Air Warfare, Global, Land Warfare

Israel backing off Saudi arms sale hopes, turning eyes to Europe

TEL AVIV — New tensions in the relationship between Saudi Arabia and the United States have led to an effective freeze in efforts by Israeli defense firms to land business with the wealthy Kingdom. But hopes for a major spending bonanza in Europe remain, if US-created hurdles can be overcome.

When Riyadh decided to cut oil production last week as part of the OPEC+ decision, it set off an immediate firestorm in Washington, where the move is expected to raise gas prices ahead of the midterm elections in November while giving Russia an economic lifeline. The criticism from Democratic lawmakers quickly coalesced around whether curtailing arms sales to the Kingdom could be a way to strike back.

Of note were comments from Sen. Robert Menendez, D-N.J., who as chair of the Senate Foreign Relations Committee has the ability to hold up any arms sale agreement. “I will not green light any cooperation with Riyadh until the Kingdom reassesses its position with respect to the war in Ukraine,” Menendez said in a statement obtained by Politico. “Enough is enough.”

Meanwhile, Sen. Richard Blumenthal of Connecticut and Rep. Ro Khanna of California, both Democrats, jointly introduced legislation that would block arm sales to Saudi Arabia as a result of the OPEC+ move. “They get almost 73% of their arms from the United States. If it weren’t for our technicians, their airplanes literally wouldn’t fly,” Khanna said in a press event. “Senator Blumenthal and I have a very reasonable proposal, which is just to pause the weapons sales, just to pause the defense cooperation until they reconsider.”

While the legislation is still in the early days and the Biden administration has so far not endorsed an arms embargo, behind the scenes, Israeli companies are reading the tea leaves — and, sources tell Breaking Defense, hitting the brakes on any effort to get a piece of the Saudi defense spending pie.

Already Israeli companies faced challenges over a Saudi requirement for local production agreements, something Jerusalem was wary of. Still industry had hoped to push Jerusalem and gain tacit approval from Washington in order to take advantage of the Saudi budget. That hope now appears dead, at least until or unless the US and Saudi relationship is repaired to better levels.

“The Israeli utmost interest is to keep the good relations with the US, and that affects any other planned process like the one that Jerusalem hoped to have with the Saudis” a senior Israeli source told Breaking Defense on condition of anonymity.

The source added that he hopes the tension between Washington and Riyadh is dissolved so that Israel can renew its efforts to be part of the Saudi effort to build a defense industry. No official in Israel was ready to comment on the situation that has been created by the new clash between Washington and Riyadh.

The September 2020 Abraham accords normalized relations between Israel, the United Arab Emirates and Bahrain. Saudi Arabia has not signed any formal normalization agreement with Israel, but the Kingdom is showing signs of some sort of normalization, like allowing Israeli airlines to use the kingdom’s airspace on their way to Asian destinations.

According to Yoel Guzansky a senior researcher in the Israeli Institute for National Security Studies (INSS), the Iranian threat is driving what some call a “quiet modernization” effort, even if the two see the threat from Iran differently.

“Relations with Israel carry advantages for the kingdom: coordination on the political-strategic level regarding shared challenges; and thwarting of threats on the intelligence-operative level, including access to Israeli technology that is relevant for anti-missile defense,” he wrote in August. “While a connection with Israel could reinforce Saudi Arabia’s image of deterrence against Iran, among the Gulf states there is a fear of being seen as serving as a kind of ‘forward base’ for Israel. Saudi Arabia, which maintains an ongoing dialogue with Iran, is no exception in this regard.”

European Market Still Beckons, If Washington Allows

The strengthened relations between Israel and its regional neighbors has opened up one potentially large market for Israeli weapons. Russia’s invasion of Ukraine, and the subsequent massive spike in defense spending in Europe, has created another. But once again, Washington will have a say, particularly in the lucrative realm of air defense technologies.

Given its precarious position in the region, Israel has long been a global leader on air defense systems, something Russia’s invasion has made a priority for almost every NATO nation. However, several of the key systems used by Israel were co-funded with money from Washington, giving the US a veto over whether they can be exported or not.

While Washington would likely, from a geopolitical stance, be happy to see European nations building out their air defenses, American industry would surely prefer to sell its domestic equipment instead. In order to get a sense of what may be allowed, the Israeli ministry of defense in the next few weeks will try to get indications of possible American reactions to queries already submitted by a number of European countries.

In particular, the new European Sky Shield initiative, announced Oct. 13, will see 15 European nations come together to jointly invest in air defense capabilities that should, on paper, create a network of air defenses that cross significant chunks of Europe. Led by Germany, the effort will include Belgium, Bulgaria, the Czech Republic, Estonia, Finland, Hungary, Latvia, Lithuania, the Netherlands, Norway, Romania, Slovakia, Slovenia, and the United Kingdom.

Germany is already in discussions with Israel over the Arrow 3 system. Produced by Israel Aerospace Industries (IAI) with funding from the US, the Arrow 3 is targeted at ballistic missile defense. Sources say Washington has already given its tacit approval for a sale to Germany if Berlin and Jerusalem can come to terms.

But the creation of the new Sky Shield network opens up new opportunities for different levels of air and missile defense. The lowest tier is Rafael’s “Iron Dome” which has intercepted thousands of short and medium-range rockets launched in recent years from Gaza. One layer above is the Rafael-Raytheon David’s Sling system, designed to intercept longer-range rockets and cruise missiles. The Arrow 2 and 3 represent the upper layers of a system that is designed to defend Israel from rockets and missiles. All three layers have received US funding.

According to a senior defense industry source, the European initiative creates a big potential for the Israeli systems but “the way to contracts will be very, very complicated.”

That’s due to industrial pressures both in the US and in the European countries themselves, said Uzi Rubin, the former head of the Israel missile defense directorate in the Ministry of Defense.

“Some European countries like France have ballistic missile defense systems under development, others don’t have these even on paper,” he told Breaking Defense. “The best thing for Israel will be to sign the deal to sell the Arrow -3 to Germany. After this is accomplished, it will be easier to convince other alliance members to evaluate the system.”

Rubin added that American companies that have developed systems to intercept ballistic missiles will put heavy pressure of Washington to use its influence to make the European countries buy American-made systems.

Another Israeli expert who spoke with Breaking Defense on condition of anonymity said that in the new European initiative, there are different operational needs spread across different countries, meaning there won’t be much chance for Israel to make a one-size-fits-all deal.

“It is not that all the participating countries will go for the same systems. And even after they decide [what to buy], combined purchases of some countries together are not realistic. The Israeli companies will have to work hard to persuade the Europeans to buy their systems,” the expert said.

However, the expert predicted, high-end radars from Israel might be the easiest thing to sell, even if the missile interception systems themselves take longer.