Submarine Scandal: Germany Postpones Deal Due to Israeli Corruption Probe

Israeli police suspect kickbacks from German shipbuilder convinced Israeli decision-makers to purchase more ships

One of Israel's Dolphin-class submarines purchased from Germany, photographed in 2016.
One of Israel's Dolphin-class submarines purchased from Germany, photographed in 2016. Tomer Appelbaum

The signing of a memorandum of understanding on the German sale of three submarines to Israel has been postponed, a National Security Council official said on Tuesday morning.

The official's announcement came following a report in the Israeli daily Yedioth Ahronoth that Germany postponed the signing of the memorandum in light of Israel's investigation into possible corruption in the deal. According to the daily, the signing of the memorandum was meant to take place next in Germany, but the event has been postponed indefinitely.

A number of senior officials were placed under house arrest on suspicion of bribery and fraud in the affair, dubbed Case 3000. The case involves two transactions to enlarge Israel’s navy: one for the purchase of three submarines, the other for the purchase of missile boats to protect Israel’s natural gas platforms at sea.

The submarine deal is meant to replace the Israeli Navy's three older submarines with newer ones. According to the plan, the deal is due to take place only in 10 years' time.  During discussion on the matter, then-Defense Minister Moshe Ya'alon wondered why the deal was being advanced when there was still a long time to its actual implementation.

The argument put forward by the prime minister and his associates, according to a security official, was that it was important to sign the deal during the lifetime of the current German administration. A national election is set to take place in September, so Israel wanted to ensure the terms of the memorandum of understandings beforehand.

In fact, the terms of the submarine deal were already signed upon and concluded, including Germany's financing of one third of the cost. The signing ceremony, which was meant to take place next week, was supposed to constitute the official approval of the deal, after both Israel and the German national security council agreed to the terms. However, the advances in the probe in Israel led to the postponement of the ceremony to a yet-unknown date.

Meanwhile, Defense Ministry Director General Udi Adam is set to leave to Germany on Tuesday afternoon. The Defense Ministry clarified that the trip was planned a year ago, and that it would constitute Adam's first visit to Germany since he began his term. 

At the end of last month, the Der Spiegel weekly reported that Germany's national security council authorized the sale of three submarines to Israel. According to the report, the German government included a clause into the agreement allowing it to cancel the deal if the allegations in the case that has been dubbed "Case 3000" prove to be true.

Investigation proceeds

On Monday it emerged that businessman Michael Ganor, who is at the center of the submarine scandal and who brokered the agreement between Israel and the Germany shipyard Thyssenkrupp, is in the process of striking a deal to become a state witness.

 Sources involved in the case say that Attorney General Avichai Mendelblit gave prosecutors a green light to reach a state witness agreement with Ganor. Ganor’s lawyer, Nati Simhoni, resigned due to these contacts. Prosecutors were now trying to examine and verify the partial information Ganor has provided, which they will not be able to use if the deal is not signed.

After receiving this information, police summoned Monday evening former Israel Navy commander Eliezer Marom for urgent questioning, perhaps in an effort to try to verify some of Ganor’s information. Marom is suspected of taking bribes.

Ganor’s detention was extended with his consent until Thursday, when he will be released from house arrest. The arrest of Avriel Bar Yosef, who was the acting head of the National Security Council and played a central role in preparing the opinion concerning the purchase of the submarines, was extended by four days.

Aside from Ganor, Bar Yosef, and Marom, the suspects in the case include David Shimron, Netanyahu’s personal lawyer and relative, who represented Ganor when the submarine deal was reached. Another suspect, Ronen Shemer, an attorney in Ganor’s firm, is suspected of shredding documents.