As Tensions on Its Borders Grow, So Do Rivalries Among Israel's Defense Industries

Behind the scenes of IDF's decision to deploy a Rafael-developed tank along Gaza border, company's rival Israel Military Industries is fighting for survival.

Israel Defense Forces Chief of Staff Gabi Ashkenazi disclosed this week that for the first time, Hamas fired advanced Russian-made Kornet missiles from the Gaza Strip, earlier this month, and damaged an IDF Merkava tank. Such anti-tank capability has, up to now, belonged only to Syria and Hezbollah.

IDF Cast Lead- Bloomberg

In view of this new threat, the IDF has decided to deploy along the Gaza border the one tank battalion that is equipped with the Windbreaker, a special system used against anti-tank weapons (marketed abroad under the name Trophy ), which was developed by Rafael Advanced Defense Systems. The image of burned-out tanks destroyed by missiles during the Second Lebanon War is still fresh in Israel's collective psyche. Windbreaker provides substantive defense against such attacks - and makes a good impression in photographs as well.

Meanwhile, behind the scenes, a tough battle is being waged between two state-owned defense industries. One, Rafael, is at the cutting edge of technology, and has been selected to engage in this special tank-defense project for the international market; the project has the potential of bringing in hundreds of millions of dollars in revenues (each such system costs an estimated $200,000 to $300,000 ). On the other side is Israel Military Industries, a company that has floundered for years and is now fighting for survival.

Last summer, the Defense Ministry decided to suspend its investment in a competitive system called Iron Fist, developed by IMI, which would provide special defense to armored personnel carriers (APCs ). IMI had viewed this as its flagship project for years to come. For his part, Defense Minister Ehud Barak is expected to hold additional discussions on this subject before the subject is closed.

Concurrently, the State Comptroller's Office has received inquiries from concerned citizens about these two projects, and seems inclined to launch an investigation about how decisions were made with respect to their development. Despite the IDF and Defense Ministry argument that the Windbreaker is ready for use and better suited for conditions in the field (a controversial claim ), it's hard to dismiss the time factor involved: The process of outfitting tanks with Windbreaker is gradual and protracted. At that rate, it will take years before the IDF infantry will benefit from comparable sorts of defense systems. Senior retired officers claim that the fact that it takes so long to install the Windbreaker will cost the army lives during the next round of warfare. Officials in the Defense Ministry disagree.

Since the mid-1990s, local defense experts have been considering development of systems that would block anti-tank missiles fired against armored vehicles, but interest picked up in the aftermath of the debacles in Lebanon. The Merkava 4 is considered the world's most fortified tank, yet military experts recognize the vulnerability of it and other models in the face of advanced anti-tank missiles. Israel's urgent search for defensive mechanisms is proceeding in tandem with that of Western armies that are dealing with field conditions in Afghanistan and Iraq. Rafael was the first to furnish a solution.

The green light for the procurement of the Windbreaker for Merkava tanks was given around the time of the Second Lebanon War in 2006. In parallel, IMI offered its rival system, the Iron Fist. Regarded by outside experts as "brilliant in its simplicity, cheap and particularly effective," the latter system was first assembled in the spring of 2009. Then-deputy IDF chief Maj. Gen. Dan Harel decided that it would be used for the army's growing fleet of heavy Namer APCs. For development, the Defense Ministry allocated tens of millions of shekels to IMI. Allocations received by Rafael were greater, however. The day Harel announced his decision, several IMI executives gathered to celebrate at a local bar (some were even stopped by police on the way home, on suspicion of drunk driving ).

In June 2010, IMI received an official document from the ministry's bureau for arms development, declaring that the Iron Fist had been deemed suitable for full-scale development, thought it called for various improvements in the system. Then, a month later, IMI officials detected a change of attitude. The official announcement came at the end of August: The ministry was suspending development of Iron Fist, arguing that it was not battle worthy. In the future, IMI was told, Iron Fist and Windbreaker would be merged, in order to produce the next generation of protective systems for Namer APCs.

Rafael, which produces an array of missiles, has a sterling reputation, a proven production and marketing track record, and a management team that includes two charismatic, influential reserve major generals: chairman of the board Ilan Biran and CEO Yedidia Ya'ari.

IMI, in contrast, is the neglected child of the defense establishment, and suffers, unfairly, from a negative reputation. For several months now, it has not even had an active chairman of the board. IMI is trapped between the Defense Ministry - which requires it to maintain an expensive production line for heavy ammunition, intended for emergencies - and the Finance Ministry, which wants to privatize the company. Lurking in the background is a worried workers committee, and also real estate elements whose eyes are peeled at the lucrative properties on which IMI is quartered, in Ramat Hasharon.

IMI has produced some successful products, but is dependent on the continued development of the Iron Fist as a means for survival. Defense Ministry officials have furnished a series of arguments for the decision in August, but there seems to be an underlying, hidden one: Why furnish a huge budget, for at least five years, to a company whose future is clouded by doubt?

Reappraisal and controversy

A reappraisal of whether Iron Fist is indeed battle worthy was undertaken by a team of experts that included three brigadier generals: Ofir Shoham, Yaron Livnat and Eitan Eshel. On August 18, Defense Ministry director general Maj. Gen. (res. ) Udi Shani, approved the team's conclusions.

