That marks a major shift in Berlin's foreign policy and underlines how defense exports have assumed a new importance for the industrial powers amid shrinking defense budgets.
Germany's coalition government under Chancellor Angela Merkel has been quietly easing restrictions for some time but has come under growing domestic criticism, with opposition Green Party leader Claudia Roth denouncing these "deals with death."
But Germany's already heavily involved in arms sale to the Middle East and keen to hustle more business.
It's building a second batch of nuclear-capable Dolphin class submarines for Israel that will greatly enhance the Jewish state's strategic reach.
At the same time it's negotiating with Saudi Arabia for the sale of hundreds of Leopard 2A7+ main battle tanks potentially worth $12.6 billion.
It's possible Merkel's seeking to emulate the United States, which sells weapons to both Israel and its Arab adversaries, apparently without qualms.
Ostensibly, her aim is to make it easier for German companies to compete with European rivals, and no doubt the United States, but there's a growing controversy over this change in a central strand of foreign policy strategy.
The German newsmagazine Der Spiegel observed Monday that Merkel, is "drawing lessons from Afghanistan and Libya ... Instead of intervening in conflicts, she wants to help arm certain countries to provide stability in crisis regions.
"But if history is any guide, the plan could backfire."
Despite opposition from Germany's allies in NATO, such as Britain, France and Italy, all major arms exporting states, Der Spiegel says that Merkel's pressing ahead with her plan to make "arms exports to crisis regions -- which has long been a taboo in Germany -- a major pillar of the country's security policy ..."
The Germans, still haunted by the World War II Holocaust, have long made Israel an exception to their arms export restrictions and have covered most of the cost of three Dolphin subs delivered to Israel and three advanced variants in various stages of construction.
The Dolphins are built by Howaldtswerke-Deutsche Werft in Kiel, a subsidiary of the giant ThyssenKrupp conglomerate.
The Saudi tank deal is wholly commercial, justified on political grounds by the assertion the oil-rich kingdom "can be built up as a counterweight to Iran," says Der Spiegel.
"The Sunni regime is Riyadh is supposed to prevent Shiite leaders in Iran from gaining any more influence or engaging in any military adventures abroad," it observed.
Berlin has simply ignored the human rights issue in these considerations, Der Spiegel said.
"Indeed, the Saudi regime numbers among the most repressive in the world ... It exports Wahhabism, an ultra-conservative branch of Islam, into the Arab world."
In 2011, the Saudis originally envisaged buying 270 Leopards, Germany's most advanced tank built by Krauss-Maffei Wegmann but now Riyadh's reportedly interested in as many as 600-800 tanks, a deal worth around $12.6 billion.
In July, Indonesia said it's interested in buying 100 Leopards. The Persian Gulf emirate of Qatar, one of the world's leading natural gas exporters which is increasingly engaged in foreign affairs, including backing rebels in Libya and Syria, has also expressed interest.
This potential sale is widely seen as the next test case for Merkel's new arms-export policy.
Qatar is eyeing the acquisition of 200 Leopards, a deal worth $2.5 billion. A team from Munich's Krauss-Maffei Wegmann recently flew to Doha, the emirate's capital, to discuss a possible deal.
The emirate's far from being a democracy, once the guideline in German arms sales, but, says Der Spiegel, it "perfectly fits the type of country targeted by the Merkel Doctrine ... It aims to be a stabilizing power in the region and declares itself to be pro-Western."
Meantime, Merkel's pushing to sell the twin-engine, multirole Eurofighter, built by a consortium of the European Aeronautic and Defense Co., Italy's Alenia Aeronautica and BAE Systems of Britain.
EADS comprises Germany's DaimlerChrysler Aerospace, Aerospatiale-Matra of France and Construcciones Aeronauticas of Spain.
Angola, an authoritarian, military-run state in West Africa that's challenging Nigeria as the continent's top oil producer, is talking of buying German-made patrol boats to protect its oilfields in the Atlantic.