Missile Boat Crisis Ends as Germany Gives Israel $382 Million Discount

Agreement is a reversal of Berlin's earlier decision to withhold the discount because of Israel's settlement construction.

ברק רביד - צרובה
Barak Ravid
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Israel Navy missile boat. The navy is looking to buy the cheaper frigate-class ship.
Israel Navy missile boat. The navy is looking to buy the cheaper frigate-class ship.Credit: IDF Spokesman's Office
ברק רביד - צרובה
Barak Ravid

A crisis between Israel and Germany over missile boats required to protect Israel's offshore gas fields has ended after Berlin agreed to slash €300 million (about $382 million) off the cost, officials on both sides said. They are expected to initial an agreement for the boats within weeks.

The talks between Israel and Germany to purchase three fast missile boats to protect the gas rigs off Israel’s shore began a year ago. Haaretz reported that the deal was worth about €900 million.

Israel asked for a 30 percent reduction on the price, like it had received in previous deals on German submarines. The German discount, tantamount to a grant of hundreds of millions of euros, was part of Chancellor Angela Merkel’s policy to bolster Israel’s security.

In the beginning of May, about two weeks after the talks between Israel and the Palestinians stalled, German’s national security adviser Christoph Heusgen told his Israeli counterpart Yossi Cohen that Israel would not receive the discount and would have to pay their full price.

Heusgen said that following the breakdown in the peace talks with the Palestinians and the harsh criticism in Germany of Israel’s construction in the settlements, the Bundestag would not approve a grant of hundreds of millions of euros to subsidize the boats.

The German decision deepened the crisis that has been developing between the two states over the past five years, due to the tense relations between Merkel and Prime Minister Benjamin Netanyahu.

The low-key talks were jumpstarted at the end of June when Foreign Minister Avigdor Lieberman visited Berlin and met German Foreign Minister Frank-Walter Steinmeier. According to a senior Foreign Ministry official in Jerusalem, Steinmeier told Lieberman "don't worry, it will be o.k.," and Lieberman left the meeting optimistic about the possibility of getting the missile boats deal back on track.

The talks continued intensively for three months after the meeting between a small group of senior officials on both sides - Lieberman and Steinmeier, Israeli ambassador to Germany Yaakov Hadas and Germany's ambassador to Israel Andreas Michaelis, national security advisor Yossi Cohen and his German counterpart Christoph Heusgen, as well as Finance Minister Yair Lapid and his counterpart Wolfgang Schäuble.

Israeli officials who asked to remain anonymous said there were several factors which led to the German decision to give Israel the grant despite the criticism over the failure in the Israeli-Palestinian peace talks and the continued construction in the settlements.

One official said Lieberman deserves most of the credit, for forging close cooperation with Steinmeier, who pushed to advance the deal in Germany. “Lieberman dealt with the issue incessantly,” the official said. “He played a very positive part and managed to enlist many German officials to advance the issue.”

Another official said Finance Minister Yair Lapid’s visit in Berlin for talks with German Finance Minister Wolfgang Schaeuble was extremely helpful in advancing the deal in its last stages.

Lapid also met Heusgen and told him he was trying to restrain Israel’s money transfers to the settlements.

Another official said the Germans understood that the missile boats were a vital security necessity for Israel. Cohen, who held talks with Heusgen and other German officials, told them there was a real threat that Hezbollah would attack the gas rigs.

Moreover, the deal was worth hundreds of millions of euros for the German economy and for shipyards which employ thousands of workers. The initial German refusal to give the discount made Israel examine the possibility of purchasing the boats from South Korea. Eventually, the Germans understood they too have an interest in promoting the deal and in putting the discount back on the table.

What finally swung the deal was Merkel’s personal commitment to Israel’s security, a Foreign Ministry official said. "Though she has a lot of criticism, when it's come to Israeli security she puts it all aside," said the official. “This deal will strengthen Israel’s strategic ties with Germany for the next 20 years,” he said.

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