Leaks show US aid money pushed Israel to buy flawed American periscopes for new subs

Leaked documents indicate that the Israeli Navy was forced to purchase substandard periscopes for its new submarines from a US company due to the Israeli desire to make use of American military aid money, when more suitable products were available from a German competitor.

The submarines procured by Israel from the German ThyssenKrupp corporation grabbed headlines due to the police investigation into the circumstances of the purchase, and the indictments that were eventually filed.

Now, an international document leak reveals that the first vessels delivered to Israel were outfitted with US-made periscopes that did not live up to the operational needs of the Israeli Navy, necessitating a further investment of millions of dollars to adapt them.

In the wake of the affair, the Navy made great efforts to ensure that the optical equipment for future submarines would be obtained from another German company.

These efforts saw Navy officials advising the company on what it must do in order to convince the Defense Ministry to procure its services and even recommended a “strategic partner” in Israel to advance the issue.

The affair raises questions regarding the military’s purchases and the preference that they be made with US aid money, and thus from American companies, even when there may be operational advantages to products manufactured in other countries.

The documents were leaked from the German military tech company Hensoldt and reached the German daily Der Spiegel. The European Investigative Collaboration alliance of investigative journalists participated in the analysis of the documents.

Shomrim, through the authors of this piece, was the Israeli partner in the project.

Upgrade periscope

Most of the documents relating to the submarine procurements are email correspondences between senior executives at Hensoldt against the backdrop of talks the company conducted with the Israel Navy and, later on, with the Israeli corporation ELTA Systems.

One such email was sent by Harald Hansen, who was in charge of sales in Hensoldt’s maritime division at the time, to Sabine Hipp, a special adviser to the corporation’s CEO. The email began with an apology for the extensive review that was about to follow.

The Israeli Navy, Hansen explained, like most professional navies, “is required to accept systems that don’t live up to its operational expectations.” This, he said, was what happened with the Dolphin-class submarines, whose periscopes were provided by the American Kollmorgen company (since renamed L3Harris KEO). He asserts that the decision to go with the American company was the result of political pressure, Israeli Defense Ministry intervention and the shipyards’ interests.

In the email, Hansen alluded to American military aid money, which Israel can only use to make purchases from US manufacturers.

He added that when Israel received the periscopes for the first shipment of submarines, it became clear that the periscopes did not meet the Navy’s operational needs, and that as early as 2019, the Navy was forced to launch a “project to modernize the equipment.”

Hensoldt had originally sought to win that contract, but at the last moment, L3Harris joined the race, “putting on the table” $20 million in US military aid for the sake of the project. The Navy, according to Hansen, had no choice but to choose the American company. However, he added, a year later the project ran into difficulties around installation and integration, opening up a fresh opportunity for Hensoldt.

The hunt for a ‘strategic partner’

The opportunity Hansen was referring to was the next tranche of three submarines that were being planned for the Israeli military. Due to the problems with L3Harris, the Navy sought to bring in Hensoldt as an alternative supplier in an early stage of the vessels’ production. In the leaked documents, company executives claimed that this desire stemmed from the fact that only Hensoldt’s optical systems live up to “99 percent of the Navy’s demands.”

L3Harris, however, was not prepared to give up on the contract. According to the emails from Hansen, the company used the aid money as a lever in the talks. The Navy, in an effort to disqualify L3Harris, demanded that the American corporation’s offer live up to all of its operational demands, though it knew that the request might be rejected.

Navy officials, according to the emails, went even further, recommending to Hensoldt what action it should take to advance its own bid with the Defense Ministry. “The Israelis encouraged us to seek out a strategic partnership with an Israeli company,” Hansen wrote to his colleagues.

An Israeli source that is well acquainted with the country’s military acquisition process explained to Shomrim that Hansen was likely referring to laying the groundwork for a reciprocal future purchase from an Israeli company, a move that would make Hensoldt a more attractive prospect for the ministry.

The Navy didn’t suffice with the general notion of a “strategic partner,” but provided a specific candidate. “The Israeli Navy’s research and development department presented us with the work done by ELTA on the submarines’ digital signals and solutions that they proposed for the antennas,” Hansen wrote. He also noted that Hensoldt was in contact with a second Israeli company, CONTROP, but its influence was limited.

Though it remains unclear whether Hensoldt eventually found a “strategic partner” in Israel, its efforts did bear fruit: The leaked documents reveal that last June Israel signed a procurement contract with the company worth €27 million ($29 million).

Das reboot

The periscope story brings to the surface the inherent conflict with which the Israeli defense establishment deals when it comes to procurements. A senior source who is well acquainted with the issue explained that the availability of US aid money (to the annual tune of $3.8 billion) makes it easier to buy American-made gear than equipment manufactured anywhere else.

At times, he said, there are even internal dealings between various defense bodies that see them “hand off” American aid money to each other in order to enable them to procure equipment from a third country.

The source added that it’s clear from the emails that the Navy made a significant effort to avoid having to work with L3Harris, and that the emails reflect a fierce battle between the Americans and the Germans over contracts. The source, however, rejected as incorrect Hansen’s assertion that the Navy was forced to procure equipment that wasn’t up to operational par.

The Israel Defense Forces spokesperson and Defense Ministry were sent a series of questions to comment on for this article. The IDF spokesperson said, “We have  decided not to issue a response.” The ministry did not convey a response as of publication.