How Netanyahu Went Behind Defense Officials' Backs in Israel’s Submarine Deals

Shipyard mediator Michael Ganor, who has shared a lawyer with Netanyahu, has been detained this week on corruption suspicions. But the prime minister’s strange maneuvers started in 2012

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Illustration: Israel's Submarine Scandal: 'Suspicions grow stronger' as Netanyahu lawyer remains in custody
Illustration: Israel's Submarine Scandal: 'Suspicions grow stronger' as Netanyahu lawyer remains in custodyCredit: Eran Wolkowski
Amos Harel
Amos Harel

One day in February 2016, the phone rang at the office of a senior defense official. On the other side of the line was one of Prime Minister Benjamin Netanyahu’s closest advisers. Netanyahu was about to leave on an official visit to Germany. The adviser wanted to know if the official could prepare the documents for the memorandum between the two governments regarding the supply of three additional submarines to Israel’s navy.

The defense establishment was doubly surprised. First, it turned out that the memorandum was expected to include a detailed timetable for the delivery of the submarines. Just a few months before, the army and the wider defense establishment believed that Netanyahu had been persuaded not to pursue a detailed deal including a timetable, because the delivery was expected to take place in the distant future.

Second, the phone conversation disclosed that the prime minister’s people possessed a navy document that detailed the navy’s operational needs for three submarines, beyond the six that had already been built in Germany. The navy document was markedly out of line with the defense establishment’s official position.

An inquiry showed that the chief of staff of the Israel Defense Forces, Gadi Eisenkot, wasn’t familiar with that document either. The navy was communicating independently with Netanyahu’s office, without going through the usual channels. This strange story is but the tip of the iceberg in the grave and puzzling matter of the navy’s dealings – the matter in which the police shifted into higher gear this week.

Netanyahu had a special interest in fortifying the navy, partly as a buildup against potential threats by the Iranians. (According to the foreign media, these submarines are equipped with second-strike capabilities in case Israel ever suffers a nuclear attack.) Also, the navy would protect Israel’s natural gas rigs in the Mediterranean.

Senior navy officials saw this is as a chance to extricate that branch from its lower status, in its eyes, among the General Staff’s priorities. Others, apparently including businessmen, attorneys and retired officers – some of whom have been detained and questioned by the police this week – hoped to cash in on the potential business opportunities linked to the deal.

The dispute over the number of Dolphin submarines Israel needs has been going on for years. In 2012, Netanyahu and then-Defense Minister Ehud Barak forced a sixth submarine on the navy, despite the reservations of then-Chief of Staff Benny Gantz and his predecessor Gabi Ashkenazi. In 2015, with the presentation of its multiyear Gideon plan, the IDF announced that it intended to retire the first submarine it received in 1999, upon the arrival of the sixth submarine from Germany in 2019. Netanyahu objected to this. Later that year he started pushing for the acquisition of three additional submarines, beyond the original six.

Then-Defense Minister Moshe Ya’alon and the IDF strenuously opposed this. The General Staff held a different position. It didn’t see the logic behind a fleet of nine submarines; it worried about a bottomless pit in terms of budgets. Such a high number of vessels would tie down enormous amounts of money for routine maintenance and a large number of crews, as well as a further enlargement of quays at the naval base in Haifa.

The operational quandaries had business ramifications as well, some of them covert ones. In the middle of negotiations with the Germans over the acquisition of the submarines and other vessels, the veteran mediator for the shipyards, Brig. Gen. (res.) Yeshayahu Barkat, was replaced by businessman Michael Ganor, a former naval officer. According to several reports, the person who pressured the Germans to change brokers was the navy chief at the time, Eliezer Marom.

A close Netanyahu associate, attorney David Shimron, is also Ganor’s lawyer. Shimron and Ganor tried to wrest responsibility for maintenance of the submarines from the navy’s shipyards and give it to a German company, arguing that this would be cheaper and more efficient. If this idea had been pursued, a nine-vessel fleet would have significantly increased Ganor’s profits. Maintenance ensures employment for dozens of years – older submarines require more maintenance than newer ones.

The plot thickens. MK Yair Lapid (Yesh Atid) said this week that four submarines made by Germany’s ThyssenKrupp, of a similar model to the ones built for Israel, have been sold to Egypt, contrary to an earlier agreement the company had with Israel. Alex Fishman reported in Yedioth Ahronoth that the defense establishment objected to the deal with Egypt, but when Ya’alon complained to the Germans they showed him a document they had received from Netanyahu consenting to the supply of the submarines to Egypt.

Israel usually insists on veto rights over military equipment that would narrow its qualitative edge over its neighbors. Defense sources have confirmed to Haaretz that this was indeed the way things unfolded. This is a serious development, with yet another claim that Netanyahu went behind the back of the defense establishment, deciding on his own to make compromises regarding a potential strategic threat to Israel.

Fishman’s report said the dispensation awarded the Germans was provided by attorney Isaac Molho, Netanyahu’s special envoy and a partner in Shimron’s law office. Shimron was questioned at length by the police this week and was sent to house arrest.

