Analysis: Israel defense exports strong

By LEAH KRAUSS, UPI International Security Industry Correspondent  |  Dec. 13, 2007 at 2:38 PM
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HAIFA, Israel, Dec. 13 (UPI) -- Israel is climbing the list of the world's top arms exporters, and as such will redouble efforts to make responsible exports, Pinchas Bucharis, director general of the country's defense ministry, announced this week.

"Defense exports in 2007 reached more than $4 billion," Bucharis said via a ministry statement. "Israel is in fourth place (in the world) in defense exports, above Britain," he continued.

The United States, Russia, and France top the list, the Israeli daily newspaper Haaretz noted in a report.

Bucharis made the announcement in conjunction with the unveiling of a new Defense Ministry initiative to supervise Israel's arms and technology exports.

He said, according to a ministry statement: "The oversight law has renewed the security industry's interest (in supervision) and will prevent the spread of weapons to agents that endanger the world."

The new law, slated to take effect at the end of December, will replace a collection of standards and directives that governed export ethics until now, the ministry said.

Bucharis called the law "revolutionary."

"The law will deepen (Defense Ministry) cooperation with the Foreign Ministry and other relevant government ministries, improve enforcement and oversight, and stiffen the punishments (for exporting to unsuitable customers)," according to the Defense Ministry.

Israeli companies have drawn international criticism for a few high-profile deals with questionable customers -- most recently, China.

There were also two well-reported incidents in recent years of Israeli companies flouting an Israeli embargo on Myanmar leveled during the tenure of former Prime Minister Yitzhak Rabin: "Israel Military Industries sold Burma several million dollars' worth of rifles, automatic rifles and ammunition, and Soltam sold 18, 155-milimeter cannons, worth about $20 million," the Haaretz newspaper recalled in an October report.

"Since that (Rabin) government decision, Israeli dealers, middlemen and weapons companies have requested several times (of) the Defense Ministry's Foreign Defense Assistance and Defense Export Organization that they be allowed to sell more weapons," the Haaretz report said.

Despite the noise of the bad press, the vast majority of Israel's defense exports go to the United States. The rise in exports this year comes even despite the recent depreciation of the dollar against Israel's currency, the shekel. At some points in recent months, the dollar has fallen below 4 shekels, from an average of more than four and a half and highs nearing 5 shekels to the dollar in the past few years.

Defense News noted the industry's currency rate concerns in July: "Although the depreciating U.S. dollar has affected industrial sectors worldwide, its impact on the Israeli defense and aerospace industry has been unique, sources here say ... (as the) defense industry and national economy rely on international sales, the combination of the falling dollar and rising shekel has been doubly bad, officials here say.

"The unique problem for the Israeli industry is that more than 70 percent of our income from exports is in dollars, and in the defense export sector, it's closer to 100 percent," Defense News quoted Shauli Katznelson, deputy director general of the Israel Export and International Cooperation Institute, as saying.

However, as recently as the third quarter of 2007, many of Israel's top defense firms -- including Elbit and Israel Aerospace Industries -- reported record sales and earnings.

"IAI isn't just an important, or large, or advanced industry (in Israel); we are also a provider of technologies that are in high demand from many customers," Doron Suslik, the vice president of corporate communications for Israel Aerospace Industries told UPI in a telephone interview Thursday, when asked to comment on the news of Israel's improved standing in the worldwide defense market.

Suslik stressed that 87 percent of IAI's business is for export, with only 13 percent for the domestic Israeli market. The country's other top defense firms also boast high export-to-domestic revenue ratios.

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