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The U.S. Role in Israel's Arms Industry
When McDonnell Douglas came up with the concept of adding conformal fuel tanks and equipment pods to the outside of the F-15 fighter (which increases the combat range by 550 miles), the U.S. Air Force did not have the research and development funds available. Wanting these additions on the F-15’s it had ordered, Israel offered the necessary funds provided under U.S. military assistance and paid McDonnell Douglas to develop the fuel tanks. The U.S. subsequently subcontracted an Israeli firm to produce these tanks in Israel. Thus, the U.S. Air Force ended up ordering these tanks for its own planes from Israel, as well as those slated for sale to Saudi Arabia.97 All in all, Israel’s subcontract work for U.S. prime defense contractors amounted to $10.6 million and $22 million in 1984 and 1985 respectively.98 Given the size of some of the publicly-known subcontracts, these figures are undoubtedly low. Modifying and Selling U.S. Military Equipment The U.S. has allowed Israel to buy the exclusive rights to produce U.S.-designed military equipment, introduce modifications, and sell it abroad. In 1967, for example, Israel bought the rights to an American jet subsequently called the Westwind executive jet. The Israeli version, however, is powered with a different engine, albeit one of U.S. production. The Westwind has been marketed both as an executive jet and as a military reconnaissance plane.99 By September 1984, 300 of these jets had been sold.100 Three years before, IAI had begun working on an advanced generation of the jet, the Westwind Astra. The Astra, with a speed of Mach 0.8 and a range of 3,000 nautical miles, has been marketed since late 1984.101 In July 1987, IAI’s project, which would upgrade the McDonnell Douglas F-4 Phantom aircraft by replacing the General Electric J-79 engines with the Pratt and Whitney 1120 engine, passed a milestone when a modified F-4 flew at IAI’s installation at Ben Gurion airport. Other modifications include a more accurate navigation and weapons delivery system, new wiring and systems designed to reduce the pilot’s work load. New radar was also installed and changes made in the plane’s frame to strengthen weak spots and the wings. These modifications were intended to propel the F-4 Phantom jets past the year 2000.102 Israel undertook this work in order to attract business in countries that use the Phantoms in their air forces. The new combat capability of the modified F-4’s is expected to be very attractive to air forces already possessing the old F-4’s but, because of severe budget problems, unable to buy new aircraft.103 According to IAI sources, modifications on existing weapons systems promise to become an IAI major income earner within the foreseeable future.104 Service and Maintenance Contracts for U.S. Forces In October 1985, the U.S. Navy signed a Master Repair Agreement (MRA) with Israel Shipyards, enabling the U.S. Sixth Fleet to use Haifa for intermediate maintenance work.105 A month later, the biggest armada of the U.S. Sixth Fleet ever to visit Israel docked in Haifa harbor for supplies, servicing and shore leave.106 Over the years, IAI has also won several overhaul and maintenance service contracts for U.S. Air force F-15 and F-16 fighter jets stationed in Europe. The Israelis, continually voicing their concern that these service agreements were insufficient, were prepared to do much more.107 The Israelis have also complained regarding their limited ability to compete with NATO countries in bids for maintaining U.S. Military equipment. In March 1987, Ze’ev Almog, general manager of Israel Shipyards, met the commander of the U.S. Sixth Fleet in Europe who promised to give the yard a larger share of the fleet’s annual $16 million repair work. The U.S. would later refrain from allowing the Sixth Fleet to visit Haifa for service and repairs, following the sentencing of the Israeli spy Jonathan Pollard.108 Service and maintenance contracts in the future will likely improve considerably. The Pentagon may allow Israel to bid on an added $100 million for operations and maintenance contracts for U.S. military equipment.109 Purchasing and Leasing Israeli Military Equipment
The establishment and expansion of the Israeli arms industry was intended to satisfy domestic needs and to reduce reliance on foreign suppliers. Less than a decade after Israel’s decision to develop a full-scale arms industry, the industry outgrew its domestic base, which was too limited to provide the economies of scale necessary for the viable and economical production of major weapons systems. In the early years, the IDF was virtually the sole client, but by the late 1970s and early 1980s, more than 60 percent of Israel’s arms production was sold abroad.110 During the last decade, Latin America, undisputedly Israel’s largest market for arms, accounted for approximately 50 to 60 percent of its total military exports.111 Although Israel has, over the past few years, expanded its arms sales to Asia and Africa, the overall share of its arms exports to Third World countries, particularly those in Latin America, has been decreasing. The faltering economic situation in many developing countries has proven to be the major obstacle.112
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