Israeli defense company wins €2 billion deal in Germany despite formal arms embargo

Rafael Advanced Defense Systems, one of Israel’s largest defense companies, has won a €2 billion ($2.3 billion) deal to provide the German military with Spike missiles despite a partial arms embargo by Berlin on Israel due to the war against Hamas in the Gaza Strip. It is one of the largest European defense contracts that the Israeli military industry has secured in recent years.

The Israeli developed missiles will be supplied through EuroSpike, a joint venture where Rafael owns 20% and the German defense companies Diehl Defence and Rheinmetall each own 40%. The production of the missiles will take place in EuroSpike’s facility in Germany. 

Rafael has sold the Spike missile systems to 40 countries including some 20 NATO member states. The Spike systems are known internationally for their compatibility with various launch platforms and they are considered easy to operate. 

Speaking on condition of anonymity, military industry sources argued that the large defense deal was likely facilitated by the fact that EuroSpike is considered a European company despite being partially Israeli-owned and selling Israeli developed defense products. 

The Gaza war caused some diplomatic tensions between Berlin and Jerusalem. However, Germany remains one of Israel’s main allies in the European Union. Germany is Israel’s second largest arms supplier after the United States. The Israeli navy is equipped with German submarines and German-built military vessels that were later modified with indigenous Israeli technologies. At the same time, Israel has also provided military equipment to Germany. 

In late September 2023, merely days before the Hamas Oct. 7 attack, Germany and Israel signed a record $3.5 billion deal concerning the delivery of the Israeli-developed Arrow-3 missile aerial defense system to the German military. The deal was part of Germany’s efforts to strengthen its defense capabilities against potential threats from Russia amid the ongoing war in Ukraine. 

At the time, Israel’s former Defense Minister Yoav Gallant praised the defense agreement with Germany. 

“Since the establishment of our ties, Germany has contributed greatly to Israel’s security. Today we are proud to do the same for Germany - a strategic ally, and European leader,” Gallant stated. 

“Only 80 years since the end of the Second World War, yet Israel and Germany join hands today in building a safer future, for both nations,” he added.

The Arrow deal with Germany is to date the largest defense contract in Israeli history. The Israel Aerospace Industries (IAI), which develops and manufactures the Arrow systems, is expected to deliver the first missiles by the end of 2025. Looking ahead, Germany is reportedly also considering buying the upgraded Arrow 4 system that offers expanded defense against incoming enemy ballistic missiles. 

Israel has emerged as one of the world’s leading exporters of various military technologies. Earlier this year, the Jewish state was ranked the world’s 8th largest arms exporter according to the Stockholm International Peace Research Institute (SIPRI). 

“The U.S., India and Germany are among the major countries receiving weapons from Israel, which supplies 13% of Germany’s arms imports,” Israeli news outlet Ynet News reported. “Additionally, Israel is a key supplier to Morocco, the UK and the Philippines, accounting for 27% of their arms imports."