Inside the Shadowy World of Israeli Arms Dealers

Some say the business isn’t really all that profitable, except when you score that one very big deal

Shuki Sadeh
Shuki Sadeh
Sudan People's Liberation Army (SPLA) soldiers raise their rifles at a containment site outside of Juba on April 14, 2016.
Sudan People's Liberation Army (SPLA) soldiers raise their rifles at a containment site outside of Juba on April 14, 2016.Credit: AFP PHOTO / cds / CHARLES LOMODONG
Shuki Sadeh
Shuki Sadeh

In November, a Peruvian paper reported that the country’s chief prosecutor was seeking to impound $8 million from a Swiss bank account belonging to an Israeli named Moshe Rothschild. Rothschild, a former fighter pilot from Kibbutz Gvaram, was termed “Israel’s biggest arms dealer” by the Israeli media back in the 1990s.

After serving as a pilot during the 1973 Yom Kippur War, Rothschild backpacked through South America in the late 1970s. A charming adventurer, he made friends everywhere he went. In Lima, the Peruvian capital, he wormed his way into the city’s business elite; one of his friends was Israeli-Peruvian businessman Baruch Ivcher, in whose mattress factory he later worked.

When Alberto Fujimori became president of Peru in 1990, Rothschild drew close to him and started being involved in arms deals. He also forged ties with the local intelligence chief, Vladimiro Montesinos.

In the early 2000s, the Peruvian government went public with accusations against Rothschild that revealed the scope of his globe-spanning arms deals. He is suspected of involvement in the sale to the Peruvian government of 36 MiG-29 and Sukhoi Su-25 jets that he bought in Belarus after the fall of the Communist government there. He also sold helicopters and cargo planes from Belarus to the Peruvian air force and police. In addition, he brokered deals to supply spare parts for aircraft and wiretapping equipment from Israel. Meanwhile, he was allegedly bribing his good friend Montesinos.

Rothschild returned to Israel and, at one point, was on Interpol’s wanted list, but Peru never submitted an extradition request for him.

Today, Rothschild reportedly lives in a large house he bought in Ganei Yehuda. According to the Israeli Corporations Authority, he owns eight high-tech and communications companies, all based in Yehud.

Rothschild also sold arms after leaving Peru, according to a report by Yossi Melman in Haaretz. In 2003, he sold two French helicopters that had been upgraded by the Israeli firm Elbit Systems to the Ivory Coast. Rothschild told Melman that the allegations against him in Peru were false, and stemmed from the new government’s political persecution of its predecessor.

Biggest dealer of them all

It’s not for nothing that Rothschild was called Israel’s biggest arms dealer. The Peruvian government valued the deals in which he was involved at $500 million, from which his cut was tens of millions of dollars. For a private arms dealer, that’s quite a haul.

Israeli arms have been sold worldwide for years, supplying Western armies and bloody Third-World civil wars. But few dealers manage to make real money off such deals, unless they score big in one enormous deal or several sales over the course of a year or two.

“In Africa, for instance, you can’t become a billionaire from arms dealing because the budgets are too small. Rwanda’s annual state budget is $3 billion, nothing compared to other countries. Nigeria, a country of more than 150 million people, has a defense budget of $2 billion. Poor countries don’t have money for defense spending,” a veteran lawyer involved in the field says. “On the other hand, people do work in arms trading with these countries, because you can become a millionaire overnight from one big deal. In the arms trade, there are few manufacturers but many trying to sell.”

Defense Ministry headquarters in Tel Aviv.
Defense Ministry headquarters in Tel Aviv.Credit: Moti Milrod

A former senior defense industry official who now owns a consulting company disagrees. “Trading arms is just like trading coffee or diamonds,” he says. “Contrary to what people often think, most major arms dealers aren’t military men ….The wisdom lies in organizing a deal at the right time and place."

“Because it happens in Third-World countries and is a field shrouded in mystery, it’s gotten a bad reputation over the years. But the truth is that all of Israel benefits from defense exports, which provide a living for tens of thousands of people here,” he adds.

Israeli defense exports totaled some $7.5 billion in 2018, according to the Defense Ministry, which supervises them. It has licensed around 1,600 people to sell Israeli products abroad. But many deals in Western countries are government-to-government, so they don’t involve private dealers. Of this $7.5 billion, one expert in the field says, only about $300 million goes to Third-World countries. But that’s where private arms dealers do most of their business. It’s also the source of incidents Israel prefers to ignore, like bribing government officials or helping foreign governments in civil wars. Nevertheless, even in sales to Third-World countries, some Israeli arms dealers are licensed and supervised by the Defense Ministry.

Several dozen arms dealers live permanently in the Third-World countries where they sell arms. They are almost always close to the government. For instance, Gaby Peretz, a lieutenant colonel in the reserves who works in Burundi, is considered close to President Pierre Nkurunziza. Barak Orland reportedly lives and works in Uganda and is considered close to its president, Yoweri Museveni. A report in the magazine Liberal four years ago alleged that most major arms deals between Israel and Uganda go through Orland.

