fc-l IS I .
■
NAVAL I
MONTERU, C
NPS-56-81-020
NAVAL POSTGRADUATE SCHOOL
Monterey, California
INDIGENOUS ADVANCED FIGHTER AIRCRAFT IN ISRAEL:
CONSIDERATIONS FOR DEC! S TON-MAKING
by
Ran Goren
December 1981
Approved for public release; distribution unlimited
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Naval Postgraduate School
Monterey, California 93940
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NAVAL POSTGRADUATE SCHOOL
MONTEREY, CA 93943-5101
NAVAL POSTGRADUATE SCHOOL
Monterey, California
93940
Rear Admiral J. J. Ekelund David A. Schrady
Superintendent Acting Provost
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4 TITLE Cand SuAt/rf.)
Indigenous Advanced Fighter Aircraft
In Israel: Considerations for Decision-
Making
5 TYPE OF REPORT ft »tmoO COVEREO
Final Report
ft. PERFORMING ORG. REPORT NUMBER
7. AUTHOR'*)
Ran Goren
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December 1981
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IS. SUPPLEMENTARY NOTES
IS KEY WORDS . Cwiinu* on rovormo aid* II nmemoomrr «n4 Identify ay block nuana.ri
Lavi, Israel's arms transfers, Indigenous arms industry,
fighter aircraft, Third World arms industry, political
influence, political independence, balance of payments,
inflation, spin-off
20 ABSTRACT (Contlnum an r*var«a tidm // nmcmmmmrf «< Idmmlltr »r »/»c* rw— mot)
On February 19 80 Israel decided to develop and produce an
indigenous advanced fighter aircraft (AFA) . This decision is
under a continuing review through the acquisition life cycle.
This report examines the decision against a bread background
which includes insights into the Third World and European
aircraft self-production patterns; the technological capability
of the Israeli arms industry; Israel as arms supplier; Israel
DO , IS"* 1473
(Page 1)
EDITION OP ' NOV AS IS OBSOLETE
S/N 0 102-0 14- **0 I
UNCLASSIFIED
SECURITY CLASSIFICATION OF THIS PAOE rWhmn Dolm Mntfd)
UNCLASSIFIED
f*cuwtv CL^ggtglCATtgM Q* Twit »*0»/-w«.„ n»i« j.,.^^
(20. ABSTRACT Continued)
as a recipient of arms and security assistance. The report
comprehensively analyzes the political and the economic
aspects of the indigenous AFA decision. It concludes that
political considerations should impact the decision only
after considering the economic ones. The latter generally
favor indigenous AFA. The major obstacle is the
inflationary impact of the indigenous production, and that
should be the determining ingredient in any further decision
DD , ForrQ^ 1473
s/fl JoTo2-ou-66oi fflaaasauEific
INDIGENOUS ADVANCED FIGHTER AIRCRAFT IN ISRAEL,
CONSIDERATIONS FOR DECISION-MAKING
by
Col. Ran Goren, Israeli AF
Naval Postgraduate School
Monterey, California 93940
ABSTRACT
On February 19 80 Israel decided to develop and produce
an indigenous advanced fighter aircraft (AFA) . This decision
is under a continuing review through the acquisition life
cycle. This report examines the decision against a broad
background which includes insights into the Third World and
European aircraft self -production patterns; the technological
capability of the Israeli arms industry; Israel as arms
supplier; Israel as a recipient of arms and security assist-
ance. The report comprehensively analyzes the political and
the economic aspects of the indigenous AFA decision. It
concludes that political considerations should impact the
decision only after considering the economic ones. The
latter generally favor indigenous AFA. The major obstacle
is the inflationary impact of the indigenous production, and
that should be the determining ingredient in any further
decision.
TABLE OF CONTENTS
I. INTRODUCTION 1
II. THE LAVI AIRCRAFT 3
III. AFA PRODUCTION — A UNIQUE CASE 10
IV. AFA PRODUCTION TRENDS IN THE THIRD
WORLD AND EUROPE 18
V. INDIGENOUS AFA AS PART OF THE IAF STRUCTURE 28
VI. ISRAEL'S ARMS INDUSTRY AND ARMS TRANSFERS 39
VII. ISRAEL AS AN ARMS RECIPIENT 57
VIII. POLITICAL CONSIDERATIONS 62
IX. ECONOMIC CONSIDERATIONS 36
X. CONCLUSION 103
APPENDIX A
APPENDIX B
APPENDIX C
ARMS IMPORTS AND EXPORTS 107
U.S. SECURITY ASSISTANCE TO ISRAEL 117
DATA ABOUT DEFENSE EXPENDITURES AND
DEBT PAYMENTS IN ISRAEL 125
REFERENCES 130
BIBLIOGRAPHY 143
INITIAL DISTRIBUTION LIST 144
I . INTRODUCTION
On Friday, the 3 of February 198 0, there was a meeting in
Office of the Israeli Minister of Defense Ezer Weizman. Among
the participants were the Minister of Defense, his deputy, the
General Chief of Staff of the Israeli Defense Forces (IDF) , the
Chief of Staff of the Israeli Air Force (IAF) , and several more
high level officials of the Israeli national security and defense
industry establishment. After an eight hour discussion, a cru-
cial decision had been made: to develop and produce in Israel
a future advanced fighter aircraft, named "Lavi" (a lion) [1] .
This was a concluding discussion after a long period of de-
bates, prolonged over several years, and it was quite clear that
the Minister of Defense decision would be approved by the Israeli
government, as really happened several weeks later.
Two years earlier, on the 2 of February 1978 the subcommittee
of Security and Foreign Affairs recommended that Israel immediately
commence the full scale development of the aircraft (at that time
still called "Arie") and to view its development and production
as a national effort, for which all resources required should be
mobilized from the resources available to the State of Israel [2].
a0nly after the "go ahead" decision was the name Lavi
disclosed. Until then the name Arie (also a lion) had been
used for the planned aircraft. Thus the name Arie appears
frequently in the early literature. To avoid confusion, the
name Lavi only will be used in this paper. In citations from
pre-February 198 0 the name Lavi is substituted for the name
Arie.
The Subcommittee raised the arguments of arms self-reliance
needed to meet possible long term embargoes; the political
flexibility it might achieve; the economic, technological
and social contributions; and more.
But the attitudes in the Subcommittee were conflicting.
One of the members said:
I tend to reject the tremendous investment. The self
production resolves by no means the political depen-
dence, but lays on our economy heavy financial burdens,
which may affect severely areas like education, health
and welfare. I think that Israel's self development
should concentrate on arms which we can't expect to
receive from others, and I don't think aircrafts are
in this category.
This reflects the arguments that have taken place ever
since the initiation of the Lavi program, and continue to
be raised even now while the program is underway.
This paper attempts to explore the question of making
an advanced fighter aircraft (AFA) in Israel, compared to the
alternative of buying (only) from foreign sources. The
analysis is done on the grounds of a broader view of Israel
as an arms supplier and recipient, and AFA production aspects
in the Third World and in Europe.
II. THE LAVI AIRCRAFT
1 . General
Although the paper deals with the general question of "make
or buy" advanced fighter aircraft (AFA) in Israel, the Lavi
case may be used as a good actual illustration for that issue
under question. As a matter of fact, the general case of AFA in
Israel and the particular case of the Lavi are almost identi-
cal. Since the Lavi is going to be the only Israeli indigenous
aircraft under development and production in the next decade
or so, and since all the arguments in this paper are valid only
for several years ahead (hopefully...), both cases may be
considered identical. Thus, they will be discussed inter-
changably in this context. As a consequence, the Lavi warrants
a closer look.
2 . Description
The Lavi is defined as a single-engined single-seat strike
fighter [3] .
It is described as the "working horse" [4], or the "back
bone" of the IAF for the late 1980' s and the 1990 ' s. It is not
supposed to be the leading edge of the IAF ' s fighter aircraft
force [5] . As an unsophisticated, though highly maneuverable
aircraft, the Lavi is supposed to replace some 220 McDonnell
Douglas Skyhawks and 160 Israeli produced Kfirs [6] (numbers
are quoted from "Flight International," 1 March 1980). It is
aimed to meet the "quantitative" need of the IAF, and therefore
it is designed as a multirole aircraft with a clear emphasis
on strike missions [7]. Thus, the Lavi will not replace the
more sophisticated U.S. -made aircraft in the IAF ' s mix like the
F-15, F-16 (and in the future, perhaps, the F-18). The need for
these aircraft or their equivalent will remain for the next
decade or more despite the Lavi production [8], The Lavi is
scheduled to enter operational service in 1988. The Lavi will
be developed and produced by the Israeli Aircraft Industry (IAI) ,
the large industrial conglomerate for aeronautical products.
The technologies that are going to be used in the Lavi design are
mainly existing ones, implemented in aircraft like the American
F-15, F-16, the French Mirage 2000, the European coproduction
Tornado and the Israeli Kfir [9] . This can explain its low R&D
costs, estimated at $570 million [10] (compared to R&D cost of
about $1 billion for the F-16) [11] . Another reason for the
relatively low R&D cost of the Lavi is the fact that Israeli
R&D labor hour cost is about one half of equivalent hour cost in
the U.S. [12] . The flyaway unit cost of the Lavi was estimated
as $6.5 million in 1978 dollars. In the next 8 years Israel
will invest in the R&D and production of the "Lavi" $1 billion,
as was announced by the Director General of the Defense Ministry
on February 12, 1981 [13].
3 . The Lavi's Engine
It is said that a jet aircraft design is tailored around its
engine. The development of an advanced jet engine is considered t
be more complicated and about twice as expensive as the de-
velopment of the aircraft's total airframe [14]. Consequently,
the decision about the Lavi's engine was as crucial as the
decision about the aircraft concept as a whole. It had substan-
tial technological, economic and political implications.
The various publications about the engine choice may
reflect the change in tendencies and concepts of the decision-
makers through the engine source-selection process. Initially,
there were talks about an Israeli developed engine. Pretty soon
it had been recognized that this would be above the technological
and economic capabilities of the Israeli industry. Then came
the announcement by the Minister of Defense that the engine would
be purchased in Europe, in order to reduce the Israeli depen-
dence on the U.S., and Israel would insist on a guarantee of "no
strings attached" to the engine purchase [15] . But then the
designers faced another fact--there was no European engine com-
patible for an AFA of the 1990' s. So there was no choice but
to return to the few large American jet engine manufacturers, namely,
Pratt and Whitney (P&W) and General Electric (GE) .
For a year and more, the General Electric F-404 engine
was mentioned as the selected one [16] . Moreover, a delegation
of G.E. personnel arrived in Israel in October 1980 to negoti-
ate the coproduction of the engine in Israel [17] .
But in July 1981 a final decision had been announced: the
engine of the Lavi selected would be the "Pratt and Whitney"
F-1120, a reduced model of the existing engine F-100 (the latter is
used in the F-15, F-16) [13] . Presumably the F-404 was found to be
too small to provide, as a single engine, the power required for
the Lavi. The decision-makers decided to take the risk of se-
lecting an engine still in its development phase, instead of
compromising and degrading the operational requirements of
the aircraft.
In any case, what is important to remember is that the
future Israeli aircraft will use an American power plant.
Although there is an American "green light" for the Israeli
government to plan on the American engine, the exact condi-
tions are unknown, especially with respect to the sale to a
third country.
4 . Coproduction Negotiations
Throughout the Lavi decision process, several coproduction
negotiations took place.
The first case is the F-16 coproduction negotiations.
