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Germany signs nearly €4 billion deal for Israel’s Arrow 3 missile defense system

BERLIN, Germany — Israeli and German officials signed a deal Thursday to move forward with the nearly €4 billion purchase of the Israeli- and American-developed Arrow 3 long-range air defense system, marking a major step toward Israel’s largest-ever defense contract as Berlin looks to bolster its missile shield array amid fears of a new cold war with Russia.

Defense Minister Yoav Gallant called the signing “a huge achievement for the defense industry” and “a historic day for our two nations that will help make German air defense fit for the future,” moments after Defense Ministry Director General Eyal Zamir signed a letter of commitment alongside the German Defense Ministry’s head of procurement, Annette Lehnigk-Emden.

The deal signed Thursday will release €560 million of funds approved by the German parliament in June, triggering Israel to begin production and manufacture of Arrow 3 batteries, which are designed to destroy ballistic missiles and other long-range projectiles. The batteries, largely manufactured by Israel Aerospace Industries, are expected to begin arriving on German soil by the end of 2025.

The complete deal will come close to €4 billion (NIS 16.2 billion), according to IAI chairman and CEO Boaz Levy, marking Israel’s largest-ever single defense contract. The Israeli Defense Ministry has cited a lower figure of $3.5 billion (NIS 13.5 billion).

Gallant and his German counterpart Boris Pistorius, who were present in Berlin’s Defense Ministry to oversee their ministries signing the letter of commitment to begin manufacturing Arrow parts, signed a separate declaration reinforcing defense cooperation between the two countries.

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Despite the fanfare and high-level representation, the deal will only be officially concluded with the signing of a separate contract once Germany’s parliamentary budget committee approves the purchase, expected in October.

File: Israel’s Arrow 3 ballistic missile interceptor is exposed during a joint Israeli-US military exercise, Juniper Cobra, at the Hatzor Air Force Base on March 8, 2018.

The Arrow 3 system is designed to destroy spaceborne projectiles before their reentry into the Earth’s atmosphere, including ballistic missiles and their warheads, as well as satellites. The US approved the sale in August, and it will represent part of the German-led European Sky Shield Initiative, to beef up continental Europe’s air defenses in response to Russian airstrikes in Ukraine.

The system “will defend all of Germany, and then some beyond,” said Moshe Patel, head of the Israel Missile Defense Organization.

A spokesperson for the German Defense Ministry and Israeli defense officials declined to confirm the number of batteries included in the deal.

Increasing the likelihood of future add-ons to the deal, the German government has earmarked €5 billion (NIS 20.3 billion) for the Arrow system, from the €100 billion fund special fund Germany created to boost defense spending in the wake of Russia’s February 2022 invasion of Ukraine.

Eighteen countries have signed onto the European Sky Shield Initiative since it was conceived in August 2023. The plan urges allies to buy deterrence systems together, with a focus on having them be interoperable with NATO air and missile defense systems.

“We would like to incorporate Arrow into the comprehensive defensive shield of NATO, so that our neighbors can benefit from it,” Pistorius said.

Criticism has arisen about Germany’s expensive purchase of the Arrow system amid questions about its ability to address immediate missile threats, including Russia’s nuclear-capable Iskander cruise missiles. A source in the Israeli Defense Ministry defended the system as a deterrent against future aggression.

“In the face of daily attacks in Ukraine we realize how important air defense is in general, even if long-range missiles haven’t played a role to date,” Pistorius said.

Rescue workers put out a fire after a Russian rocket attack on a food market in the city center of Kostiantynivka, Ukraine, September 6, 2023. (AP Photo/Evgeniy Maloletka)

Gallant noted the common thread running between European fears of Russia and Israel’s own rivalry with Iran.

“Today, more than ever, we share common threats. The Iranian fingerprint is everywhere,” Gallant said, referring both to Iranian proxies on Israel’s borders and Iranian drone sales to Russia, pounding the battlefield in Ukraine.

“In the face of Iranian aggression, we must prioritize security readiness and capabilities, as well as bold actions by the international community,” Gallant said.

The sale would represent the first time that the Arrow 3 system would be deployed beyond the borders of Israel and the United States. Israel and Germany say that the agreement represents close and growing defense cooperation, which has included joint defense drills and the sale of the Israeli TROPHY system to protect Germany’s Leopard 2 tanks.

Gallant said while there were other potential partners in Europe that could purchase the system, no serious negotiations are ongoing.

“Right now, we would only sell this system to Germany and the United States, because we are speaking about a strategic system. It would be delivered only to countries meeting certain standards, with respect to Israeli interests,” Gallant said.

The celebratory signing was laden with the weight of history for both sides, with many in the Israeli delegation the children and grandchildren of Holocaust survivors,

“It’s an emotional moment, to be here as the son and grandson of Holocaust survivors, on German soil, in Berlin, to sign a defensive arms contract,” Gallant said. “It’s very important, personally and diplomatically. This moment of history leans on our past and dictates our shared future.” He called the sale “a moving event for every Jew.”

Before departing back to Israel on Friday, the minister is scheduled to visit the Platform 17 Holocaust Memorial to pay his respects.

(L) Saudi Crown Prince Mohammed bin Salman in Jeddah, Saudi Arabia, May 19, 2023. (Saudi Press Agency via AP); (C) Prime Minister Benjamin Netanyahu in Jerusalem (Alex Kolomoisky/Pool/Flash90); (L) US President Joe Biden on November 2, 2022 in Washington, DC (Michael A. McCoy / GETTY IMAGES NORTH AMERICA / Getty Images via AFP)

Gallant and Pistorius were expected to discuss Saudi Arabia during a closed-door meeting, with Riyadh moving closer to signing a US-brokered normalization agreement with Israel.

Part of the deal is said to center on allowing Saudi Arabia to enrich uranium on its own soil, which has faced vocal criticism from Israeli Opposition Leader Yair Lapid, but met with relative silence by Israel’s security establishment.

Gallant said that “the Israeli security establishment will give a professional answer” on the matter after consulting the Defense Ministry, the Mossad, Israel’s nuclear authority, and the military chief of staff, among other parties. “When the answers will be clear, we will let the prime minister and cabinet know, and then the public,” Gallant said.

“We know one thing, that normalization with Saudi Arabia is a blessed thing for Israel. But we will do everything to limit the risk,” the defense minister said.

The two defense ministers highlighted their countries’ shared democratic values, and touched on Israel’s contentious judicial overhaul, a tangential part of which is facing a challenge in Israel’s top court as the defense ministers meet in Berlin.

Pistorius told reporters that they discussed the Israeli government’s plan to weaken judicial checks on its own power, and said that “I’m absolutely confident that it wouldn’t change democracy in Israel.”

High Court of Justice justices at a court hearing on petitions against the government’s prime minister recusal law at the Supreme Court in Jerusalem, September 28, 2023 (Chaim Goldberg/Flash90)

Prime Minister Benjamin Netanyahu has equivocated on whether he and his government would respect court rulings trampling their overhaul plans, saying that the courts should respect the government, as the government respects the courts.

Taking a clearer line, Gallant stated, “I will respect Israeli law and I will respect any decision of the Supreme Court as the defense minister,” when asked about Thursday’s ongoing proceedings on the coalition’s contentious law to block Netanyahu’s potential forced recusal for violating his conflict of interest agreement by involving himself in judicial structure.

Netanyahu entered into the agreement in order to once again become prime minister, in light of his ongoing criminal trial for four corruption charges.