Other Israelis also periodically appear in the media for arms dealing in the Third World. Most are shrouded in mystery, and sometimes, they make headlines because of business battles within the family or involvement in corruption. There are many others whom the public knows nothing about.

Recently, Maj. Gen. (res.) Israel Ziv was named as an arms dealer. Last year, the U.S. Treasury Department put him on its blacklist of people suspected of terror financing and money laundering, due to allegations that he illegally sold $150 million worth of arms to South Sudan during its civil war. The Americans say Ziv was arming both the government and the rebels while disguising his arms sales as agricultural projects.

Being put on the blacklist affected all of Ziv’s business dealings. Bank Leumi promptly froze his Israeli bank account. He appealed to a district court and then the Supreme Court, but to no avail. Now, he’s appealing his inclusion on the blacklist to the U.S. authorities.

“All the American accusations are based on a serious mistake – they have no evidentiary basis,” he says. “Moreover, following the American accusations, the UN did a comprehensive review of South Sudan and concluded unequivocally that there were no arms deals. My company and I never even sold them a cap gun.”

Ziv founded his company, Global CST, in 2006, a year after retiring as head of the Israel Defense Forces’ operations directorate. Until the South Sudan scandal broke, he was known for training military forces worldwide, but not for arms dealing. Countries where he has reportedly done military training or security consulting include Togo, Guinea, Gabon, Nigeria, Georgia, Colombia, Peru and Panama. His associates say he trained government forces, not militants.

Exposed by Wikileaks

In 2011, Ziv’s name appeared in a huge cache of documents published by WikiLeaks. Cables by America’s then-ambassador in Bogota, William Brownfield, said Ziv’s company had begun operating in Colombia thanks to his personal ties with the defense minister at the time, Juan Manual Santos.

An Israeli soldier stands atop a tank in the Golan Heights, January 3, 2020.
An Israeli soldier stands atop a tank in the Golan Heights, January 3, 2020.Credit: REUTERS/ Hamad Almakt

“Over a three-year period, Ziv worked his way into the confidence of former Defense Minister Santos by promising a cheaper version of USG assistance without our strings attached,” the cable said, referring to the U.S. government. The United States and Colombia later discovered that Ziv’s company had no prior experience in Latin America, and Ziv’s proposals to Colombia “seem designed more to support Israeli equipment and services sales than to meet in-country needs,” it added.

Ziv said his work in Colombia consisted of consulting on national security. “I didn’t train soldiers,” he insisted. “When there was a need for training, I used subcontractors who do this. Nor did I sell arms.” Several onetime Israeli arms dealers have long since switched to other fields. For instance, Hezi Bezalel, who now owns the Israeli cellphone company We4g, ran for years a host of business enterprises in Africa, about which little was known in Israel. However, he was known to be involved in defense deals in Uganda, Rwanda and Ethiopia.

Bezalel was involved in upgrading planes, tanks and warning systems, and companies connected to him trained presidential guards. He also mediated a deal in which state-owned Israel Military Industries sold tank shells, artillery shells and light arms to Uganda for $13 million.

For years, his associates argued that he wasn’t an arms trader; at most, he brokered deals. But the fact that he recruited Yehiel Horev, the Defense Ministry’s former director of security, in the mid-2010s to work with him raised questions about whether he was still involved in the arms trade in some fashion.

In 2015, however, it turned out that Bezalel had moved to the manufacturing side, albeit on a small scale. He founded the company Meteor Aerospace together with Itzhak Nissan, a former CEO of Israel Aerospace Industries. Horev serves on the company’s board. Bezalel, who invested $8 million in the company, is involved only as an investor, while Nissan runs the company. Meteor Aerospace develops and manufactures drones similar in size to those made by Israel Aerospace Industries and Elbit. It also develops missiles, unmanned naval vessels and robots.

Another company formerly involved in arms trading is the LR Group, founded in the mid-1980s by three pilots who served together in the air force – Roy Ben Yami, Ami Lustig and Eytan Stibbe. In 2008, Markerweek reported that in the late 1990s and early 2000s, the company was involved in a series of arms deals in Angola. It sold the country artillery systems made by Elbit, and also partnered with IMI to sell mortar bombs and artillery shells that the government used in its war against Angolan rebels. A much larger deal was LR’s sale to Angola of eight U.S.-made Bell 212 helicopters that the IDF had taken out of service. Sources familiar with the deal said the state had asked LR to carry out the sale, and the company agreed.

Aside from selling Israeli equipment, the company also sold Angola two Sukhoi Su-27 fighter planes and radar systems from Ukraine. But after two to three years of intensive activity, the three founders decided to get out of the arms business and focus on civilian projects like setting up agricultural villages in Angola and elsewhere in Africa.