According to ex-Prime-Minister Isaak Rabin [19] , as a result
of the Israeli acceptance of the American proposal for the
second Disengagement Agreement with Egypt in September
1975, President Ford offered to Israel a purchase of 150
to 250 F-16s. Israel demanded a high level of coproduction,
and delayed the transaction. The United States did not accept
the demand for coproduction since it already had a heavy commit-
ment for coproduction with the European consortium ("The Sale
of the Century," 348 F-16s to Belgium, Denmark, Netherlands
and Norway) . The deal was not concluded until President Carter
Newsweek of September 14, 1981 tells that among a variety
of enticements the U.S. had offered to Israel in order to
bolster its economy, it has already dropped its objection to
overseas sales of Israel's Kfir jet, which is subject to
American controls because it has a U.S. -built engine.
took office. Then the F-16's to Israel were approved- only as a
part of the well-known "Middle East Aircraft Package", and the num-
ber was cut down to 75 [20]. Probably, if there was a coproduction
agreement on the F-16s, the decision about the Lavi would have been
different.
Several years later two major American f irms--General Dy-
namics and McDonnell-Douglas were requested by Israel to collab-
orate in the development and the production of the Lavi. Each
firm was asked to invest $250 million in the development and to
provide know-how and installations. Both firms responded with
a list of off-set demands like purchase of more F-16s, usage
of P&W engine (which is used by the F-16) for the Lavi, or pur-
chase of F-18, DC-10 and DC-9 made by McDonnell-Douglas [21] .
In fact, none of the negotiations has been concluded.
Another report tells about a proposal made by Northrop,
which includes two conditions for coproducing the Lavi:
a. The Lavi design would be based on the new model of
the F-5.
b. The Lavi will be powered by the same engine as the
F-5.
Northrop declared that by such coproduction Israel would save
$300 million R&D costs, and about $0.5 million per unit produc-
tion costs. In addition Israel would gain advanced know-how,
and new export opportunities [22] . It was quite clear that
Northrop proposed a sort of production under license of its al-
most fully developed aircraft. The Israeli Aircraft Industry
that looked for R&D challenges for its 2000 engineers could not
accept the proposal.
In this context can be also mentioned the negotiations with
the two F-18 producers, McDonnell-Douglas (F-18A, which will
be a flying aircraft in the US inventory) , and Northrop (F-18L,
which is still on the drawing board) [23] . Both competitors
suggested some share in production (especially generous with
this respect was Northrop, which has been fighting for its
market) . Today, after the Lavi decision has been made, it is
clear that even if the future purchase of the F-18 from either
firm will include some off-set agreement, most of the Israeli
production resources will be devoted to the Lavi [24] .
The last collaboration to be mentioned is associated with
the Lavi ' s engine. The agreement with P&W, the F-1120 manufac-
turer, includes technology transfer which will allow the
Israeli factory Beit-Shemesh Engines to produce most of the
components and assemble the engine. But P&W rejected a pro-
posal for partnership in the Israeli firm [25],
5 . Concluding Comments
a. The coproduction negotiations reveal one basic fact:
none of the American firms went too far towards the Israeli
requests. Naturally, each of them was concerned with profit
and as a result was reluctant to sign an agreement, and stated
too binding conditions. Consequently, Israel decided to go
it alone with the program, a decision with significant economic
implications, as explained in Chapter IX.
b. The Lavi has been introduced in this chapter without
any further interpretation. But it should be emphasized that
with the decision to go ahead and develop the aircraft, the
8
government has undertaken tremendously significant political,
economic and social commitments. The magnitude of these
commitments can be realized by examining the general case of
advanced fighter aircraft (AFA) production, and by observing
how it is handled in the Third World countries and in Europe.
This is done in the next two chapters.
III. AFA PRODUCTION — A UNIQUE CASE
1. General
Among the conventional arms developed, produced and trans-
ferred worldwide, the AFA has a unique status. It is, perhaps,
the most sophisticated and complex product of modern tech-
nology which is produced in large scale. It exploits a variety
of advanced technological innovations, as well as state-of-the-
art design concepts. These facts have some significant impli-
cations— economic and political, which will be anlayzed in the
following sections.
2 . Economic Uniqueness of AFA
a. Initial Costs
A tremendous investment is demanded by the creation of
initial research and development capability [26] . But even
an industry who has the substantial capability should invest
very large amounts of money for developing a new type of air-
craft. For example, the R&D costs of the F-16 were a little
less than $1 billion [27]; the R&D cost of the Israeli Lavi
are estimated at about $600 million [2 2] ; the R&D costs of the
new European tactical fighter for the 1990' s — the TKF-90 —
(collaboration of West Germany, France and Britain) are esti-
mated at over $1.5 billion [29]. Even more impressive are the
costs of developing a new advanced jet engine. These are esti-
mated at about $2 billion [30].
The actual building of the production lines requires
also a huge investment even where the basic facilities exist.
10
But they are much bigger where the production infrastructure
should be established from scratch. Since the returns from
the investments come several years later, one needs huge
financial resources and a long run "economic breath" to
embark on AFA development and production.
b. Implications of High Initial Investments
The high initial investment, or in other words — the high
fixed costs — are shared by the units produced. The bigger the
amount of units produced, the smaller the R&D cost per unit
share. But in real life, in order to sell, one should estab-
lish competitive prices, which do not necessarily cover the
large fixed costs. Only above certain volume of sales, fixed
costs are covered, and sales generate profits. In the AFA case
the fixed costs are high, thus the break-even point (the quan-
tity of units at which the contribution margin equals the fixed
costs) is at relatively high amounts. These break-even amounts
for AFA are estimated between 200 to 400 depending on the
specific case. Several sources estimate the minimal amount
of Lavi aircraft to be produced as 200 [31] , while others point
to 300 as the correct number [32]. The Swedish estimated that
300 aircraft should be produced domestically in order to be
economically equal to the alternative of buying American
aircraft [33] .
In almost every case (excluding the U.S. and the Soviet Union),
the internal market is too small to absorb such large amounts,
which causes the industry to be extremely reliant on the export
market for its existence, as is true even for the arms industries
11
of the major West European states [34]. "In order to survive,
indigenous defense industries must export," writes Michael
Moodie [35] , or as an Israeli Defense Ministry spokesman put
it: "It is impossible for a small country to maintain an
economically viable arms industry without exports" [36] .
Another important feature of the cost-volume-profit charac-
teristics of the AFA industry is the operating leverage effect.
The operating leverage expresses the degree to which a firm
uses fixed costs to generate profits. A high break-even point
means high operating leverage. If the ratio is high and volume
is highly variable, the risks and potential rewards are rela-
tively large. In industries of this nature, and the AFA industry
is certainly one of them, when volumes are beyond the break-even
point, profits can be relatively large, but if volume is under
the breakeven point, losses are relatively large as well [37].
This emphasizes again the need to exceed the break-even point
of production, usually by producing for export. When the break-
even point is exceeded, the AFA can be a very profitable commodit
3. The Nature of the AFA Market
a. General
Each firm in the AFA production may be considered as a
monopoly, while the market as a whole is regarded as an oligopoly
AFA firms are monopolies because of the two main
barriers to entry which are the sources of any monopoly power:
Technical barriers to entry;
Legal barriers to entry.
12
b. Technical Barriers to Entry
AFA R&D and production represent an innovative technology,
a special know-how of low-cost productive techniques, and conse-
quently high quality of output. Technological capability is a
function of a long term effort, accumulation of experience and
huge R&D investments. Thus, not only is the financing a
barrier to entry into the AFA industry, but the technologi-
cal capability is a harder barrier to cross.
This barrier is even higher while speaking about advanced
engines. Innovations are achieved only by a "tier over tier"
technique. For example, the manufacturer should strive all the
time to increase the compression and the by-pass ratios; to
increase the entrance temperature to the turbine; to improve
the blades cooling; to achieve more efficient burning process;
to develop better materials, etc. While airframe design is
spread over many developers, who design separately the various
components, the engine manufacturer must develop most of the
components by himself. On these grounds it is understood that
development of a new engine is a much more demanding effort
than a development of a new aircraft [38] . There is no wonder
that only three manufacturers are left in the western world
for first-line advanced engines: the U.S.'s Pratt and Whitney
and General Electric and the British Rolls-Royce. Even large
and experienced firms like the French SNECMA have had diffi-
culties which drove it to enter some sort of partnership with
the American company, G.E. [39].
The "barrier of technology" can be by-passed partially
by technology import, and sure enough, within the Third World,
13
the major arms exporters are those states which have concen-
trated most heavily on the acquisition of military know-how
[40]. On the other hand, engine development and production is
so demanding that none of the Third World countries possess a
completely indigenous capability for engine production [41] .
Most engine production prcoesses are kept as industrial
secrets, and they are almost impossible to copy from a com-
plete product. As a result of the large fixed costs, the produc-
tion of the AFA exhibits decreasing average and marginal costs
over a wide range of output levels [42]. That means that the
greater the output levels, the lower the costs. That is the
essence of the "Economy of Scale" which is characteristic of
the AFA industry. Only the large firms can compete in such
circumstances .
c. Legal Barriers to Entry
Naturally, all AFA innovations are protected by patents
which grant a monopoly position. Another legal barrier is the
need for government license for coproduction or assembly under
license between two or more countries.
Another form of a legal barrier can be an exclusive
franchise given by the government to a local producer in serving
the domestic market. In fact such is the case in almost all
countries which maintain AFA industries.
d. The Oligopoly Nature of the AFA Market
Although the individual AFA firm may be considered a
monopoly since it maintains those barriers to entry, there are
actually many firms spread over several countries, which implies
14
that the market is in fact an oligopoly. Several factors
enable this oligopoly to exist:
1) Product Differentiation. There are differences
in types, capabilities, purposes and prices among AFA indus-
tries. Smaller industries try to find the areas least covered
by the major ones, to concentrate on them and by that to
achieve a competitive level of production.
2) Political Constraints. Political constraints that
prevent a supplier from selling to a certain country, or
prevent a country from buying from a certain supplier, may
leave enough room for more than one supplier to exist.
3) Domestic Markets Protection. Domestic arms mar-
kets are often protected either by design or circumstance.
4) "Uneconomic" Sale. Some potential Third World AFA
exporters may find it justifiable to export AFA even when sales
are not, in the narrow sense, profitable, in order to earn
foreign hard currency, demonstrate a level of technological
sophistication, gain access to another country's market or to
defend a political interest.
5) Third World Ideological Solidarity. This solidarity
which is often no more than rejection of industrialized state
dominance may create export opportunities in its own right [43],
6) Pure Competition. In some cases industries of the
Third World may compete with the developed industries on purely
economic grounds. Usually they have lower labor costs (Israeli
labor cost is about one-half of that of the U.S.) . In some
Third World countries productivity tends to be high; they often
15
have access to cheap raw materials and sometimes cheap energy.
They are in many cases free of environmental, health and safety
regulations. They can leap-frog some of the earlier stages of
technology, allowing the more developed states to underwrite
the R&D costs, while learning from their mistakes [44] . (That
is the case with the Lavi which is supposed to rely on the
research works [that have been openly published] done through
the development of the F-15, F-16, F-18, Tornado and Mirage
2000 [45].)
4. Political Uniqueness of AFA
a. AFA as a Political Tool
Several reasons caused the transfer of AFA to become
an outstanding policy tool for gaining political leverage:
1) Being a scarce commodity.
2) The difficulties in entry to AFA industry and the
monopolistic control on some components like jet engines.
3) The great demand for AFA in the Third World.
4) The need for follow-on support of spare parts and
technical assistance during long years of the AFA life cycle.
5) Its high prices which require a special financing
program, spread over a long time.
b. AFA as a Political Symbol
The supersonic jet fighter has long been perceived by
developing nations as representing both the substance and
the image of a significant arms transfer program [46] . This
perception assigns to the AFA a symbolic political meaning.
Since aircraft transactions are hard to hide, the publicity
16
given to every AFA sale amplifies the symbolic value of this
weapon system.