Iron Fist, according to IMI documents submitted to the ministry, beats Windbreaker in all respects: Its warhead and its interception system are more effective, cheaper, and better suited for integration with other defense systems; and it can cope with a whole gamut of threats and missile-firing ranges. Its response time is quick, and it has the capability of addressing two simultaneous threats. Iron Fist underwent hundreds of interception tests, some of them overseas, and succeeded in most of them, say the documents. Plus, interest in purchasing the system, in the United States, Western Europe and East Asia, is high.

In addition, Avi Felder, IMI's CEO, claimed recently that Iron Fist has attained field-preparedness levels much faster than what was anticipated by ministry officials; production can be completed by the end of 2011, he insisted. At the same time, a recent important test of Windbreaker, undertaken with a foreign country, revealed significant malfunctions.

There are a number of related, controversial issues in this whole story, but it is not really possible to render a definitive judgment about them. There is a long-standing debate about the replacement of Iron Fist's radar systems, a requirement that IMI officials complain was coercively imposed; there is also debate about middle-ranking officers whose promotion has been stalled because they publicly advocated the "wrong" defense system. Lurking behind everything is IMI's sense of getting the short end of the stick.

"At play here is structural inferiority," says an outside observer who, like all other interviewees for this report, spoke on condition of anonymity. "Rafael is the defense system's darling. Think about a 45-year-old officer who is soon to be discharged. He would have to be a saint to avoid thinking about who his next employer will be, when rendering decisions on this issue. Rafael is a much better employment option than IMI. How does that affect a situation in which IMI's solution is better than Rafael's?"

A former IDF officer, who held a top post in the IDF General Staff, claims: "IMI's system is clearly better than Rafael's. Whoever says anything else is mistaken, and has been misled. The big scandal is that as a result of these decisions, the Namer APC will not have a new fortification system for years to come. That is a historic mistake - a blunder whose cost will be human lives."

The defense establishment's response is summed up by a senior official who was involved in the decision-making process. The Iron Fist's development and installation process is much longer than what IMI is suggesting, he declares: "We have been through this with Rafael. Three years elapsed between presentation of proof that the technology is battle worthy and that the system works - and actual installation of the system on tanks. You have to keep in mind that we are talking about systems that work automatically in response to threats, and basically take decision-making power away from the commander of the vehicle. We can't take any risks here. Windbreaker had been extensively tested for three years before Iron Fist even got out of the starting blocks. IMI's forecast about capability within one year is unrealistic. As time passed, we realized it would take more time and cost more than what we thought."

The decision, this source claims, was well considered and related directly to facts on the ground: "Udi Shani demanded an orderly process. The team reappraised the calculations in a systematic fashion, and decided that there should be a merger, combining the huge amount of experience accumulated by Rafael and IMI's simpler interception technology, which has less test experience."

The official acknowledges that the team's decision could delay the installment of protective systems on the Namer APC, but says "this delay was necessary, in order to assess the situation." Success in one or another test, he adds, does not necessarily mean that a defense system is operational, and he dismisses discussion of the malfunctioning of Rafael's Windbreaker in recent tests. "Malfunctions always occur in tests. That doesn't cast doubt on the project."

The official is especially perturbed by claims about risks posed to the lives of soldiers by this bureaucratic in-fighting. "That is charlatanism. We are worried about soldiers' lives as much as about anything else. We ourselves rescued casualties from damaged tanks. It is easy for retired generals to cast aspersions; whoever doesn't have responsibility can say whatever he wants. The media lack the ability to decide which side is correct in this dispute. Such judgment requires knowledge of engineering and technological matters.

Defense officials have received strongly formulated warning letters about the suspension of the Iron Fist system. In November, the State Comptroller's Office started to collate these and other documents pertaining to this issue, but it has yet to announce whether it will launch a formal investigation of who is behind this.

For their part, the defense minister and the IDF chief of staff, who have been at loggerheads about innumerable matters in recent months, concur that a merger of the two defense systems is needed for the Namer APC. They also seem to agree that IMI was nudged off the stage in an unpleasant way and this should be rectified.

Barak, who visited IMI earlier this month, alluded to Iron Fist's "interesting advantages," and has promised to look into the entire subject seriously in the weeks ahead. Up to now, discussion about merging the systems for the Namer have yielded no substantive results. Neither IMI nor Rafael is thrilled about the idea. IMI officials worry that Rafael is simply waiting for Iron Fist to be shelved before it takes control of the Namer fortification project. Meantime, the IMI board has decided to continue to invest in Iron Fist, despite the suspension of government allocations. Tests overseas continue, and IMI is hoping for Barak and the Defense Ministry to be more supportive.

The ministry issued a short response to this article: "The Defense Ministry expects that the defense industries will not conduct their business rivalry in the media. Should Rafael and IMI not regroup quickly and decide to cooperate on the Namer system, the ministry's director general would be able to use his authority, take the project away from them, and deliver it to a third company. Both companies should recall that they are owned by the state."

The IMI-Rafael story is thus far from being concluded, and in months to come it will doubtless feature continuing bureaucratic and business skirmishes.