Splitsville

In 2011, the three split up. Stibbe founded a company called Mitrelli with Haim Taib, who had been a senior LR executive, while Ben Yami and Lustig kept the LR name but branched out into other fields, including energy, communications and infrastructure. Stibbe also got involved in socially responsible investing overseas. But in early 2019, he and Taib quarreled and went their separate ways.

Foreign media reports say a company linked to Mitrelli (apparently a subsidiary) called HLSi is managed by a former naval commando officer. According to a report by the Nigerian investigative newspaper Premium Times, HLSi signed a $195 million contract in 2017 with the Nigerian government to supply airplanes, helicopters, patrol ships and other items in a deal brokered by the Transportation Ministry for the navy to help fight piracy. When the deal came under fire from members of parliament, President Muhammadu Buhari was said to have cancelled the agreement in May 2018. However, sources say it was in fact never cancelled.

HDSi signed a deal with Haiti’s economy and finance ministries in October 2015. The $50 million deal was connected with border control and customs, according to foreign media reports.

Dignia Systems is another offshoot of LR and is managed by Itzhak Tzadik, who left LR five years ago. Until it split with LR, Israel Export Institute it as a subsidiary of LR. According to its website, it deals in homeland security in Africa and counts as customers armies, security forces, and intelligence and law enforcement agencies. Last November, a Botswana newspaper said Dignia was suing the country’s intelligence chiefs for $11 million, an amount it claims remains unpaid from a $22 million contract to supply drones to Botswana’s special forces. The report said Dignia supplied three drones before the government broke off the contract.

Most of the people in the arms industry are either brokers or company representatives. One of the most surprising names to emerge in the industry in recent years is Roni Milo, a former cabinet minister and Tel Aviv mayor. He acted as a go-between in the sale of SPYDER surface-to-air missiles to Georgia made by the Israeli state-owned defense company Rafael. The $50 million deal occurred in the mid 2010’s but only surfaced last year due to a lawsuit filed by his partner in the deal, Rafi Eloshvili, asserting that Milo had concealed fees the latter should have been paid (Milo denies the accusations).

Milo has also been in a dispute with Georgian defense company Chindze over millions of shekels from earlier arms deals between Georgia and Israeli firms Elbit and Rafael. Milo denies the claims and the lawsuit is still pending.

One of the most veteran practitioners of the Israeli arms business is David Kolitz, founding chairman and CEO of Elul and is best known for his friendship with the late Ezer Weizman at the start of his political career. Over the years, many former Israel Air Force pilots have worked for Kolitz, the most famous of whom was Aharon “Yalu” Shavit.

‘Passive participant’

One of Kolitz’s first deals was in the 1980s, when Brazil bought from Israel avionics systems developed by Israel Military Industries. In the last decade, Kolitz has represented General Dynamics, which won a contract to supply engines for Israeli-made armored personnel carriers.

“I don’t like the term arms dealer,” says Kolitz. “I represent global manufacturers. I don’t buy and I don’t sell but advance the interests of the manufacturers. I get a fee per sale. You could say that I help the trade in the sense that I’m a participant, but a more passive participant.”

“My sellers are found all over the world and my buyers are in Israel and abroad. Israeli supervision is our standard. I’m not trying to present myself as among the righteous of our generation – I am not. I follow the rules set by the State of Israel.,” he says.

Kolitz is regarded as a straight shooter in a field shrouded in mystery, where the public constantly discovers old players who were previously unknown, like Amit Sadeh. His name suddenly made the headlines in June 2018 when he was alleged to have engaged in bribery connected with the sale to Nigeria for $21 million of three Shaldag-class fast patrol boats made by Israel Shipyards. He is alleged to have collected a steep 7% commission for brokering the deal, some of which it was asserted were used to pay bribes.

At the time of his arrest, it emerged that Sadeh had been profiting handsomely from arms deals for years. Police claim his assets included a fancy villa and other real estate, and that he had once owned a private plane. His attorney, Shahar Mandelman, said Sadeh had once been well-off but no longer. The case is still under investigation. “There’s no basis for the allegations against my client,” Mandelman said.

Sadeh’s career is characteristic of Israeli arms dealers, many of whom established their Third World connections after working in security and parleyed them into arms sales. Sadeh served as an adviser to the Angolan army after completing his army service as an employee of an Israeli company guarding oil installations. He then went to Nigeria and over time got to know many of its leaders. In 2004 he brokered a $250 million sale that included drones and unmanned ships made by Israeli firm Aeronautics to Nigeria.

“The thing is there are another ten Sadehs that you have no idea are out there until something rotten happens,” says one senior source in the arms export industry. “There are quite a few business people among us that no one will ever know how many arms they sold and where. Part of this is due to the secrecy maintained by the Defense Ministry, which is reluctant to release information on Israeli arms deals around the world. The people who beenfit from it are those same anonymous business people, who naturally are close to the defense establishment and operate under the radar.”

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