5 . Concluding Comments
The general characteristics of the AFA, which distinguish
it from other arms produced and transferred worldwide, signi-
ficantly affected the "make or buy" decision in the Israeli
case. Some of the above mentioned characteristics play a role
in favor of the "make" alternative; some raise doubts, and
some clearly suggest the "buy" alternative. The specific
considerations are examined in detail in the coming chapters,
but not before observing the way some other arms producers
cope with the challenge of AFA production.
17
IV. AFA PRODUCTION TENDS IN THE THIRD WORLD AND EUROPE
1. General
Observations on the general trends associated with AFA pro-
duction may provide a broad perspective for the evaluation of
the Israeli decision about domestically produced AFA.
2 . AFA Production in the Third World
Since the end of World War II the number of countries pro-
ducing arms in some form has risen dramatically, especially in
what traditionally has been considered the Third World [47] .
Today, more than 30 developing countries produce weapons of one
kind or another. Between 1969 and 1978 the number of countries
capable of manufacturing or assembling major military equipment
has more than doubled — from 6 to 14. It is estimated that the
value of arms and military equipment produced in the Third
World has more than quintupled in ten years: from less than
$1 billion in 1970 to over $5 billion in 1979 (this figure
excludes China) . The value of arms exported by the Third World
countries changed from $49 million in 1969 to $707 million in
1978, while their percentage of global exports (although rela-
tively small), rose from 0.51% in 1969 to 3.7% in 1978a [4 8].
Among the exporting nations the more noticeable are Israel,
Brazil, Argentina, South Africa, India, South Korea and Taiwan.
But, in contrast to the dramatic picture drawn above, things
are different where the AFA industry is concerned (the notion
See Appendix A.
18
Advanced Fighter Aircraft is significant here since there is
a clear distinction between AFA and any other aircraft pro-
duction— transport, training—with respect to the issue under
discussion) . Only five countries are currently producing jet
aircraft from indigenous design or under license: Israel, with
its Kfir C-l and C-2, based on the Mirage III airframe and the
American G.E. J-79 engine; Taiwan has produced the American F-5
since 1973; Brazil and South Africa both produce versions of
Italy's Aermacchi MB 32 6 and South Africa has also secured
licenses for the French Mirage III and F-l; India has produced
several jet combat aircraft including a number of versions of
the Soviet MIG-21 [49].
Most of the above mentioned countries are veterans in the
area — 20-25 years. Although several countries (South Korea,
Mexico, Indonesia, Argentina) have expressed interest or plan
to develop capability for the production of jet aircraft, it
is unlikely to see a great expansion of the exclusive club of
the Third World AFA producers.
As indicated by the previously mentioned list, none of the
five countries producing jet aircraft has a purely indigenous
designed or produced one. Looking into the future, although
India's industry is well advanced by Third World standards,
its search for a new deep-penetration aircraft will not
result in developing a new aircraft indigenously.
The best it can hope for is licensed production. (The Anglo-
French Jaguar has been selected, because British Aerospace
agreed to build a significant number of the planes in India [50].)
19
Another representative of the "club's" members, General Wu-Yeh,
commander of Taiwan's Air Force, said: "It will be many years
before we can build our own fighter, so we still need the sup-
port and assistance from the U.S. We can wait, but I am not
sure our enemy will..." [51].
With all this in mind, the Israeli decision about domesti-
cally designing the Lavi can mark a large step forward toward
the country's self-sufficiency in aircraft production. But
even dealing with the most advanced aircraft industry in the
Third World today [52], it still depends on American technology
for the Lavi ' s power plant and, perhaps, in terms of some avionic
advanced flight controls, or terrain following radar. Without
them, the plane would be no match for fighters whose acquisition
is being planned by other countries [53] .
3 . AFA R&D and Production Trends in Europe
Several trends of the European aircraft industry may apply
to Israel:
a. The Need to Export
The domestic market is too small to acquire the amounts
required to make the production profitable. As aircraft have
become more capable, more sophisticated and more expensive, the
quantitative demand of the local air forces dropped. For exam-
ple, the French Air Force ordered in the late 1950 's 424 Mirage
III fighters, but only 127 Mirage F-l, which appeared about 10
years later, have been ordered [54].
Thus, the French aviation industry is highly dependent
on arms sales. Dassault is especially attached to foreign
20
markets. In 1976 almost 70 percent of Dassault's total business
receipts were derived from military export. Aerospatial, larger
and more broadly based than Dassault, and SNECMA, the principle
producer of aircraft engines must also rely heavily on military
sales abroad [55] .
b. The Economic Benefits
In the previous section the need to export European AFA
was presented as a vital means for the industry to survive,
since domestic markets are not big enough. But AFA export,
among other arms, is used to achieve a further goal — to con-
tribute to the national economy. For example, it is argued that
the economic, not strategic or foreign policy, considerations
have become the major support for French arms transfers [56].
This leads to an aggressive commercial approach, mostly attri-
buted to France, without too many restraints on whom it sells
what.
c. Collaborations
The third trend in the European AFA industries is the
tendency toward collaboration for development and production
of AFA. Even the giant industries like the French Dassault-
Breguet and Aerospatial, the British Aerospace, and the West
German Messerschmitt-Boelkow search for collaboration. They
need it to share the heavy burden of R&D and production costs,
and to guarantee big enough markets , based on the cumulative
demand of all states involved.
Today Western European countries are cooperating in
the production of fourteen aircraft, ten aircraft engines and
21
eight missile programs [57]. In a list of thirty-two orders
for French major arms, sixteen are for joint production items.
The most significant joint production of European AFAs are the
Jaguar (France, U.K.); Alpha-jet (France, West Germany) MRCA
(West Germany, Italy, U.K.), and the future European tactical
fighter for the 1990 ' s — the TKF-90 (West Germany, France, U.K.)
[58]. It is worth a notice that all these aircraft are driven
by European -made engines.
d. Types of European AFAs
In their aircraft design concepts, the Europeans try
not to compete with the superpowers at the highest end of the
market, especially where export is concerned. On the other
hand, in their collaboration aircraft, proposed mostly for self-
consumption, the Europeans do pretend to reach the edge of tech-
nology. But, in fact, there is always a lag of several years
compared to the U.S. state-of-the-art. These aircraft, usually
less cost-effective than the equivalent American ones, are diffi-
cult to export. Therefore, the British, who gave up AFA export,
try to sell the best at the lower end of the market, away from
highly sophisticated items, and more manageable and cost-
effective systems [59]. The French Dassault has prompted the
Mirage 4000 program, as an aircraft exclusively aimed at foreign
buyers [60]. Moreover, some argue that France's armed forces
are forced to accept second-rate equipment since France does not
have the resources to produce two lines of goods, and the lower
quality arms sell better abroad [61].
22
4 . AFA in Sweden — A Special Case
There are several similarities between Israel and Sweden
with respect to the question of "Make or Buy" AFA: Both are
small countries (although Sweden's population is about twice
as large as that of Israel — 8.3 million to 3.7 million in 1978,
respectively [62]; both are technologically developed; both
strive to achieve arms self-sufficiency; both have aircraft
industries of about the same size (around 20,000 workers); both
have not yet exported aircraft (though because of completely
different reasons: Sweden because of self restraints and Israel
because of "real life" difficulties, inspite of its efforts);
both succeeded in producing good AFA in the past (e.g., Swedish
SAAB Draken and Viggen , Israeli Kfir) .
These two countries differ, of course, in their international
status and circumstances, and in the threats posed on each of
them. This is reflected in the military expenditures which are
about 30 percent larger in Israel than in Sweden ($3914 million
compared to $2932 million, respectively, for the year 1978).
Since the Swedish GNP is more than five-fold times larger than
the Israeli ($85,373 million and $16,123 million, respectively,
for 1978) , it is clearly understood why in Sweden military
expenditures are only 3.4% of the GNP, while in Israel they are
24.3% (these figures are true for 1978) [63]. Both countries
spend about the same percentage of GNP on education and health,
and both are very sensitive to the social rights and securities
of their workers.
For additional comparative data, see Appendix A.
23
In the past, Sweden has produced its own aircraft. In order
to prevent fluctuations in production it has geared the military
procurement to the production cycle. In order to reap the
other benefits of long production runs the Swedish Air Force
has relied on multi-role combat aircraft, and has reduced the
number of basic types in the aircraft inventory [64].
Yet, Sweden is dependent for almost 25% of its defense needs
on foreign technologies, including an American engine for its
Viggen aircraft [65] . Inspite of the above mentioned, Sweden
is considered virtually self-sufficient in arms production. This
emphasizes the fact that very few countries are completely
self-reliant in arms, if self reliance is strictly defined to
mean producing indigenously everything that is used by the armed
forces [ 66] .
The Viggen-3 7 is supposed to end its role as a first line
fighter, sometime around 1985. In the years 1974-1975, a new
fighter was first mentioned which is now named the B-3LA. From
the beginning the B-3LA has been perceived as a "light strike
aircraft", about one third of the Viggen weight. The responsi-
bility for the design and the production of the new aircraft has
been assigned to the four "giants" of the Swedish industry:
SAAB is responsible for the airframe and final assembly, Volvo
for the engine designa, M.L. Erikson for the avionics, and Bofors
According to a later source, the Swedish reached the con-
clusion that they were unable to develop the engine domestically,
and as in the Viggen case, they had to import it. The alterna-
tives they found compatible for the B-3LA were the P&W F-100
(or the smaller version F-112) ) , the G.E. F-404 and the Rolls
Royce ORB 199 . [1]
24
for the weapon delivery and gun systems. There was a lot of
controversy around the new aircraft. Within the military
community itself, the Air Force Commander argued that an armored
assault heiicoper can do the job better, and for the price of
one B-3LA, 10 helicopters can be built. Others preferred vari-
ous types of missiles to substitute the new aircraft. But the
main objections were political and economic: some argued that
Sweden, as a small nation cannot compete in the global competi-
tion for a new fighter, and it should purchase a finished or
partially-finished aircraft from one of the superpowers.
The political arguments in favor of the self-production were
as follows: first, Sweden would have not been able to keep its
political independence without preserving its indigenous arms
industry. Second, only domestically-designed aircraft can
really fit the specific Swedish operational requirements.
But it seems that what has been most crucial in the decision
was SAAB's statement that the actual meaning of a decision not
to embark into the 3-3LA production is a death sentence for the
Swedish aeronautical industry within eight years. That meant
also immediate firing of 1000 skilled personnel as a first step
to laying off the 2 0,000 workers in the industry. Under this
"threat", the government decided to finance the first steps of
the 3-3LA development [67].
Several similarities can be observed between the 3-3LA and
the Lavi case:
In both cases the decision has beer, taken to pursue in
indigenous production despite many contrasting arguments.
25
The argument of political independence raised in both
cases (although the underlying motives were very different
between the two nations) .
- In both cases the decision was to select relatively light,
unsophisticated fighter types and to avoid competition
with the big aircraft suppliers on the state-of-the-art aircraft,
Both countries have been driven eventually to select
American engines, despite their attempts to produce them
domestically.
The Swedish example may support the controversial Israeli deci-
sion about the Lavi, but it raises several questions as well,
as introduced in the concluding comments.
5. Concluding Comments
The general observations on the aircraft industry in
the Third World and on the European leading producers, and the
detailed look at the Swedish case, lead us to ask several ques-
tions with respect to the Israeli "Make or Buy" decision:
- Can Israel, a 4 million people nation, succeed in a task
which multimillion-people nations of the Third World, like
India or Brazil, haven't undertaken yet?
- Can Israel afford a full indigenous development and produc-
tion of AFA economically, and can it accomplish it technological.
- Can Israel manage without collaboration of some sort,
or should it recognize that this is a vital need for a small
country's AFA production, as the bigger and richer European
countries have recognized?
26
- Should Israel view its AFA export as a significant
economic tool as the European countries do?
