hint in the direction of ‘traditional arms sales diplomacy’, alas more of the kind Israel had with pariah states. The deal with the junta in Rangoon possibly aims to get a friendly voice in ASEAN – next to Singapore which Israel cultivated as an ally not least by helping the newly independent Asian state to build up its army in 1965 – and a supporter for arms control initiatives.[23] Yet, even while the Sharon government announces arms deals for example with India or Turkey with great fanfare, more often than not Israel’s clients are using their buying of arms for their foreign policy objectives. For India for example good relations with Israel bear the prospects of improved relations with the US. The same can be said for Turkey and is probably not absent from other states’ thinking.[24]

This leads to the important role the US play for Israel’s arms exports: For many of its exports Israel needs at least tacit approval of the US, as America claims that many components are based on US designs or developed with US aid. Over the last decade, the US have become more and more concerned over China’s arms acquisitions, and thus also over Israel’s arms deals with it, trying to limit them on the grounds of illegal transfer of technology. [25] This, and the upsetting of the balance of power were also advanced by Washington for vetoing the sale of Phalcon early warning aircraft to China. Israel cancelled the deal in order not to alienate its most important backer. However, the counter argument runs that not Israel, but Russia is upsetting this balance with the massive sales of ready-to-use weapons systems to Beijing and that actually Washington’s decision was also influenced by its own commercial interests.[26]

Lastly, the changed make up of the Israeli arms industry makes its use for extended arms diplomacy in the future unlikely. Currently, IAI, IMI and RAFAEL are still under government control and offer competitive weapons systems, such as the Phalcon airborne early warning radar or the Spike anti-tank missile. Increasingly though, Israeli companies are part of international consortia when competing for tenders.[27] While this improves chances for these companies to gain contracts, it reduces the leverage the Israeli government over using their export activities. At the same time the Israeli government is cutting back on its R&D, for example in satellite technology,[28] reducing the chance of developing weapons systems it can market without outside participation.

Conclusion

In times of receding government spending – despite a hike during the current Intifada – the Israeli defence industry needs foreign customers to survive. Thus, as the government of Israel is determined to do everything to keep the country’s defence industry alive and independent, the defence industry and Israel’s foreign policy will remain linked. While defence exports are generally almost per naturam political, the way they are integrated into foreign policy thinking in Israel remains unique. For one this is result of Israel’s standing in the international arena. Diplomatic contacts with many states are far from given while many of the main defence markets, especially in the Middle East but also in Asia are closed to Israeli companies. The close relations with the US and the degree to which it is involved in the Israeli arms development are another point of contact, but also source of friction between interests of the foreign policy establishment and of the defence industry. This situation makes both, diplomacy and defence industry, dependent on one another.

Structural factors in Israel’s political system enhance this fact. For a large part of its history, the defence ministry played the most important role in foreign policy making after the Prime Minister, not the foreign office. Israel’s volatile security situation gave the defence of the country priority over other foreign policy objectives, a position that is embodied in Moshe Dayan’s[29] statement that “Small nations do not have a foreign policy. They have a defence policy.”[30]

Officials in the defence ministry and in the defence industry often stem from the same background. SIBAT is organising the Israeli appearance at weapons or air shows abroad. SIBAT was also instrumental in bringing about the contacts that led to the Phalcon deal with India.[31] While this indicates firstly the continued close link between defence industry and defence ministry, it highlights secondly that a transformation in the relationship between government and defence industry that has taken place: From the defence industry facilitating diplomacy it has changed to diplomacy facilitating the defence industry’s business.

But even more important, despite or because of the outbreak of the Second Intifada, the foreign ministry remains number two in the foreign policy hierarchy. The Prime Minister remains the unchallenged number one. Yet, while Sharon, as a former General and Minister of Defence, has close links to the defence industry and promotes it where he can, those states more circumspect of Israel, which would or could be an aim of ‘arms diplomacy’ prefer contacts with the foreign ministry and the current Minister of Foreign Affairs Silvan Shalom.

‘To gain friends and influence people’ was once a task for the defence industry abroad. However, the current round of violence has tainted the Israeli image abroad severely. Not arms, but some sort of renewed peace process will be the only chance for increased international recognition. The arms industry can then take the secondary part to cement and cultivate relations, as it did throughout the nineties. Its times in the forefront of Israeli foreign policy seem to be gone.

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