Since the whole affair surfaced last year, this reporter has repeatedly questioned the ties between Netanyahu, Shimron and Molho. The prime minister and Shimron have argued all along that the attorney didn’t tell Netanyahu that he was also representing Ganor, stressing that Netanyahu was totally unaware of this.

Molho, Shimron’s partner, must have known and should have taken extra care while handling sensitive defense and diplomatic issues on Netanyahu’s behalf. But Molho vigorously denied any involvement in the sale of submarines to Egypt, according to people who spoke to him this week. Defense sources also doubted that he was involved in this matter.

The current investigation broadened as a result of what seemed at first a more limited issue. This was a complaint to the police, filed by the nonprofit group Ometz, that Brig. Gen. (res.) Avriel Bar-Yosef was involved in corruption not directly linked to the submarine and shipyard deals. This complaint was lodged in March 2016. Four months later, at the end of July, Bar-Yosef told Netanyahu that he wouldn’t accept his offer to head the National Security Council. In November, Bar-Yosef was detained for questioning, starting a chain of disclosures in the media regarding the navy’s contracts.

The first police investigation into these deals reportedly started last July; legal sources say the head of the Central District’s Magistrate’s Court, Judge Einat Ron, let the police launch undercover investigations. This usually includes obtaining the communication records of potential suspects, occasionally allowing wiretapping.

It appears that Attorney General Avichai Mandelblit led a deep undercover police probe for a long time before it surfaced this week. At the hearing Thursday extending Ganor’s detention, Judge Ron said that “most of the material has not yet been made public.” The hearing indicated that the police believe that Ganor’s associates shredded documents to obstruct the investigation.

From strip clubs to the Labor primary

Marom set an unsavory precedent this week in becoming the most senior IDF officer ever placed under house arrest. Also, his bank accounts were frozen. Of course he’s innocent until proven guilty, but his former colleagues at the General Staff weren’t exactly flabbergasted.

Marom lost a bid to become navy chief in 2004. His superiors were keen on his capabilities but had reservations about his personal conduct. The candidate who got the job, Maj. Gen. David Ben-Besht, stumbled in the affair of the Hanit, a missile boat that was hit during the Second Lebanon War, so he was sent packing a year later by then-Chief of Staff Gabi Ashkenazi.

Two years later Marom, the new naval commander, was seen at a strip club in Tel Aviv. Female Knesset members and women’s groups demanded his resignation, but the chief of staff decided that an apology was enough. It could be that the demand that he resign was overdone puritanism. One could believe that a close look into the conduct of other officers, particularly when they’re far from home, show that Marom hasn’t been the only top officer involved in such incidents.

The public was told that this was a one-time slipup, even though Marom was seen in that club a few times. Then-IDF Spokesman Avi Benayahu, who extricated Marom from the journalists’ fury, discussed the issue with other senior officers. Between the lines one could see that this could be considered a one-time failure only by generously combining several occasions over a short period.

So the officers got uncomfortable. Things didn’t jibe with the IDF’s demand that its officers tell the people the truth. In any case, the IDF took pains to describe the navy’s positive attributes under Marom’s leadership. In the following years we got used to reading veiled reports about the navy’s commandos and submarines in their hair-raising exploits behind enemy lines. It didn’t help when a year later the navy got embroiled in the Marmara affair, where commandos boarded a Turkish ship bringing humanitarian aid to Gaza and killed civilians who violently resisted.

The police now suspect that Marom took bribes from Ganor and the Germans, paid into secret bank accounts in Cyprus. In the German shipyard's financial statements there's an item labeled “practical expenses.” Marom vigorously denies everything.

The OECD is trying to combat bribery and set limits on broker fees in military deals. Internal investigations have taken place in Israel before when it turned out that defense firms had bribed officials in developing countries, paying tens of millions of dollars. It’s not hard to imagine how Western countries that conduct defense-related business with Israel will regard similar suspicions about senior officials in this country.

Ya’alon has been the subject of scorn in the media due to his insistence on describing the affair in strong moral terms. He resigned in May 2016 when his relations with Netanyahu deteriorated amid several disputes. The main ones were the submarine affair and the trial of Elor Azaria, the soldier who killed a subdued Palestinian assailant, Abdel Fattah al-Sharif. Since then Ya’alon hasn’t turned out to be a wily political fox.

Avi Gabbay resigned as environmental protection minister a week after Ya’alon resigned as defense minister, disappointed that Netanyahu was replacing Ya’alon with Avigdor Lieberman. Gabbay has now overtaken Ya’alon by winning the Labor Party primary. The current investigations will apparently show that Ya’alon’s moral compass is more finely tuned than Netanyahu’s. Netanyahu always seems to miss seeing what’s in front of him, with so many of his associates getting caught up in criminal investigations.

When asked for his opinion of Netanyahu a few years ago, Ya’alon replied that the prime minister was a hedonist, not a corrupt person. He has changed his mind since. This week he told CNN he believed that these affairs would lead to an indictment of the prime minister.

Netanyahu is experienced, wise and far more cautious than U.S. President Donald Trump. Still, the investigations that now endanger both men bear some similarities. Investigators are slowly dismantling the defenses around these leaders. When so many family members, lawyers and advisers are walking around with a criminal cloud over their heads, the chances are high that sooner or later the investigations will reach the person at the top.

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