Reports: Germany to sell Israel submarines at discount price

BERLIN - German Chancellor Gerhard Schroeder's outgoing government has agreed to sell two submarines to Israel for a deeply discounted price, German news magazines reported on Saturday.

Der Spiegel and Focus magazines said the two Dolphin class submarines would be built in Kiel for a total of about one billion euros (e1.17 billion) and the federal government, leaving office on Tuesday, would pick up one-third of the cost.

After the Gulf War in the early 1990s Germany gave two Dolphin class submarines to the Israel's navy, which then bought a third for a fraction of the price.

Schroeder's Social Democrat-Greens government had long been hesitant about selling more submarines, according to German media reports, over fears Israel could arm the Dolphins with nuclear weapons and threaten Middle East stability.

But according to Israeli security sources, the dispute was over whether Germany should charge the full price. Der Spiegel and Focus said on Saturday that Germany had indeed long resisted Israel's request to help finance the cost of the submarines.

If the sale is confirmed, it would be the second major and long-delayed arms deal the government has agreed in its final month in office. Two weeks ago, Schroeder's government agreed to sell 298 surplus Leopard 2 battle tanks to Turkey.