Germany starts funding Israeli Arrow-3 missile defense system procurement

Updated 6/15/23 at 12:45 pm ET with comment from Israel’s Ministry of Defense.

JERUSALEM — Germany has taken a major step towards buying the Israeli-made Arrow-3 air defense system, with an Israeli official confirming that the Germany Bundestag’s budget committee has approved spending €560 million to start procuring the weapon.

“The decision represents a significant upgrade in the strategic relationship between Israel and Germany. Germany and Europe as a whole will benefit from this step, as will the Israeli economy,” Israel’s ambassador to Germany Ron Prosor wrote on social media.

In a statement released after publication of this report, Israeli Ministry of Defense said it “welcomes” the approval to “initiate the necessary steps” for Germany’s acquisition of Arrow-3.

“The professional teams led by the Director General of the IMOD, Maj. Gen. (Res.) Eyal Zamir, the DDR&D’s Israel Missile Defense Organization (IMDO) and Israel Aerospace Industries are continuing discussions with their German counterparts to finalize the procurement contract. Israel Ministry of Defense officials maintain ongoing communication with the American administration to ensure the necessary sales approval,” the statement said. “The German commitment letter will be signed after the American administration grants approval for the sale.”

The statement also noted that Defense Minister Yoav Gallant will be at next week’s Paris Airshow and will “meet his counterparts from France, Italy, Hungary and Romania.”

The Arrow-3 deal has been in the works since at least September, when initial reports about the discussions became public in the wake of Russia’s invasion of Ukraine. The overall deal is estimated to be around €4 billion ($4.3 billion) in total cost, with today’s budget decision being characterize as an advance payment.

There had been movement in recent months. A German delegation visited Israel in March to learn more about the system. Then on April 20 Israel’s Minister of Defense’s office said that “Israel and Germany’s Defense Ministries and Israel Aerospace Industries have launched discussions regarding the drafting of an agreement for the procurement of the Arrow-3 system.” At the time they said they were in “advanced negotiations” aimed at drafting a “detailed agreement for the delivery of the Israeli Arrow-3 system to the German Ministry of Defense.”

The Arrow-3 is the top tier of Israel’s multi-layered air defense system, and Is described by primary contractor Israel Aerospace Industries (IAI) as a exo-atmospheric interceptor for long-range threat engagement, designed to intercept ballistic missiles and other long range threats.

The system was jointly developed by the Israel Missile Defense Organization (IMDO) and the United States Missile Defense Agency (MDA). As a result, the export of any Arrow-3 requires approval by the US. While there was some question about whether Washington would approve the sale for economic reasons — US firms with missile defense programs have been hard at work trying to sell to European nations — there is clear confidence the deal will be approved.

German publication Welt reported that “A binding conclusion of the contract is planned for the end of 2023” and that the system should be ready for use in Germany by the end of 2025. Welt also noted that funding is coming from a 100 billion euro special fund for the Bundeswehr that was set up by Chancellor Olaf Scholz’s government in the wake of Russia’s invasion of Ukraine.

Karsten Klein, a member of the Bundestag and head of the Budget Committee, from the Free Democratic Party (FDP), characterized the procurement as part of a larger European sky shield, characterizing this as a manifestation of the “Zietenwende” or times changing policy.

Getting Arrow-3 into Europe is a major win for IAI and Israel’s export community. The only other major Israeli-made air defense systems under contract with Europe is in the Czech Republic, whose ministry of defense decided to purchase four Rafael-made Spyder batteries in 2012, including radars produced by IAI, in a contract valued at roughly $520 million. The agreement includes the involvement of Czech defense industries. Breaking Defense has previously reported that both the Spyder and Barak MX systems are also being evaluated by Romania.