The Israeli government has decided that if Elbit Systems and Israel Aerospace Industries couldn’t compete nicely then they shouldn’t compete at all − and blocked the two companies from bidding for a contract to supply Poland with drones.
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The Defense Ministry told the two companies, both leading makers of unmanned aerial vehicles, that it would not issue either of them an export license.
In taking the unusual step, which cost whichever company would have won the contract some $150 million, the ministry cited “the unbridled competition, which could have implications on bilateral relations [with Poland] due to the resignation of the Polish deputy defense minister who had been involved in the matter.”
The rivalry between the two companies had reached a point that word was leaked to the Polish media that General Waldemar Skrzypczak, Poland’s deputy defense minister, preferred the Elbit offer. The reports said that Skrzypczak had made known his preference to Israel’s Defense Ministry eight months ago, saying Elbit’s product was more appropriate to the Polish army’s needs.
The trouble was that Skrzypczak expressed his view while the tender process was still on, suggesting that it had been fixed in advance. Israeli defense industry sources said they couldn’t explain why such a senior figures as Skrzypczak would express his preference openly while the tender process was still underway.
Skrzypczak, considered the strongest figure in the Polish army, was stripped of his security clearance when the reports first surfaced and finally resigned last November amid allegations that his connections with large arms makers, including Israeli firms, was swaying his judgment.
A source at IAI, who asked not to be identified, said he was mystified why his company had been asked to bid in the tender after Skrzypczak had already expressed his preference.
Defense industry sources said the sensitivity surrounding Skrzypczak’s resignation prompted Dan Harel, director general of Israel’s Defense Ministry, to call executives from Elbit and IAI for a meeting where he ordered them to put an end to the rivalry and suggested he might “nationalize” the contract, i.e., turn it into a government-to-government sale. That proposal never took off and as a result the Defense Ministry effectively pulled the two Israeli companies out of the competition by denying them an export license.
None of the parties involved was prepared to confirm the details, with the Defense Ministry saying it doesn’t disclose to the media its dealing with domestic defense companies.
Elbit, which is traded on the Tel Aviv Stock Exchange and in New York, limited its comment to acknowledging it had not been given an export license. State-owned IAI also confirmed it had been denied the permit.
The ban will deprive the two companies of a potentially important contract as Poland replaces its obsolete Soviet Su-22 bombers and 48 American F-16 fighter jets that are the mainstay of its air force with squadrons of unmanned strike aircraft.