- Is the domestic AFA production a real contribution to
Israel's political independence as it is viewed in Sweden?
- Can Israel build her Air Force mix on self-sufficient
aircraft only? Could the Chief of Staff of the Israeli Air
Force (IAF) view the next generation of aircraft in his
arsenal as assault helicopters only, as his Swedish colleague
did?
- Are socio-economic considerations like maintaining
employment, preserving skilled manpower, or maintaining the
industrial base the main ingredients in the "Make or Buy"
decision as they were in Sweden?
These questions and more will be answered in the coming
chapters .
27
V. INDIGENOUS AFA AS PART OF THE IAF FORCE STRUCTURE
1. General
An indigenously produced aircraft must be viewed as
a part of the general force structure and that is the
way it should be examined. A number of questions arise,
such as :
- Does its performance meet the requirements?
- Are the amounts consumed domestically economically justi-
fiable?
- Does it really free the country from dependence on external
suppliers?
- And more . . .
can be answered only while analyzing the place of the indigenous
aircraft in the general framework of the force levels.
A basic assumption is that for the next decade Israel will
not be able to produce more than one type of aircraft at a time.
Moreover, this aircraft is defined for the next ten years (at
least) as a light, highly maneuverable fighter, proposed mainly
for strike missions, namely — the Lavi. This aircraft is supposed
to occupy the production lines up to the early 1990' s.
As announced by the Minster of Defense, Ezer Weizman, the
Lavi is not supposed to be the "tip of the spear" of the IAF.
It is not the air superiority fighter. It is supposed to keep
the quantitative factor of the IAF power, and to replace the
getting-obsolete Skyhawks and Kfirs. It is a multirole air-
craft but with obvious emphasis on air-to-ground missions [68].
28
So that is what we have to keep in mind while analyzing its
role in the general IAF framework.
2 . Characteristics of the IAF Force Structure
Israel, over the past ten years, has built and maintained
one of the most sophisticated and modern military arsenals in
the world [69]. Within the Israeli military arsenal the Air
Force is the leader in technological advances, operational
capabilities and costs. The security needs, opera-
tional experience, a capability to define what is actually
needed and a reliable and capable supplier have all combined
to produce the high levels of operational efficiency and effec-
tiveness of the IAF.
The Israeli inventory includes types other than those which
are most often sold to Third World countries. The real moderni-
zation of the IAF was started in 1962 by the then-considered
highly advanced Mirage-III fighter-bomber. In 1968 large
deliveries began of several hundred McDonnell-Douglas A-4 Sky-
hawks and F-4 Phantoms, to be replaced in turn by the new fighters
for the 1980's — the McDonnell Douglas F-15 Eagle from 1977 and
the General Dynamics F-16 from 1980 [70].
There are several unclassified estimates on the structure
of the IAF — types and quantities [71], and it is left for the
reader to decide which numbers to select. In a more general
sense, we can observe that of these numbers, the so-called
"high-low" mix consists of 40 F-15's (of which the last 15 are
still to be delivered) , 75 F-16's (of which 53 have been de-
livered up to the U.S. suspension on the 10 of June 1981,
29
and 14 more delivered when the suspension was lifted about two
months later [72]) — on the "high" edge of the list; Phantoms
and Kfirs at the center; Skyhawks and Mirages at the "low" end.
It is very likely that this concept of "high-low" mix will re-
main also in the future.
3. Future Needs of the IAF
Aviation Week and Space Technology describes the IAF ' s
present and long term needs as including 600 modern tactical
fighter aircraft. It continues, saying that Israel wants to
replace its McDonnell Douglas A-4's and F-4's over the next 10
years. Thus the total replacements are counted in excess of
4 00 fighters [73] . Janes 1980 says that "approximately 150
Kfir C-2 were believed to have been built by the spring of
19 79, with production then continuing at an approximate rate of
two or three per month," and in addition to "two squadrons of
the IAF that were equipped with the initial Kfir-Cl version" [74]
Having in mind the Minister of Defense's announcement that
the Lavi should replace the Skyhawks and the Kfirs, we reach
total replacements of over 400 again. If the Phantoms are
added/ the number is much larger.
Of course, it is naive to think that replacements are made
on a one-for-one basis. Sure enough, the total mix is determined
by a general assessment of the threat, and the "real life"
possibilities and constraints, and not by any "replacement
formula". It can be assumed that the IAF will try to fill some
of the replacements by "high" end aircraft like additional F-15's
F-16's or purchase of one of the F-18 models [75]. Not only the
30
qualitative balance suggests additional purchase of those Ameri-
can advanced fighters. Since the Lavi are not supposed to enter
service before 1988 [76] , there is a need for existing aircraft
to fill the gap through the mid 1980' s. Candidates are almost
exclusively the F-15 and the F-16 [77].
Nevertheless, from this "vague" quantitative analysis one
conclusion can be drawn: the need for "center" and "low" air-
craft, which is supposed to be met by the Lavi, is quantitatively
large, possibly within the range of the numbers mentioned as a
minimum for its economic justification, i.e., between 200 to 300
aircraft (see Ch. Ill, Sec. 2).
Another conclusion is that in order to keep its mix balanced,
the IAF cannot give up the purchase of state-of-the-art, highly
sophisticated aircraft, which are available only from external
sources, namely, the U.S.
4 . Will the Lavi Meet the Requirements?
All the previous analysis was based on the assumption that
the Lavi would really meet the actual operational requirements
of the IAF. But this assumption is by no means straightforward.
The doubts are mainly economic:
- Will the vital funding flow through the whole R&D period,
to assure meeting the performance and schedule requirements?
- Will the Lavi suffer huge cost overruns as happened to
many such projects in the modern world? [78]
These economic problems will be discussed in more detail in
Chapter IX. There are also some technological doubts:
31
- Does the Israeli industry have the required technologi-
cal and industrial capabilities to develop and produce the
AFA that would be compatible with the operational environment
of the late 1980' s and early 1990 's?
- Is it assured that the Lavi will not be obsolete for the
IAF 1990' s requirements?
Apparently, there is linkage between the answer to these
questions and the project's financing amounts and schedule, but
it also depends on know-how and experience usually accumulated
through time, that perhaps can be shortened but not skipped;
it depends also on facilities which take a long time to build,
and more.
While the economic questions are still argued in the Israeli
public and government, a great confidence about the technologi-
cal capabilities is reflected in the media and industry spokes-
men. According to these publications, the IAI has engineers
and technicians with a lot of experience and knowledge in design
and development of aircraft. It masters modern technologies,
spread all over the aeronautical spectrum (aerodynamics, meta-
lurgy, propulsion, human engineering, electronics, etc.) [79].
This confidence is reflected in the general literature too,
with statements like:
-"Of those Third World countries which have reached an ad-
vanced production capability ... Israel stands out as the most
technologically advanced" [80]. Or,
- "Today, Israel's aircraft industry is the most advanced
in the Third World".
32
Of course, being the most advanced in the Third World does
not mean automatically getting an admission ticket to the ex-
clusive AFA manufacturers club. After all, the Third World is
generally described as "comparatively disadvantageous in the
endowment of virtually every factor to sustain an economically
viable arms industry" [81], and thus lags behind the major arms
producers, especially where state-of-the-art arms, like AFA, are
concerned. But the Israeli confidence has several arguments
to rely on:
- The industrial base and technological experience of the
IAI has already proved itself in the past with a list of highly
sophisticated products, including an AFA--the Kfir.
- Since the Lavi is not supposed to be an "elite" AFA,
there is no need to make a pioneering work in exploring innova-
tive areas. It can exploit technologies developed for the
current generation aircraft.
- The Israeli industry has already shown that while concen-
trating on specific areas, it can achieve a level of sophisti-
cation not matched even by the U.S. Israel's electronic indus-
try is the case in point [82].'
- The indigenous aircraft development enables a close touch
between the decision-makers, the designers and the users. In
such a way, a more suitable aircraft to the local needs can
be achieved [83 ] .
- This same idea has been put in other words by Moshe Arens ,
Chairman of the Knesset's Defense and Foreign Affairs Committee,
who told a group of journalists:
33
We have the ability to define the new weapon systems,
maybe, more so than anybody else, because we have
had to fight many wars and as a result have picked up
experience on the battlefield as it is today. [84]
The last argument warrants a further discussion. No doubt,
there are several examples where indigenous design and produc-
tion allowed a developing country greater opportunity to match
weapon specifications and operational requirements (e.g., The
Indian new version of the Gnat, the Israeli Elta 2001 radar, or
the Kfir avionics) . But in many other cases weapon systems
produced by Third World States are no more, and sometimes less
appropriate for their needs and environment, than weapon systems
that can be bought off the shelf [85] . It should be remembered
that the Third World is a most attractive export market. Thus,
in many cases systems are now being designed for it by the manu-
facturers (especially the Europeans) . Moreover, since in most
cases systems are not bought from the shelf, but ordered in ad-
vance to their production, modifications can be made according
to the recipient requirements (if it pays the proper bill for
that...). This opportunity is used widely by Israel. Modifica-
tion can take place even after the system is delivered. Thus,
at a minimum it can be said that in the Israeli case imported
systems are not less suitable than the indigenous ones.
Regarding the indigenous systems, a question asked gener-
ally about the Third World indigenous arms production applies to
Israel as well: Is the decision to initiate domestic production c
a given system or to develop a specific branch of industry made
after first defining defense needs and then getting the tech-
nology to meet those needs? [86] Given the variety of incentives
34
for initiating a domestic defense production, even in Israel,
it is not at all clear that military considerations always take
first priority. For example, in an answer to a questionnaire,
12 high level officers of the IAF involved in acquisition esti-
mated that the socioeconomic considerations weighted more than
50% in the decision about the Lavi indigenous production [87].
In such situations, political trade-offs and bargaining among
concerned groups is substituted for the neat, orderly process
defined in theory [88]. It is completely legitimate and appro-
priate in a democracy such as Israel that the reasons why
politicians may want a particular defense capability are pro-
bably not the same as those of the generals. In turn, these
are different than industrialists' motives. Reading "between
the lines", we can observe some of the above mentioned charac-
teristics with respect to the Lavi case. It is mentioned in
some newspapers that the IAI invested 200 million Israeli pounds
(in 1978) in the initial development of the Lavi before any
formal decision had been taken. That had been done with informal
approval of the Minister of Defense of that time, Shimon Peres
[89], It can be assumed that in that phase, the IAI has based
its design concept of the aircraft on its technological capa-
bilities (and limitations) , export prospects and estimated mili-
tary needs of the IAF. It was not mentioned when the IAF entered
actively into the deisgn definition of the Lavi, but an answer
to a question of the Chief of Staff of the IAF, Y.aj . Gen.
David Ivri, reflected the attitude of the IAF at the time of the
program initiation. General Ivri said that "the Lavi is not the
35
first priority of the IAF. In front of him stands those ad-
vanced weapon systems that we don't have resources to indigenous-
ly produce.... Although the Lavi may well integrate in the IAF
inventory in the late 1980 's, the development costs should not be
financed by funds proposed to other vital weapon systems" [90] .
This attitude is compatible with the general tendency of the
IAF, characterized by an independent approach, and a reluctance
to bind its requirements to home-made systems. The Arava case
is a good example. In spite of heavy pressures from the indus-
try and the Office of the Minister of Defense, the IAF refrained
from purchasing the Israeli-made Arava, which at that time was
not perceived as meeting its needs. (This has changed since
then [91].)
Another report in the Israeli media says: "...facing severe
shortcuts in the Defense budget, the General Chief of Staff,
General Rafael Eitan, and other senior officers of the IDF
(Israeli Defense Forces) Headquarters, demanded to cancel the
Lavi project" [92].
