Analysis |

Despite Inflated Price, Bennett Stands by German Submarine Deal

According to Netanyahu, he acted fast to ensure they get more subs at a reasonable price, but the new government tarried. Bennett's version of events is completely different

Amos Harel
Amos Harel
An Israeli Navy submarine, in 2019.
An Israeli Navy submarine, in 2019. Credit: IDF Spokesperson's Unit
Amos Harel
Amos Harel

Prime Minister Naftali Bennett and his predecessor, the current leader of the opposition, Benjamin Netanyahu, are shifting responsibility onto each other over the considerable increase in the price of new submarines that Israel will be buying from Germany.

This week, Avi Bar-Eli reported in Haaretz that the manufacturer of the subs, ThyssenKrupp Marine Systems, had surprisingly upped the price of the three submarines to be included in the deal, boosting Israel’s tab from 1.2 billion euros, as the parties had agreed in 2017, to 2.4 billion euros ($2.7 billion). The German government promised to fund the balance of the cost – 600 million euros.

At the beginning of the week, the ministerial defense procurement committee approved the deal despite the substantial jump in price. Associates of Netanyahu have accused the current government of responsibility for what happened. According to this version, Netanyahu acted in advance to ensure the procurement of additional subs at a reasonable price. But it was the new government that delayed closing the deal and the German shipyard took advantage of its amateurish approach to inflate the price.

Opposition leader Benjamin Netanyahu in the Knesset in December. Credit: Emil Salman

At the Israel Defense Forces, the steep price increase was explained by the constant rise in the price of metal on the world market. Senior army officials have said the IDF spotted the expected change in time and alerted the politicians, but the decision was delayed for roughly two years against the backdrop of the ongoing political crisis in the country at the time, which also led to suspension of the approval of the state budget for two years, as well as delays in other defense procurements.

Bennett’s version is completely different from Netanyahu’s. The former’s account has it that a short time after he assumed office as prime minister in June, the Defense Ministry and the staff of the National Security Council made it clear to him that if an agreement wasn’t quickly reached on the purchase of three new submarines – which are due to replace three antiquated subs and leave the fleet with six subs at the beginning of the coming decade – it would greatly delay the time of delivery.

Prime Minister Naftali Bennett in the Knesset on Monday. Credit: Ohad Zwigenberg

The result, Bennett was told, would be that for a critical period of time Israel might remain without a sufficient number of submarines, which are considered strategic weapons for the country, so there was a need to quickly intervene. It was also made clear to the prime minister that the Germans are the only supplier of the subs and that the defense establishment doesn’t have an alternative source.

This was the background to the invitation extended to German Chancellor Angela Merkel for a farewell visit to Israel in August. Bennett had learned that the main thing holding up the signing of the deal was the Germans’ fear that the investigation of the submarines and ships affair in Israel would reveal corruption in the relationship between the decision-makers in Israel and ThyssenKrupp in previous deals, and this would legally require the German government to freeze all the deals.

The prime minister brought up this issue in meetings with Merkel and her advisers in Israel, made it clear he had no connection to any of the alleged violations under investigation (Netanyahu associates are suspected of involvement in some of these), and gave the Germans his personal guarantee that the rest of the process would be conducted with absolute propriety.

At the same time, Bennett moved to delay by several months the establishment of the commission of inquiry into the affair pushed by Defense Minister Benny Gantz, arguing that it could impede progress toward the closing of the new submarine deal. When Bennett tried to ask Merkel whether German aid could be increased beyond 600 million euros, he was informed that this could complicate the quick approval of the deal.

Former German Chancellor Angela Merkel in Jerusalem in October. Credit: יואב דודקביץ

Bennett believes the rising cost of the submarines is a direct result of the suspicions of corruption that arose during Netanyahu’s tenure and of the years-long delay in obtaining final approval for the deal. As he sees it, his direct appeal to Merkel in August and the approval of the deal this week amounted to a rescue operation for Israel’s submarine fleet, which got into this trouble because of his predecessor.

Had Netanyahu remained in power, the deal would have been frozen due to suspicions of his associates’ involvement. And had Bennett waited longer, the future supply of submarines would have suffered a critical postponement. Had he not pressed Merkel, Bennett would have had to wait to deal with her replacement, Olaf Scholz, and it is far from certain that Scholz would have been ready to disregard the cloud of suspicion as Merkel did.

Aside from the dispute between Bennett and Netanyahu, questions also arise regarding the defense establishment’s conduct in relation to the latest deal. Is it true, as the army says, that all the warnings were given about the anticipated price jump, or did someone fall asleep on their watch? Does the delay derive entirely from the political disagreements and from the repeated election campaigns? Given the vast sum involved, which again was quickly and easily approved by the cabinet, an external review seems to be called for. The repeat expenditure of nearly 5 billion shekels ($1.6 billion) cannot be looked upon as something preordained, particularly at a time when the Israeli economy is struggling mightily amid the ongoing pandemic.

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