Record Europe Sales Push Israeli Defense Exports to $6.5 Billion in 2016

Sales to Europe have increased over the last four years; Asia remains a top customer with total of $2.6 billion in exports.

Spike missiles mounted on a Hummer.
Spike missiles mounted on a Hummer. Rafael Advanced Defense Systems

Israeli military exports grew to $6.5 billion in 2016, an increase of $800 million compared with the year before, according to Sibat, the military exports unit of the Defense Ministry.

Sibat chief Michel Ben-Baruch admitted that 2016 had been a particularly challenging year. However, terrorism and Europe’s refugee problem led several European countries to step up their defense spending, reversing the trend that began after the global financial crisis of 2008-2009. That in turn helped boost the export of Israeli defense technologies, said Ben-Baruch.

While Asia remains Israel’s biggest market for military technologies, Europe has become a key buyer too, Ben-Baruch said, notably for counterterrorism, border defense and infiltration prevention. Israeli defense exports to Europe have been climbing for four years, with particularly strong sales in the last two. Exports to Europe reached an all-time high in 2016.

In the same year, Israel also entered into export agreements in cyber, civilian and administrative defense, which can be used to protect “smart cities,” Ben-Baruch said, referring to the push to integrate technology and the internet of things into all aspects of city management.

Despite the growing need for defense technologies globally, certain elements worked against Israeli exports, such as the persisting oil crisis, he said. Exports to certain South American countries suffered, for instance.

Exports totaled $2.6 billion to the Asia-Pacific region (an increase of $300 million from 2015), $1.8 billion to Europe, $1.3 billion to North America, $600 million to Latin America and $275 million to Africa – a 70% jump in exports compared to the year before. Africa remains a relatively small market for Israel, but it is a growing one in the industry’s eyes.

Within Asia, India is a key market. The Indian press has been reporting this week that a giant deal for hundreds of Spike anti-tank missiles, which had been held up for two years, will finally be brought for approval before the cabinet in New Delhi.

Exports by small and medium Israeli defense companies amounted to about $500 million a year: “It’s no secret that most of the defense exports are by 12 to 15 medium and large companies,” Ben-Baruch said, adding that Sibat helps the minnows, mainly with marketing and taking them to industry expos.

In previous years, export figures for Europe had been skewed by large deals between governments, such as the air force training jets and a satellite supplied to Italy. There were no such deals in 2015 and 2016, so the increase in European sales – from $724 million in 2014 to $1.6 billion in 2015 to $1.79 billion in 2016 – reflects mounting demand for Israeli military products and technologies.

Sources in Israel’s defense world think the increase in sales to Europe was driven chiefly by terror attacks on the continent, and also by European armies' participation in the fight against the Islamic State. European countries are also hoping Israel can help them contend with lone-wolf attackers.

“When they come to Israel, they only care about three things: terrorism, borders and cyber,” remarked an Israel Defense Forces General Staff officer on collaboration with foreign armies.

Defense deals in 2016 included upgrading fighter jets and aeronautic systems (about 20 percent of the deal flow), monitoring and optoelectronics (18 percent), missile and antiballistic systems (15 percent), ammunition and weapons stations (13 percent), radar systems (12 percent), intelligence and cyber intelligence systems (8 percent), drones (7 percent) and more.