These quotes reflect something less than enthusiasm towards
the Lavi among the military establishment. Naturally, as those
who are responsible for the actual fighting of Israel, they were wor-
ried about .being forced to get something less than the optimal frc
the military viewpoint, either by getting the Lavi as a less
capable aircraft than expected, or by giving up better ones
that could have been bought abroad.
To conclude this point it should be emphasized that the
major decision-maker on an indigenous aircraft is the Minister
36
of Defense, who is responsible for both the IAI (as a govern-
ment owned industry) and the security needs of the nation.
Thus, beyond contrasts of interests, the final decision is
assumed to reflect some compromise without taking unreasonable
risks. In addition, once a decision has been made, the IAF
makes a maximum effort to achieve the best product possible.
5 . Concluding Comments
From this analysis based on unclassified data, it is
concluded that there is a role for an indigenous AFA in the
IAF, at the "center" and the "low" end of the "high-low" mix.
Thus the Lavi, if meeting the specifications of cost- schedule
and performance, can be properly integrated into the general
force structure. Moreover, a quantitative analysis (although
superficial) points out that the domestic needs may meet the
amounts defined as a minimum for economic profitability.
On the other hand, Israel, so different in her circumstances
from Sweden and many other countries, can't maintain her vital
military power without importing the most advanced aircraft
in existence. Thus, the actual choice Israel faces is not just
"make or buy". Rather, the actual alternatives are "make and
buy vs. buy only".
By the very decision of producing an indigenous AFA, Israel
has undertaken a lot of risks, as in any multiyear, multi-
million dollar weapon system development. It should be aware
of not taking additional risks by attempting to satisfy too
many interests. Israel can't afford to let factors like
37
prestige of producing an aircraft — although less capable and
more costly than the imported alternatives — override its mili-
tary considerations (as happened in several Third World states)
[93]. Israel can't afford to design weapons on the basis of
how well they will sell abroad, and then force its military
to adopt them, as France does [94].
On the other hand, considerations other than military ones
should guide the decision-makers as long as they benefit the
state, without risking its security. In such cases, they must
not necessarily be economically profitable. These considera-
tions will be discussed in more detail in the coming chapters.
38
VI. ISRAEL'S ARMS INDUSTRY AND ARMS TRANSFERS
1. General
The question of "make or buy" AFA in Israel can be properly
analyzed — politically and economically, only in the general con-
text of Israel as arms producer, exporter and recipient. This
chapter will deal with the first two.a
2 . Overview
In Israel's case, self-reliance in preserving national
security has been emphasized since the birth of the state. This
attitude stems in large part from the historic experience of
the Jewish people and the nature of the threat the new state
confronted at the time of its independence. The fact that the
threat has not dissipated in more than thirty years has only
intensified national sentiment for maintaining security through
national means. Israeli's recognize that they are far from their
goal of self-reliance, yet they are making every effort to come
as close to that goal as possible [95].
Thus, the Israeli indigenous arms industry began as a
result of purely security needs. At the time of its emergence,
export intentions played only a minor role, if any. Even today,
while export is a major factor in the Israeli arms industry,
most of its products are domestically consumed.
Today, Israel is acknowledged as a leader of the Third
World producers and exporters [9 6] . While many developing nations
aFor additional data for this chapter, see Appendix A.
39
have some form of arms industry, only a few produce a wide
range of weapon systems and defense-related equipment [9 7] .
Israel is mentioned in the company of South Africa, China, India,
Brazil and most European states, as being able to produce almost
everything it needs [98]. Of the Third World countries that
have reached an advanced production capability, Israel stands
out as the most technologically advanced [99].
Israel's current indigenous defense manufacturing capability
includes production of military and civil aircraft, air-to-
surface and surface-to-surface antishipping missiles? air-to-
air dogfight missiles; patrol boats; multimission combat vehicles;
tanks; howitzers; mortars; grenades; guns; submachine guns; radar
systems; communication and navigation systems; fire control sys-
tems; computers and computerized communication systems; and a
lot more... [100]. Specific systems include; the Arava-STCL mili-
tary transport aircraft; the Kfir fighter; the Westwind-jet
transport civilian and military aircraft; the Jericho surface-
to-surface missile; the Shafrir air-to-air missile; the Gabriel
ship-to-ship missile; the Reshef missile boat [101] ; and the
Merkava tank.
The development of the weapons industry has been
evolutionary. A good example of that process is the de-
velopment of the Israeli Aircraft Industry (IAI) — the biggest
and the most prestigious industry among the Israeli arms manu-
facturers. The IAI introduction, which is very significant to
the essential issue of this paper, is presented in the following
section.
40
3. The IAI — Development and Current Status
The IAI is state owned, like most of the Israeli arms indus-
tries [102]. Its establishment in 1953 was, perhaps, the most
important event in the development of Third World indigenous arms
industries in the 15 years following World War II [103] .
During its development process it followed more or less the
step-by-step process which is characteristic of most Third World
state's domestic defense industrial development. Moodie describes
this process as a seven step process [104]. According to
Moodie the first step is the establishment of maintenance and
overhaul facilities for the service and repair of imported
arms. The IAI was established in 1953 to overhaul and service
the aircraft of the Israeli Air Force with a charter for future
production of aircraft, engines, spare parts components, ground
equipment, electronics and other aeronautical equipment. The
difficulty in obtaining spare parts for the IAF was a major
factor in Israel's decision to develop an aircraft industry.
This repair and overhaul infrastructure initially created — has
been expanded today to the extent that the IAI now performs
overhaul work on the aircraft of numerous foreign airlines [105].
Israel quickly proceeded through steps two and three of
Moodie 's development model, namely, domestic fabrication and
assembly of aircraft components produced under license. In the
late 1950' s, the IAI began licensed production of the Slingsby
sailplane for the IAF and flying clubs [106] .
Looking ahead to step four, the Israeli's signed an agree-
ment with the French Potez to manufacture the Fuga Magister jet
41
trainer in 1958. The first domestically produced Magister
rolled off the production line in 1960. The IAI viewed the
Magister program as a springboard to future aircraft production
and immediately set about designing and substituting modifica-
tions to the basic Magister design [107] .
By introducing indigenously designed components, the IAI
was gliding smoothly along through the fifth step (namely, com-
ponents for weapon systems are designed locally and incorporated
into existing systems) [10 8].
While the Magister program was underway, the IAI became
involved with the design and development of an indigenous air-
craft, the Arava. Well aware of the international market for
civil aircraft, the IAI decided to try to carve a niche for
itself with the development of a short-takeof f and landing (STOL)
transport that would fill a gap in the commercial market [10 9].
This clearly put Israel into step six of the development pro-
cess. As an indigenously designed aircraft, the Arava was pro-
duced using only a few imported components of sophisticated
technology (Pratt and Whitney PTGA-2 7 turboprop engines) .
In the fighter business, it was the June War of 1967
and the subsequent French arms embargo that pushed the IAI
rapidly beyond limited capabilities [liol. Following the French
embargo on the delivery of Dassault Mirage 5 fighters to Israel,
the decision was taken to manufacture aircraft of a generally
similar design to the Mirage. Since the IAI undertook responsi-
bility for manufacturing spares for the Mirage III CJ fighter
operated by the IAF, it was capable of putting into production
a new aircraft named "Nesher". This comprised a locally built
42
airframe, similar to that of the Mirage III/5, fitted with an
Atar 9C afterburning turbojet and Israeli electronic equipment.
The ultimate outcome of this policy was the "Kfir" [111] .
The Israeli designed "Kfir", is a much-modified airframe
of the Mirage 5, with American G.E. J-79 engine [112]. The
late model Kfir-C2, has almost nothing in common with its ances-
tor, the French Mirage. It contains a different engine, signifi-
cant airframe modifications, different internal systems (fuel,
hydraulic, electric, etc.); completely different weapon delivery
and navigation system; a different radar, and more. Almost all
the components, excluding the engine, are Israeli designed and
produced.
Thus, the IAI reached step six, while the seventh one — of
completely indigenous designed systems, incorporating no imported
components, is still beyond reach, mainly attributed to the
engine .
As far as engines are concerned, Israel made large progress
here too. Most of the activities on engines are concentrated
in the IAI and Beit-Shemesh Engines. The engines department
of the IAI was established 25 years ago as a repair and overhaul
facility. Today it concentrates mainly on production of com-
ponents and overhauls of large jet engines. It manufactures
about 60% of the J-79 engine — the power-plant of the Kfir.
It runs over 1000 engine overhauls for more than 30 organiza-
tions worldwide, mainly commercial airlines. It takes care of
the modern F-100 engine of the F-15 and the F-16.
Beit Shemesh Engines was established in 1967 as a consequence
of the French embargo. The Israeli government and the Jewish
43
President of the French Turbomecca firm, Josef Shidlovsky, in-
vested equal shares to initiate the plant. The main product of
the firm is the Marbore 6 engine, a relatively small jet engine
that drives the Magister trainer. But Beit-Shemesh engines par-
ticipates in the production of J-79 components, components for
other Turbomecca engines, electric gas turbines, and more.
About 30% of its products are for export [113] .
After a long competition between these two engine manufac-
turers, Beit-Shemesh Engines has been selected to be the chief
contractor for producing the P&W F-1120 of the Lavi , under P&W
license. As a consequence, the government purchased Shidlovski's
shares of the company. The latter held 51% of the shares, and
the government wanted to assure its control on the vital activity
of the Lavi engine production [114] .
Today, the IAI is the government's conglomerate that is
responsible for the majority of the nation's arms production.
From a small aircraft repair and overhaul business in 1953, it
has grown to become Israel's biggest single industrial enter-
prise, and it continues to grow [115] . The IAI employs more than
22000 people in its facilities, and about 5000 more in its sub-
sidiary plants [116] . The Engineering Division employs about
2000 engineers, the largest single engineering group in Israel
[117] .
Although the IAI is a government organization, with govern-
ment officials serving on its Board of Directors, the company
has been a commercial success, with a solid record of consecu-
tive years of profits and business growth [118]. The IAI exports
44
have grown dramatically in recent years. While the records show
in 1974/75 only $37 million exports, which were 18% of the total
IAI sales, the next year it grew to $55 million and 34%, respec-
tively. In 1976/77 the exports were $111 million which were
37% of total sales, and in 1977/78 $145 million or 45% of total
sales [119]. Exports almost doubled in 1978/1979 with foreign
sales of $260 million which are about 50% of the total sales
[120]. This amount is about 35% of the $707 million value of
arms transferred by the whole Third World in 1978! [121]
From another source we learn that in the first 7 months of
1981 the IAI exports reached $182 million (may be projected on
the total of about $350 million for the whole year) which are
80% larger than the same period a year earlier [122]. On June
10, 1981, the IAI celebrated the delivery of its 500th air-
craft. This count includes 174 "Westwinds" [123], more
than 80 "Arava's" and more than 150 "Kfirs" [124]. (The last
one has not been exported yet, as will be discussed in more
detail later in this chapter.)
Other notable products of the IAI are the antiship missile
Gabriel Mk.3 (third version); weapon delivery and navigation
systems; surf ace radars, EL/M-2200 series; airborne communication;
flight control systems; and the new-borne Scout mini-RPV [125].
4 . Israel as an Arms Supplier
a. Overview
The success story of the Israeli Aircraft Industry re-
flects the more general success of the Israeli arms industry
as a supplier worldwide.
45
We have already discussed the technological capability
of the Israeli indigenous arms industry, the spectrum of its
products, and how close it is to complete self-sufficiency.
This industry, which was established as a consequence of deep
concern for the self -security of the State of Israel, soon
discovered, like many of the Third World defense industries,
that in order to survive it must export [12 6] . Moreover,
Israel recognized the potential economic contributions arms
exports might offer to its economy. As a so-called "Pariah"
state, Israel could expect from arms exports to gain some
access and, perhaps, influence in the international community.
