The Globes business daily reports that compliance by the defense and foreign ministries with the trade laws, which tighten oversight on defense exports, will curtail UAV sales by Israel Aerospace Industries, Aeronautics Defense Systems, Elbit Systems and others.
Earlier this month, the international business consultancy Frost and Sullivan anointed Israel's defense industry the leading exporter of UAVs. It said that in 2005-12, the Israelis sold drones, mainly surveillance craft, worth more than $4.61 billion, with 2005 the best year with UAV and systems exports worth $1.7 billion.
Israel's overall defense exports averaged $6.1 billion a year in 2005-12, putting it in the leading rank with the United States, Russia, France, Germany and Britain.
Frost and Sullivan forecasts that Israeli UAV exports would grow 5-10 percent through 2020, in part because the U.S. manufacturers cannot export UAVs since most of them are classified platforms.
These include General Atomics' MQ-1 Predator and MQ-9 Reaper, which are widely used by the U.S. Central Intelligence Agency and U.S. Special Forces for assassinating al-Qaida operatives and their allies in Pakistan, Yemen and Somalia.
Israel's main export targets have been Europe, Asia, Africa and Latin America. India is a major buyer.
"Israeli companies continue ... investing in aggressive marketing in markets where demand for UAV systems continues to grow, such as Africa, Asia-Pacific and South America," said Eran Flumin, Frost and Sullivan's Israel manager.
But, Globes defense analyst Yuval Azulai observed, "despite the fantastic numbers in the Frost and Sullivan report, Israeli companies are apparently unable to repeat their peak year of 2005, when they had $1.7 billion in exports of UAVs and systems."
This, he said, was because "in view of diplomatic and other sensitivities, the Ministry of Defense has blocked several big UAV deals by Israeli companies in recent years.
These firms include state-owned IAI, flagship of Israel's defense industry and a leading UAV manufacturer, Elbit Systems and Aeronautics, as well as smaller outfits like Bluebird Aero Systems and Gilat Satellite Networks.
The Israelis were somewhat dismayed by Northrop Grumman's successful and historic May 15 launch of its futuristic X-47B UAV from the U.S. Navy aircraft carrier USS George H. Bush.
That was the first carrier launch for a UAV, which will eventually allow the United States to autonomously operate drones from anywhere in the world and revolutionize naval warfare.
The X-74B will attempt its first carrier landing this summer.
The fighter-size drone has a range of around 1,875 miles, three times that of the Predator.
Globes' Azulai noted that Israeli companies "praised North Grumman's impressive achievement but worry that the X-47B's success will harm their leadership in the UAV field."
Elad Aharonson, general manager of Elbit Systems' unmanned systems division, observed: "We're not completely exposed to the capabilities developed by the Americans in the UAV field because they're classified platforms, which are not intended for export ...
"In any event, the Americans have entered the field of combat UAVs, which are due to replace combat jets and we're not in this niche.
"Entering this niche involved huge investment. We aim our systems at the export market and we're more concerned with systems than platforms."
Elbit's Skylark UAV is used by the Israeli army for intelligence and target acquisition.
Its larger systems are the Hermes 450, operated by the Israeli air force, and the Hermes 9000, considered to be its flagship model.
Elbit Systems specializes in innovative payloads to enhance intelligence-gathered capabilities, usually tailored for customers' requirements.
"In the coming years," said Aharonson, "we'll see innovation in other payload applications but we'll see less creativity in the platforms."
IAI, Elbit and Aeronautics Defense Systems are developing new and more agile unmanned aerial vehicles, as well as ground and seaborne drones.
Despite tightened export rules, Israel's foreign sales volume could still expand as production costs are relatively low.
Industry officials boast that it's significantly cheaper to buy an advanced UAV than it is to train an air force pilot.
Indeed, officials say that within a few decades Israeli UAVs will be able to carry out virtually every battlefield function currently conducted by manned aircraft.