India Reportedly Ready to Clear $3 Billion in Arms Deal With Israel

Prime Minister Modi said to be seeking his cabinet's approval before visiting Israel later this year.

Ora Coren
Ora Coren
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Indian Prime Minister Narendra Modi at the IAI exhibition. Photo courtesy of IAI.
Indian Prime Minister Narendra Modi at the IAI exhibition. Photo courtesy of IAI.
Ora Coren
Ora Coren

Indian media were reporting this week that Prime Minister Narendra Modi is about to seek approval for a massive $3 billion in arms purchases from Israel. Defense sources in Israel told TheMarker that if the deal reaches the Indian cabinet, it will likely be approved.

The Times of India and other media said Modi aims to win approval by his cabinet committee on security for the deal before he visits Israel later this year. “It should be cleared by the [committee] within a month or so,” an Indian Defense Ministry source was quoted by the newspaper as saying. No date has been slated for the visit.

Israeli sources said ties with India have improved considerably since Modi’s election a year and a half ago, but progress on signing actual contracts has moved slowly and promises that deal would be signed quickly haven’t been realized.

Since full diplomatic relations between Israel and India were established in 1992, the two have gradually but significantly moved closer together – primarily on the basis of growing trade, centering on sales by Israel’s defense industry to India.

Along with the United States and Russia, Israel is one of India’s top arms suppliers, with sales of about $1 billion annually, according to foreign sources.

Israeli sources said two deals that have been advancing are with state-owned Israel Aerospace Industries and Rafael, in some case negotiations starting as far back as three years ago. Both have already been cleared by India’s cabinet security committee.

One of the proposed deals is for Rafael’s Litening-4 navigation and targeting technology, which according to Indian sources would be installed on Russian-made Sukhoi-30MKIs fighter jets and Anglo-French Jaguars. That contract alone could be worth between $250 million and $300 million, Israeli sources said.

Another sale would be for some 250 of Rafael’s advanced Spice precision bombs, which are capable of taking out fortified enemy underground command centers. That sale is likely to be worth between $150 million and $200 million, Israeli sources said.

Accord to the Times of India, progress is also being made on what it called stalled negotiations for 321 Spike advanced anti-tank guided missile systems, or ATGMs, and 8,356 missiles, also from Rafael. Israeli sources that the deal could end up being the largest to date, with a value of as much as $900 million.

India selected the Spike over the U.S.-made Javelin system in October 2014, but no contract has been signed.

“There was a major difference [of opinion] in the ATGM project cost between the Israeli commercial bid and the much-lower price benchmarking done by the MoD... The effort now is to close the gap,” the Times quoted an unnamed source as saying.

Israeli sources said the talks are less far along than for the other deals because they involve transferring technology and production to India. India has put a high priority on technology transfer in recent years, which has encouraged IAI and Rafael to tie up with local partners.

American defense contractors have resisted contracts involving technology transfer, opening up opportunities for Israeli companies.

A decade ago, the Indian army launched a modernization program and allocated tens of billions of dollars to it, but the modernization project is proceeding lackadaisically. The Times said the Army desperately needs next-generation ATGMs to equip all its 382 infantry battalions and 44 mechanized infantry units.

Indian media sources said IAI is interested in advanced intelligence-gathering gear for aircraft in a deal that could range between $1 billion and $1.5 billion. The company is also in talks sell Barak 8 ground-to-air missiles to the Indian Army in a contract that could reach as much as $1 billion. A similar deal for sea-launched missile now being delivered was valued at $1.4 billion. India is also believed to be interested in unmanned aerial vehicles, or drones.

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