(The economic and political motives will be discussed in
more detail with respect to the Lavi case in Chapters VIII
and IX.)
Like other major arms exporters of the Third World,
Israel has concentrated most heavily on the acquisition of
military know-how [127] . By this approach it could create a
solid base for future self-progress, and exploit the advan-
tage of technology transfer; i.e., compared to hardware, it
is much harder to control by the original supplier.
Paradoxically, the unfortunate fate of Israel,
namely a continuing state of hostility and frequent breakouts
of major wars against its Arab neighbors, has been, perhaps,
the greatest promoters of Israeli arms exports [128] . The
Israeli weapons could be designed on the grounds of the actual
war experience of the reputable IDF, Moreover, many of them
could be described as "Combat proved", like the Gabriel
46
ship-to-ship missile that had an extremely good record during
the 1973 October War, when it destroyed at least 13 Arab ships,
or the Shafrir missile [129] with an outstanding operational
ratio of 50% kills-to-launches .
But the Israeli special security situation plays also
as a burden on the Israeli export. On the one hand, by its
indigenous arms indsutry Israel could keep some of the weapons
classified, while the imported ones are almost completely dis-
closed in the official and commercial publications of the suppli-
ers. On the other hand, the will to keep some surprises for
wartime has been a "stick in the wheels" of the export effort.
Thus we can read that the "IAI is facing a tough battle with
Israeli government security officials over its campaign to ex-
port the Kfir. " The Israeli government is said to be pushing
the IAI hard to earn foreign currency from Kfir exports, but
refuses to allow major aircraft subsystems to be exported for
security reasons [130].
At any rate, the last argument is not a critical one,
and apparently, this is not the reason for the Kfir's export
difficulties. To conclude this section it must be stated that
in spits of the various difficulties, Israel is the chief arms
supplier among the developing states [131].
b. The Rise of Israeli Arms Exports
Israel's arms export program has been expanding dra-
matically for more than a decade. This growth is reflected in
the increasing sophistication of its equipment, the broadening
range of its hardware, and the global nature of its sales effort.
47
Since 1968 when it logged military exports of about $10 million,
Israel has boosted its worldwide sales to approximately $300
million in 1976a [132] .
SIPRI places Israel as the largest Third World arms
exporter with a total value of $447 million exported from 1970-
1979 (only major systems, in constant 1975 dollars). This repre-
sents 26% of total Third World exports over the referenced
period. Israel's closest competitor is Brazil who exported
$349 million which was 21% of the Third World's total [134].
While SIPRI claims that it expects Israeli arms exports
to be approximately $1000 million per year by 1980 [13 5] , we
have confirmation from the Israeli Deputy Minister of Defense
who announced that "the military export for the year 1980/81
is about $1.25 billion". He added that "this occurred as a
result of agreements with new customer states which can be con-
sidered as breakthroughs and reaching new horizons" [13 6]. On
another occasion this same official, Mr. Mordehi Tzipori esti-
mated the arms exports for the fiscal year 1981/1982 in the
range of $2 billion [13 7].
To emphasize the significance of the arms exports to
the Israeli economy we can bring out the following fact: between
the years 1969-1978 the percentage arms export/total export for
Israel grew from 0.7% in 1969 to 2.6% in 1978, with a high of
SIPRI 's figures are more moderate for this period, partially
because referring to major systems only, and using constant
dollars. According to SIPRI Israel's total value of arms sup-
plied in the time period 1970-1976 was 174 million, which is stil.
the first among Third World suppliers [131] .
48
5.8% in 1976 [138]. This fact is outstanding when compared
to a consistent average of 0.3% of the same ratio for the Third
World, and declined from 2.6% in 1969 to 2.0% in 1978 for the
developed countries [139].
A.L. Ross [140] claims that an indicator of progression
of a developing country from dependence towards independence
in arms production is the ratio of arms export/arms imports.
Using the ACDA data [141], the following figures have been
derived:
Table 1. Israel's Ratio Arms Exports/Arms Imports
1969 - 3% 1974 - 3
1970 - 2% 1975 - 7%
1971 - 0% 1976 - 14%
1972 - 4% 1977 - 6%
1973 - 8% 1978 - 11%
The figures clearly represent a trend in favor of arms
exports .
c. The Markets for the Israeli Arms Exports
Israel rarely confirms the details of its arms sales
and is even hesitant to identify its clients [142]. The deli-
cate political situation of Israel and sometimes of its clients,
requires the transactions to be kept confidential.
The main market for Israeli arms is Latin America [14 3].
Among the customers we can find Argentina, Chile, Guatemala,
Honduras, Mexico, Ecuador, El-Salvador and Nicaragua.
49
In other parts of the world there are: South Africa,
Kenya, Taiwan, Thailand, Malaysia, Iran, and Greece [144].
Similar to the European countries, the Israeli government is
heavily involved in the promotion of Israeli arms sales. As
announced by the Deputy Minister of Defense, the recent break-
throughs into new foreign markets is attributed to initiatives
of the new Foreign Affairs Minister, who directed the Israeli
embassies around the globe to participate actively in the arms
marketing effort [145].
Talking about the Israeli arms customers, the claim that
Israel is inclined to sell arms to anyone can't be ignored, or
as it was put in an Israeli newspaper, "to trade with states
who stand at the margins of the nations' family" [14 6]. Accordin
to Business Week, "Israel sells to customers that have a hard
time buying arms elsewhere. Among them are such controversial
governments as South Africa, Nicaragua, Chile and Argentina"
[14 7]. These sales to countries who suppress human rights, is
supplemented by SIPRI [14 8] data stating that in the period
1970-1979, 35% of Israel's arms sales were to South Africa, 29%
to Argentina, and 6% to El-Salvador.
An attempt to view these trades (which have never been
formally confirmed) as an unrestricted, brutally commercial
effort, might be mistaken. More balanced conclusions can be
drawn if viewing the situation of Israel as a so-called "pariah"
state, who faces international isolation, who lives under per-
manent threat to its very existence, and who should import all
of its oil and other vital materials. With that in mind, the
50
arms trade relations with controversial countries can be
identified by three categories:
- Sales in an attempt to break the international political
blockade around Israel. To this category can be related the
sales to most of the Latin American countries.
- Sales as a part of a general mutual assistance framework
among international "pariah" states. To this category can be
related the sales to South Africa and Taiwan (i.e., states with
resources or technological advancements, who can really assist
each other) .
- Sales, grants or other assistance, in order to ease the
direct threat to the security of Israel, mainly on the basis of
common enemies. To this category can be related the assistance
to the Kurds in Iraq in the 1960 's and early 1970 's; the arms
sales to Ethiopia [149] (in order to secure the Israeli mari-
time traffic in the Red Sea) ; the assistance to the Christians
in Lebanon (who fight the PLO and the Syrians) , and even the
recent "sensational" sale of some Phantom's tires and guns to
the Khomeini regime in Iran (who have been fighting the
Iraqi's) [150]. It should also be mentioned that in some of
these countries, there are large Jewish communities of which Israel
has undertaken indirect responsibility for their security.
Thus, it is clearly observed that the motives for the
controversial Israeli arms sales are mainly political and not
merely commercial. As such they can be better understood, though
not always agreed upon.
51
d. The Israeli Experience with the Kfir Export
1) Overview. While the Israeli arms exports in general
and the IAI exports specifically, are a real success story,
this is not the case as far as the Israeli AFA is concerned.
Naturally, dealing with AFA "make or buy" dilemma,
the prospects of the AFA export have a primary significance.
In fact, Israeli AFA exports are not a complete
failure. Several sources mention a sale of 26 Nesher fighters
to Argentina [151] . According to Jane ' s, the transcation oc-
curred in 1978-1979. At this time the Kfir, which moved into
production in 197 3 [152] , had been on the production lines for
several years. That might indicate that the sold Neshers were
used, probably obsolete from the IAF viewpoint. But none of
the sources mention even one export transaction of the much
more sophisticated and capable aircraft, the Kfir.
2) Examples . Three examples may illustrate the kind
of difficulties IAI has faced in its efforts to market the
Kfir.
a) The Ecuadorian Case. In February 1977 the Carte
Administration blocked the sale to Ecuador of 24 Israeli Kfir
fighters. The U.S.'s right to veto the sale derived from the
Kfir's use of G.E.'s J-79 engine [153]. Washington did so
on the grounds that it did not want to introduce advanced
aircraft into Latin America. But there was some speculation
in Israel that the United States was merely trying to eliminate
competition in the region [154] .
52
In this case two points stand out:
- The fact that Israel was not capable of maintaining a
complete indigenous production of the AFA, enabled the sale
to be blocked. This is mostly true as far as American hardware
is concerned, since the U.S. is more restrictive in its condi-
tions to third party sales.
- Israel learned that competition with a major supplier,
even a friendly one, might be tough.
b) The Taiwan Case. The Carter Administration
announced in early June 1978 that it would allow the sale of
up to 60 Israeli Kfir jets to Taiwan. Taiwan, however , did
not find the proposed deal very attractive and it rejected
the offer on both military and industrial grounds. It argued
that the plane represented only a marginal improvement over the
F-5E which it was already producing under U.S. license. It also
contended that switching to an Israeli manufactured plane would
require it to adjust to a new series of specifications and
spare parts. Instead, Taiwan indicated that it wanted to pro-
cure American -made F-4 fighters.
A completely different explanation of Taiwan's re-
jection of the deal is found in an Israeli newspaper which quotes
a high level Taiwanese AF officer, saying: "There are diffi-
culties in the implementation of the deal. It can annoy some
of the Arab oil supplying countries" [155].
The conclusions from this case are:
- Israel's choice to produce an aircraft which is not at the
end of the state-of-the-art spectrum might be an obstacle in its
53
sale to more developed countries, who find it inadequate to
meet their needs.
- Again, it is tough to compete with a major supplier,
though very cooperative in this case, who can create arms
transfer ties which are difficult to break.
- The fear of Arab economic retaliation on any deal with
Israel might deter many potential buyers of Israeli weapons.
Even those who have arms sales relations with smaller arms,
might avoid aircraft transactions because of its perception
as a symbolic political act.
c) The Austrian Case. In 1978, negotiations were
disclosed between Israel and the Austrian government on the
proposed sale of 24 Kfir aircraft. After long examination of
the transaction, the Austrians gave up the deal, and turned
to American and French alternatives. Finally, in the contest
between the J-79 equipped F-16 version and the Mirage 50,
the latter has been selected. The decision had been taken
on the grounds of the French tempting offset agreement, the
argument that it would better fit the neutral position of
Austria, and a lot of high-level political arm-twisting
[156] .
Here again Israel's delicate political situation
caused the failure of the deal. One cannot buy arms from
Israel without being identified with the Israeli side in the
on-going Middle Eastern conflict. That has been the reason
why many of Israel's customers preferred discreteness, which
is pretty hard to maintain where aircraft are concerned.
54
5 . Final Comments
By most indicators, the Israeli arms industry is a great
success. It is the most advanced technologically in the
Third World, and it is the leading Third World's arms supplier
as well. Israel does not lag far behind the large European
arms suppliers. The Israeli arms industry and its exports con-
tinue to grow at an impressive pace. The future of this
industry is more promising than ever.
But in contrast to this great success, the export efforts
of an Israeli AFA, namely, the Kfir, have so far, failed.
The question then becomes whether Israel should pursue its
prestigious Lavi program or put the emphasis on products for
export. If Israeli AFA exports succeed, they can reap more
economic benefits than any other product [15 7] .
On the other hand there are much more optimistic views
like the one of the Deputy Minister of Defense, Mordehi Zipori,
who spoke about an expected breakthrough of the Kfir sales,
though refraining from detailing his reasons. He also men-
tioned that the new Reagan Administration tends to be less
restrictive with respect to Kfir's sale [158].
