TEL AVIV, Israel — Israel’s top defense and aerospace firms are riding the wave of a high-profile friendship between Israeli Prime Minister Benjamin Netanyahu and Indian Prime Minister Narendra Modi. More and more companies are benefiting from expanded defense trade, joint research and development, and a shared commitment by both leaders to augment strategic cooperation against common threats ranging from global terror to cybercrime.

With an average $1 billion in annual defense sales in recent years, India already constitutes a key export market for Israeli industry. From air-defense systems and drones to anti-tank missiles, cybersecurity and space, India is for many firms here the largest single defense market.

Just since the beginning of this year, state-owned Israel Aerospace Industries reported some $2.5 billion in new joint projects with New Delhi for medium-range and long-range surface missiles based on the Israeli-developed Barak-8 system, with state-owned Rafael Limited serving as a major subcontractor.

India also selected Rafael’s Spike anti-tank missile over a competitor by Lockheed Martin in a deal that could exceed $1 billion, industry executives say.

And that market is likely to grow even further, experts and defense executives here say, as leaders of their respective right-wing, nationalist governments forge tighter ties in the face of Islamic terror and the growing rocket and missile threat.

“India is a huge market for Israel; one of the most important countries in the world and it will be even more important in the future,” said Yaakov Amidror, a former Israeli national security adviser.

Amidror noted that Israel — “as a small country with very big security needs” — must export a significant share of its industrial capacity in order to sustain its industrial base. “We also need new friends to support us in the international community. In India, we have both: a good friend and a big market.”

In a visit here earlier this month marking 25 years of diplomatic ties, Modi and Netanyahu reaffirmed the importance of bilateral defense cooperation that dates back well before the 1992 establishment of formal ties. A joint statement issued by the two leaders noted that future defense trade “should focus on joint development of defense products, including transfer of technology from Israel.”

The statement also lent support for Modi’s Make in India initiative, which seeks considerable in-country investment and joint ventures by major suppliers worldwide.

To that end, during Modi’s visit to Israel, the two countries convened their first-ever India-Israel CEO forum, during which several defense- and aerospace-related agreements were announced. They included an agreement between IAI and India’s Kalyani Strategic Systems to expand an existing joint venture to include a new maintenance center for advanced air defense systems in Hyderabad as well as another IAI teaming agreement with India’s Wipro Enterprises Limited to build a plant for the manufacturing and assembly of aero structures.

“Many are talking about the Make in India initiative, but we have been practicing it for many years now,” said Boaz Levy, IAI executive vice president and general manager of the firm’s Systems Missiles and Space Group. “We are taking our partnership with India to the next level, and we have a very broad base upon which to build and expand.”

Levy noted that a $620 million contract announced in May for additional long-range surface-to-air missile systems for the Indian Navy marks the first time that IAI will serve as subcontractor, rather than prime contractor, to its Indian partner, state-owned Bharat Electronics Limited.

Elbit Systems also signed an agreement to expand an existing joint venture with Alpha Design Technologies to include advanced thermal imaging equipment, fire-control systems and UAVs; while Cyclone, a subsidiary of Elbit, inked a memorandum of understanding to build aerostructures for airframes.

In a statement, Bezhalel “Butzi” Machlis, Elbit’s CEO, said his firm has been active in India for many years and views it as a strategic, top-priority market. “The subcontinent is huge and varied, with an appreciation for technological innovation that fits extremely well with the broad spectrum of systems and capabilities that Elbit has to offer,” he said.

Machlis, like IAI’s Levy, flagged Israel’s readiness to transfer technology and to broaden strategic partnerships with Indian industry. He noted that the firm has joint ventures with several Indian firms, including Bharat Forge, Mahindra, Adani Group and Hindustan Aeronautics Limited.

As for state-owned Rafael, which is a major subcontractor to IAI on the Barak-8 program, the firm said it continues to work with the different branches of the Indian military and security community “while maintaining and implementing our strategy to forge local partnerships and address India’s Make in India policy.”

The one major Israeli defense firm that is yet to benefit from the bonanza in bilateral defense trade is state-owned IMI, formerly known as Israel Military Industries, which has been blacklisted since 2012 along with five other foreign defense contractors for alleged improprieties, including bribes.

IMI has consistently refuted claims by India’s Central Bureau of Investigation, and government and industry sources here expect all outstanding issues to be resolved soon.


About Barbara Opall-Rome

Opall-Rome is Israel bureau chief for Defense News. She has been covering U.S.-Israel strategic cooperation, Mideast security and missile defense since May 1988. She lives north of Tel Aviv. Visit her website at www.opall-rome.com.

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