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Wednesday, January 20, 2010

Israel seeks huge naval procurement package from Germany

Earlier this week, part of Israel's cabinet traveled to Berlin for a joint meeting with the German government. Now, we know one of the items on the agenda.

Israel is seeking a 1 billion euro ($1.45 billion) naval procurement package from Germany, with much of the cost to be financed by Germany and the United States. The package includes an additional Dolphin diesel-electric submarine (Israel already owns two, one of which is pictured), torpedoes and two German-built warships.
The ships - stretched, 2,200-ton versions of the Meko A-100 - are the Israel Navy's preferred alternative to the U.S.-built Littoral Combat Ship (LCS), which the service rejected last year as unaffordable because of cost growth. At first, Israel lobbied to build the German ships under license at home, with the Israeli Treasury footing initial costs to establish a local warship-building industry.

But under the latest incarnation of the deal, Israel is proposing to build the ships in Germany, where they will be outfitted with Israeli radar and a comprehensive combat weapons suite. ThyssenKrupp Marine Systems (TKMS), the Hamburg-based consortium building submarines for the Israeli Navy, is to be prime contractor, with Israel Aerospace Industries (IAI) the likely lead integrator.

The proposed acquisition, Israeli defense and industry sources here say, depends not only on significant German funding, but on Washington's permission to use annual military aid to pay for raw materials, subsystems and engine parts destined for the non-U.S. ships.

Altogether, U.S.-produced content could reach $200 million for the estimated $650 million, two-ship program, which the Navy hopes to fund with Foreign Military Financing (FMF). In parallel, the program will draw on so-called U.S. Offshore Procurement funding - the portion of annual aid authorized for conversion into local shekels - to outfit the ships with Israeli technologies.
Read the whole thing. The way these deals are put together is fascinating to me. If Israel manages to pull off all the financing (which essentially means that Germany and the US will foot at least half the bill), it would be quite impressive.


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