It seems that the political constraints on the Israeli
AFA exports will continue unless a radical political change
occurs in the Middle East. Such a change may be underway
as a consequence of the peace treaty between Israel and
Egypt. But who can really predict the situation eight-ten
years from now, when the Lavi is due for export?
55
This chapter found that:
- The export prospects of the Israeli arms industry in
general are good. They imply a positive prospect for AFA
exports as well.
- The political future which affects AFA exports is vague,
but not necessarily unfavorable.
- The Lavi domestic needs are in the range of the invest-
ment return.
These findings lead us to conlcude that worries about Lavi
export prospects should not be a major ingredient in the
decision to proceed or not with the program. While any export
level would be desirable, lack of exports should not cause
program cancellation. Considerations other than exports
should get a higher priority. These are discussed in Chap-
ters VIII and IX.
56
VII . ISRAEL AS AN ARMS RECIPIENT
1. General
We have already found that the actual alternatives Israel
faces with respect to AFA are not "make or buy", but rather
"make and buy vs. buy only". That means that the "buy" factor
exists in any case. In fact, the arms bought abroad are not
the only commodity that flows to Israel to maintain its security.
There are other forms of security assistance which Israel gets,
mostly (or even only) from the U.S.
In order to examine to what extent an indigenous AFA pro-
duction might free Israel from external assistance, the magni-
tudes and tendencies of this assistance should be explored. Such
exploration is provided in this chapter.
2 . General Tendencies in the Israeli Arms Imports
Israel has been one of the largest arms importers in the
world in the last decade. 3etween 1967 and 1976 it was
one of the world's leading six recipients, in the
company of South Vietnam, Iran, North Vietnam, Egypt, Turkey
and South Korea, and more [159].
While in recent years the Middle East took the lead as an
arms importing region (e.g., receiving 37% of the world's arms
deliveries in 1978) [160], Israel has kept a high position
within the ME. In 1978 Israel stood sixth in the world after
lFor additional data to this chapter, see Appendices A and B
57
Iran, Libya, Iraq, Ethiopia and Saudi Arabia. A year earlier
it was second, behind only Iran [161] . Between the years of
1970-1976 the Middle East percentage of the Third World total
was 51%, while Israel's percentage within the ME was 17%,
equal to Egypt and second only to Iran (30%) [162].
Since the 1967 war Israel has had almost a sole arms suppliej
the U.S. Between 1966-1975 the relative position of the U.S.
in the total Israeli arms imports amounted to 9 6%, while France
was far behind with 2.7%, the U.K. with 0.6% and all the others
about 1% [163]. This percentage remains in later years.
The U.S. share in the Israeli arms imports for the period 1974-
1978 is $4600 million out of a total of $4800 million (96%)
[164].
As far as aerospace equipment is concerned the picture is
even more extreme: of the Israeli purchases in Europe, only
2% are for aerospace [165], which is about 0.0006 of its total
arms imports . . .
For further insight into the Israeli arms imports, let's
examine the percentage of arms imports out of total imports.
In the Israeli case there is an increasing trend — from 9.5% in
1969 to 12.8% in 1978, with peaks in 1974, 1976 and 1977 (17.9%,
17.6% and 19%, respectively). These figures are more meaningful
when compared to the general trends in the world. Not only
are the percentages much smaller, but there is a decreasing
trend in both the developing countries (from 6.8% in 1969 to
5.0% in 1978) and the developed countries (from 0.9% in 1969 to
0.4% in 1978) [166] .
58
The total U.S. security assistance to Israel in recent
years shows a relative stability (excluding a peak in 1979 to
finance the consequences of the Camp David Accord) [167] , des-
pite the indigenous arms industry's growth in the same period.
It seems as if the increase in self-produced arms in the IDF
arsenal, and the hard currency earnings of the domestic indus-
try, could hardly keep pace with the arms race in the Middle
East, so the American assistance, although decreasing percentage-
wise, should be kept stable in absolute terms. Therefore, it is
assumed that Israel will continue to rely on U.S. assistance
for at least the next five years [16 8]. Also, for the fore-
seeable future, the U.S. will continue to be the exclusive
foreign arms source for Israel [169] . Being so predominant, the
U.S. security assistance to Israel warrants a closer look.
3. The American Security Assistance to Israel
a. FMS and Commercial Arms Sales to Israel
Total FMS agreements between the U.S. and Israel between
19 55-1979 have amounted to over $9 billion, which is about 9%
of the worldwide U.S. FMS for this period. It is next only to
Saudi Arabia with 32%, and Iran with 15%, and exceeds any Euro-
pean country. A similar picture is revealed in FMS deliveries.
Here Israel counts for 12% of the U.S. worldwide total--and
again next to oil-rich Iran (20%) and Saudi Arabia (18%).
While peaks are observed in the agreements pattern — in 1974 (re-
building the forces after the 19 73 war) and 1978 (Camp David
Accord) , the deliveries pattern is relatively stable throughout
the vears .
59
The magnitude of U.S. security assistance to Israel
is reflected even more in the FMS Financing Program. Very
different from Iran and Saudi Arabia who pay cash, Israel
needs credits and grants to pay for the huge amounts of arms
it purchases. So here Israel has held, for the years 1955-1979,
about 56% of the total program. Out of the $11 billions
Israel received in these years, almost $4 billion of the pay-
ments were waived. In recent years, annual credits of about
$1 billion, of which a half are waived, are kept to assist
Israel in purchasing its arms from the U.S. (with an outstand-
ing amount of $3.2 billion for FY 1979, which includes also
the financing of the withdrawal from Sinai, as required by
the Camp David Accord) .
In the commercial sales for the period 1971-1979, Israel
also kept its place at the top, with $935 million which are
11% of the U.S. total — more than any other country [170].
b. Economic Support Fund
The Economic Support Fund, whose purpose is to strengther
the strategic status of Israel by easing its economic pressures,
is another tier in the U.S. assistance to Israel. In the
three previous years, annual amounts of $785 million has
been given, of which two-thirds ($525 million) were grants and
the rest were loans [171] .
4 . Final Comments
As illustrated by the various figures in this chapter, the
Israeli need for American assistance is very heavy. It totals
about $2 billion per year, of which about $1 billion is in fact
a grant. To emphasize the meaning of this assistance to the
60
Israeli security, it is acknowledged that the assistance pro-
gram counts for about 55% of the total Israeli Defense budget
[172]. Of course, the credits and loans are paid precisely,
but that puts another burden on the Israeli economy. For exam-
ple, projected 10 years ahead, Israel pays for FMS financing
only, annual amounts starting at $512 million, up to more than
$644 million [173] .
The need for large assistance, as well as the need for arms
flow from the U.S. to Israel will presumably continue for the
next decade. The obvious conclusion is that an effort
should be made by Israel to decrease its needs for security
assistance and arms supply from the U.S. But, on the other
hand, the present needs are so essential that no single
act, even indigenous production of AFA, will completely free
Israel from this basic dependence.
As a consequence, several questions arise:
- What dimensions and what nature of dependence does the
present relationship between Israel and the U.S. actually create?
- Is there a chance for Israel to become completely
politically independent?
- To what extent do the indigenous arms productions, and
especially AFA, offer more political freedom to Israel, within
the existing framework?
- How does economic relief contribute to political independence?
- What are the political benefits of an Israeli AFA production
besides the bilateral relations between Israel and the U.S.?
Chapter VIII will attempt to answer these questions and more.
61
VIII. POLITICAL CONSIDERATIONS
1. General
After acknowledging the Israeli needs for AFA; the capa-
bilities and limitations of its indigenous production; the ex-
port prospects; and the special relations of supplier-recipient
between U.S. and Israel, we can move to the political analysis
of the issue under question. It is a little artificial to di-
vide political and economic considerations since they are heavily
linked. A healthier economy might require less assistance, and
therefore, reduce political dependence. The division has been
done for analytical purposes, but the above mentioned linkage
should be kept in mind. As before, the analysis is done on the
grounds of a broader view on motives for indigenous arms indus-
try and questions of political dependence-independence, politi-
cal influence, and the like.
2 . Political Motives for Indigenous Arras Production
The first and foremost motive for indigenous arms production
in the Third World has been the desire to eliminate, or at
least greatly reduce, dependence on industrial countries for
arms deemed vital for national security. Indigenous defense
production is an expression of self reliance, and thus, it is a
means of reducing a state's vulnerability to military and
political pressures during times of crisis [174] . This senti-
ment was clearly articulated by an Israeli official in 1977:
when asked what Israel needs to sustain itself in a crisis, he
noted, "...arms, food and energy. . .we have to be independent
62
in the sphere of defense production to as great a degree as
possible" [175]. His attitude was echoed by the Brazilian AF
iMinister in December 19 77, saying, "The time has come to free
ourselves from the United States and the countries of Europe.
It is a condition of security that each nation manufactures its
own armaments" [176]. The difference in the way both spokes-
men put the same idea while the Israeli use the most essential
terms associated with the very survival, expresses the perception
of such independence in Israel. As an internationally isolated
state, with an immediate and potentially overwhelming threat, and
with only a single outside arms source, Israel has engendered strong
self-reliance sentiments, not only within the leadership, but
in the population as a whole [177] . Other political incentives
for indigenous arms industry can be summarized as acquiring
domestic regional and international prestige [178], In this
context prestige is by no means insignificant. It is synonymous
with an expression of national sovereignty; it suggests
national self-confidence, and validates international
"great power status" [179]. These motives, especially the domestic,
have much to do with the Israeli nation. In general, the sup-
plier's political benefits of arms transfers are perceived as
a means to express symbolic gestures of friendship, to gain
and exercise influence, and to be used as a leverage for obtain-
ing some specific political goals by supply or denial of arms
covered by precisely tied agreements [180]. There are also
direct military benefits like support for allies and friends.
Some of the suppliers benefits, such as influence and leverage, are
reciprocally perceived by the recipient. Influence, which is
63
perceived favorably by the supplier, is perceived by the
recipient as dependence -. - How these elements are implemented
in Israel, as both a recipient and a supplier, will be
examined later in this chapter.
3. The Meaning of Political Influence
In general, being dependent on an arms supplier means poli-
tical influence of the supplier over the recipient. This has
been recognized by both superpowers, the U.S. and the Soviet
Union, who view arms transfers as a major tool for implementing
their foreign policy objectives. Examples of general influ-
ence would be U.S. military sales to NATO, Iran, Saudi Arabia
and Israel, and the Soviet Union to Warsaw Pact countries and
Cuba [181]. For the purposes of this chapter, the influence
of one country over the policy of another through the supply of
arms will be defined as the ability to change or sustain the
policies, goals or behavior of the recipient country [182 ] •
It is likely that on any significant policy issue there will
be an element of conflict between arms suppliers and recipients,
Thus, in this context, the exercise of influence will typically
involve resolving conflict between two states in ways that are
consistent with the preferences of the supplier [±83 ] . This
influence can be generally broken down into two categories:
a. Specific influence tied to specific circumstances.
b. General influence concerning the recipient's long-
term political behavior [184].
Cahn developed a table which counts the factors that determine
the level of influence of a supplier over a recipient, and the
64
factors which determine the recipient level of not being influ-
enced by the supplier or even to influence him in reverse (see
Table 2). Some of these factors are supported by several authors
Kemp [ 185 J is consistent with factors 1 and 2, saying that
the supplier will maximize leverage when it is the sole source
for arms. Thus, over time the U.S. probably has greater lever-
age over Israel, South Korea and Taiwan than over Iran, or
Saudi Arabia which has money to buy on the open market. Quandt
[186] agrees to factor 7, saying that arms recipients are more
vulnerable to influence attempts in the midst of crisis that
pose serious threats to their security, than in more normal
times. More generally, decisions concerning war and peace are
most likely to be influenced by an arms supplier. Quandt' s
proofs are taken also from the Israeli-U.S. relationships. Being
strict with her influence factors, Cahn reaches the inevitable
conclusion that Israel is the most susceptible to supplier
influence attempts. Israel has had no alternate supply source
since 1967; it is unable to pay for all its arms purchases and
is dependent on the U.S. for critical components of indigenously
produced weapons. In addition, Israel faces a real threat
to its national survival and does not possess oil or other
scarce high-demand resources in appreciable quantities [187] .
