JERUSALEM — Israeli defense companies are expanding their footprint in Europe through technologies such as land digitization, avionics upgrades, electronic warfare, and command-and-control systems, with sales totaling up to $2 billion in 2018 for Israel’s three largest defense firms.
On Nov. 18, Rafael Advanced Defense Systems announced it signed a multiyear contract to supply Spike missiles and launchers to the Germany Army. The deal involves Eurospike, a joint venture of Rheinmetall Electronics and Diehl Defence. The agreement is for 1,500 Spike rounds worth about €200 million (U.S. $221 million).
The Spike contract is one of several recent deals in Europe involving Israeli industry. On Oct. 29, the Swiss Armed Forces selected Elbit Systems to provide a tactical software-defined radio for its Army. The company also went on to sign a $50 million contract with the Portuguese Ministry of Defense to supply the Air Force with an electronic warfare suite over a five-year period.
In addition, the Italian Coast Guard has hired Israel Aerospace Industries to provide its motorboats with MiniPOP electro-optical and infrared systems.
Rafael’s Ariel Karo, executive vice president for marketing and business development, told Defense News that the company intends to maintain close relations with European partners.
“We will also deepen our cooperation with local industries as part of our commitment to share knowledge and technology and to create opportunities for domestic manufacturing of our systems, as we have for the Spike missile, which has essentially become a European missile," Karo said. "We look forward to taking part in the major European programs taking place, such as land digitization, vehicle modernization, air force upgrades and many more.”
For its part, Elbit sees Switzerland as a strategic market. The company’s president and CEO, Bezhalel Machlis, said he wants to expand cooperation with Swiss industry.
And IAI’s executive vice president for marketing, Eli Alfassi, considers Europe a core market for the company, specifically Germany and the United Kingdom. The first two quarters of 2019 saw IAI secure $274 million in European sales, and that year looks on track to outperform 2018’s $395 million for the whole year. Overall global sales at IAI in 2018 came to $3.6 billion, meaning Europe business represented about 10 percent of that total.
IAI’s European sales focus on its Elta Systems group as well as its aviation and UAV divisions. Elta’s focus is radars and electronics, whereas IAI’s aviation group includes both civilian and military contracts. IAI’s line of drones includes platforms such as the tactical Heron, unveiled in Paris over the summer. Rafael, which is known for its Trophy active protection system and its Iron Dome air defense system, recently acquired the UAV-maker Aeronautics in hopes of integrating new unmanned systems into its line of offers. Rafael’s sales of $2.6 billion in 2018 are not broken down specifically for Europe, but the company reports that about half of those total sales cover Europe, Asia and North America.
But Israeli companies, despite their reputation for producing high-end UAVs and their technological prowess in electro-optics, air defense systems and active protection platforms, must still face down other defense giants with global footprints. The U.K., for instance, selected Boeing for an early warning and control aircraft this year in a deal valued at almost $2 billion. Israel Defense reported that Boeing was chosen over an IAI offer.
In addition, Switzerland is seeking ground-based air defense as part of its vision for 2030. Despite interest and an invitation to bid, Rafael did not pitch its David’s Sling. Meanwhile, Raytheon has offered its Patriot system to the Swiss.
Overall, the European market accounted for 26 percent of $7.5 billion in 2018 sales involving Israeli defense companies. According to Elbit’s 2018 figures, 20 percent of its sales came from Europe, totaling $737 million. At the time, Elbit said its sales increased in Europe thanks to electronic warfare and armored vehicle systems. The company reports that the first half of 2019 brought in $388 million worth of sales — about 20 percent of the global total.
“There is an alignment between the operational needs of many European countries with our portfolio of capabilities," said Ran Kril, executive vice president of international marketing and business development at Elbit. "We are witnessing in recent years a significant increase in the demand for our solutions in a variety of areas, including platforms protection, next-generation radios, C2 and cyber, as well as EW and unmanned systems. We believe that our strong industrial presence across Europe and our broad portfolio will enable us to continue to support European customers and to further grow our activities in these markets.”
Elbit’s acquisition of Israel’s IMI Systems is expected to provide the former with added value in Europe. In September, the Dutch announced that Elbit will install the Iron Fist active protection system on the Royal Netherlands Army’s CV-90 combat vehicles. Elbit also was recently awarded a $38 million contract by the U.K. for its joint fires simulation training artillery systems; a deal with Greece to provide the Hellenic Coast Guard with combat suites and perform systems integration for three new patrol vessels; a contract with a European Union agency for maritime patrol drones; and a $73 million contract with the German Air Force for directed infrared counter measures.
Rafael also has hopes for its Spyder air defense system. It signed a deal in 2019 with Romania’s Romaero for local production. As Poland begins arming itself with the Patriot air defense system, produced by American firm Raytheon, the country is considering further bolstering its defense with the David’s Sling stunner interceptor, which is co-produced by Raytheon and Rafael. Poland sought eight batteries of the Patriot, and it’s currently negotiating a second phase of the contract.
The demand in Europe for missile defense systems and border-patrolling drones, coupled with what a number of countries there perceive as a threat from Russia, are driving defense investments. Pressure on NATO members to increase their respective defense budgets and military modernization efforts — particularly in Eastern Europe — are proving fruitful for Israeli companies, as businesses there can offer systems already proven on the modern battlefield.
But Israel defense firms trying to go it alone may struggle in competitions involving American companies. Reports indicate that direct competition between the two markets on air defense for European customers is unwelcome. The U.S. supports Israeli development of the David’s Sling stunner interceptor, for example, via Raytheon, which sells the Patriot system. The stunner interceptor, known as SkyCeptor, can be used with the Patriot battery. This plug-and-play approach can benefit both companies, and seems to be the preferred approach over a contest where David’s Sling and Patriot are completely separate offers.
Seth J. Frantzman is the Israel correspondent for Defense News. He has covered conflict in the Mideast since 2010 for different publications. He has experience covering the international coalition against the Islamic State group in Iraq and Syria, and he is a co-founder and executive director of the Middle East Center for Reporting and Analysis.