In fact, this implicit conclusion is not necessarily completely
true. As many authors write, there are limits to influence
in general, and in the Israeli-U.S. case — in particular.
Some of these limits are discussed in the following section.
65
Table 2. Influence Derived from Arms Transactions
Supplier's influence is
maximized when the recipient
1. has no alternate sources
of supply
Recipient's influence
is maximized when the recipie
1. has multiple sources of
supply especially cross-
bloc
2. cannot pay for the arms 2.
3. is a "pariah" state within 3.
the international community
4. has no indigenous weapons- 4.
production capability
5. does not occupy a strategic 5.
geographic position
6. has a small storage capacity 6.
for spare parts
7. perceives a real threat to 7.
its national survival
has the ability to pay
has the multiple diplom-
matic and cultural rela-
tions within the inter-
national community
has an indigenous weapons
production capability
occupies a strategic
geographic position
has ample storage capacit
for spare parts
does not perceive a real
threat to its national
survival
8. does not possess scarce
unsubstitutable raw
materials
8. possesses scarce un-
substitutable raw
materials
9. requires supplier personnel 9.
for weapons maintenance and
training
10. perceives that receiving 10.
arms from supplier is
particularly prestigious
11. has such a strong ideological 11.
orientation that switching
suppliers is precluded
has sufficient technicall
trained indigenous
personnel
perceives that the seller
prestige is "on the line"
is ideologically unhinder
in switching suppliers
66
3. The Influence of the U.S. Over Israel Through Arms Supply
a. Limits of U.S. Leverage Over Israel
In general, several writers think that there can be a
tendency to exaggerate the supplier political controls or
influence over the recipient [188]. SIPRI [189] put it in
other words saying that there is no causal relationship between
suppliers of arms and the creation of political goodwill at the
receiving end. The first and foremost limit for influence is
the essential fact that any soveriegn country, even a small
and dependent one, when its vital security interest is at stake,
would take what it perceives as the required measures, even in
a conflict with the supplier's wishes [190]. Recipient nations
have a clear threshold of national interests which they will
not sacrifice in favor of the supplier nation [191]. Countries
will pay a heavy price to avoid letting the arms supply relations
influence their foreign policy [192]. In such a case the recipi-
ent may be willing to risk loss of arms support in the short run
[193], There are many examples of the above assumption from
the Third World in general, and particularly from the Israeli
experience. Several examples may illustrate:
- Even after the initial embargo against Israel in 1967
and the impounding of 50 Mirage 5's by France, Israel launched
an attack against Beirut Airport in 19 68, using French Super-
Frelon helicopters.
- Israeli use of American made cluster bombs in the strikes
against Palestinian guerrila sites in 1978 in contravention of
restrictive accords with the U.S. [194]. (In general, Israeli
67
attacks on P.L.O. strongholds have often been subject to con-
troversies with the U.S. through the recent years.)
- Israel ceased its fire in the 197 3 October War only two
days after October 22, the date on which it had agreed with
the U.S. On the 2 3 and the 24 of October, Israeli troops
continued to advance on the town of Suez, and virtually cut
off the Third Army in Sinai [195].
- Israel attacked on the 7 of June 1981 the Iraqi nuclear
reactor in Baghdad, inspite of expected American protest.
(This expected protest has been verified by the suspension
for two months of F-16's and F-15's.) [19 6] Apparently,
the above mentioned examples by no means suggest that there is
no American influence on the Israeli policy in spite of the huge
security assistance described in Chapter VII. The opposite is
true. The question is — in what cases is this influence most
effective?
Wheelock [197] emphasizes the distinction between coer-
cion and inducement. Coercion involves the denial of ongoing
or future aid, while inducement depends upon the promise to
increase aid. Both are means for obtaining leverage which is
defined as "manipulation of the arms transfer relationship in
order to coerce or induce a recipient-state to conform its
policy or actions to the desires of the supplier-state". Whee-
lock analyzes a series of Israelis-U.S . cases in the 1970's, in-
cluding Rogers Peace Plan (1970) , the October War (1973) , the
first and the second Egyptian-Israeli Disengagement Accords
(January 1974, September 1975, respectively), and the Syrian-Isra<
68
Disengagement Accord (May 1974). Wheelock's conclusion is
clear: Constraints imposed by policy objectives and diplomatic
strategy limit the degree of coercion that the American policy-
makers may exercise. On the other hand, American inducements
have proven more successful in affecting Israeli policy change.
In other words, only arms transfer increases, and long-term
American commitments to the security of Israel have achieved
the U.S. policy goals and influence with respect to Israel.
Quandt [198], analyzing some of these 19 70's cases, arrives at
the conclusion that the combination of first withholding arms
then agreeing to provide them in increased amounts in return for
a change of policy, could provide at least short-term results
in the U.S . -Israeli relationship framework. Again, the induce-
ment is an integral part of the preferred policy. Constraints
on coercion stem from both the American and the Israeli sides.
A policy of coercion might endanger the U.S. policy objectives:
first, it has not induced reciprocity from the Soviet Union.
On the contrary, it has possibly encouraged Soviet mischief [199].
Second, it may jeopardize the credibility of the U.S. security
commitment to its friend and allies [200]. (in fact, increasingly,
countries are questioning American reliability and credibility.
Their perception of the U.S. as less willing and less able to
come to their defense is a major factor in their self-reliance
policy [201].) Another set of constraints on coercion policy
towards Israel is the countervailing influence which Israel ex-
erts in the United States through the Jewish community, and
sympathetic members of Congress [202]. From the Israeli side,
coercion may harden the resistance of the government, and bring
69
about a national consensus in viewing a situation as an
attempt to violate vital and basically inflexible
interests. To conclude this point — use of arms transfers
to assist U.S. policy toward Israel has worked when the aid
helped Israel to do what it wanted or found to be in its own
interest. Efforts to use delays or denials on security assis-
tance to soften tough Israeli negotiating positions have either
had limited success or have had eventually to be coupled with
massive aid commitments [203] .
b. The June 10 1981 Aircraft Delivery Suspension
The June 10 1981 aircraft delivery suspension may shed
some light on the effectiveness of coercion within the U.S.-
Israeli relationships framework. On June 7, 1981 several Israeli
warplanes attacked and destroyed the Iraqi nuclear reactor in
Baghdad. This raid was executed by U.S. -made F-16's and F-15's.
Three days later President Reagan, through Secretary of State
Haig, informed Congress that "a substantial violation of the
19 52 agreement barring use of American supplied arms for any
but defensive purposes may have occurred." Mr. Haig said that
a review of this entire matter would be conducted and the re-
sults reported later. Pending completion of that review, four
F-16 jet planes that were due to be delivered on June 10 were
held up [204]. When the review had provided conclusions
satisfactory to the U.S., and the F-16's again were being deliver
Israel bombed, on July 17, PLO headquarters in the midst of
Beirut, killing some 300 people, many of them civilians. Presi-
dent Reagan, participating in the Industrial Countries Conven-
tion in Ottawa, Canada, decided to expand the suspension. The
70
suspension later encompassed 10 more F-16's. On the 24 of
July a cease-fire had been achieved between Israel and the PLO,
with the U.S. intermediating between the belligerents. After
the cease fire, on August 10, the White House announced that
the ban also would apply to two F-15 fighters. On August 17,
the United States lifted its two months suspension on the de-
livery of the 16 sophisticated warplanes . Talking to the National
Security Council, Secretary of State Haig said that "the cease
fire is a very positive new element in the region", but he re-
frained from stating whether Israel had or had not violated the
agreement with the U.S. [205] This case emphasizes several
issues:
- Israel had acted twice — the raid in Baghdad and the raid
in Beirut — in clear conflict with U.S. policy, since it per-
ceived these acts as vital to its self-defense.
- The Beirut raid occurred in the midst of an ongoing
embargo, which emphasizes the Israeli policy hardening effect.
- The suspension caused angry reaction in Israel and the
U.S., mostly on the point of violating a signed FMS agreement
[206] .
- The New York Times [207] editorial that wrote "there was
never much doubt that Israel would get its 16 new warplanes from
the United States, no matter how great American distress over
its attacks on the Iraqi reactor and Lebanese civilians", re-
flected the confidence in the deliveries resumption both in
the U.S. and Israel [208]. Such confidence apparently weakened
the effect of the suspension.
71
- United States refrained from ruling about the 19 52 agree-
ment violation because ruling "pro" would mean backing the
Israeli raids, while ruling "con" would have meant cutting off
any further government-to-government military sales and
financing to Israel. This points out that the suspension was
in fact against the essential long-term American interest.
- The Reagan administration may demonstrate the cease fire
was an outcome of the suspension, but one can assume it would
have been achieved anyway since it was in the Israeli interest:
Under heavy shelling on the northern settlements, and a recog-
nition that conditions were still premature for an invasion of
Lebanon as the only means to completely stop this shelling,
Israel seemed to be seeking this cease fire.
c. Susceptibility to Influence in Crisis
The previously described suspension case is taken from
a relatively calm period. But there is no doubt that things
are different in a crisis situation. The October 1973 example
is a good one to realize that even a country with relatively
developed arms industry, like Israel, could not be completely
self-reliant in wartime. This is at least true in the Middle
East where wars are extremely intensive, highly sophisticated
and with a large attrition rate. The need for aid is amplified
by the involvement of the superpowers on both sides. Israel
cannot rely on itself only, while the other side is supplied by
the Soviet Union. That explains why Israeli leaders were shocked
by the delays and reluctance that colored the support the U.S.
gave Israel in the first days of the 197 3 war [209].
72
The 197 3 October war reveals two facets to U.S. influ-
ence over Israel. Some examples suggest increased influence:
Israel's Prime Minister Golda Meir disapproved a preemptive
attack on the 6 of October morning, with the argument that
initiating the fire by Israel may endanger the American aid that
Israel would need later in the War that was known for sure to break
out in the same day's afternoon. Another example was Israel's
agreement to cease its fire on the 24 of October with a con-
siderable reluctance, since the decision was made to stop short
of full military victory. When asked subsequently why Israel
had accepted, Defense Minister Dayan stated "We had no choice",
and Chief of Staff Elazar agreed that "we were compelled to
agree". Apparently Kissinger and Nixon had evoked the issue of
arms supplies, and, as Dayan was later to state, the shells
Israel was firing in the afternoon had only arrived that morning
from the U.S. In those circumstances, a refusal to comply with
the U.S. demand was almost unthinkable [210]. On the other
hand, there are opposite examples: A cease fire was agreed
after negotiations between Kissinger and the Soviet leadership
and was to go into effect on October 22. Stopping briefly in
Israel on his return from Moscow, Kissinger felt that the Israeli
leadership had agreed with the desirability of ending the fight-
ing. The following day, October 23, stating that they were re-
sponding to violations of the cease fire by the Egyptian Third
Army, Israeli troops continued to advance on the town of Suez,
and by October 24 they had virtually cut off the Third Army in
the Sinai [211]. Beyond the question of whether there were
73
violations of the cease fire or not, it was clear that Israel
took the freedom to complete the Third Army cut off which was
vital to it for the post war negotiations.
The main limitation on the U.S. coercion policy in a
crisis stems from the fact that it faces a major choice: whethe
it was ready to see its ally lose a war or not. The outcomes
of such a loss are so severe for the strategic interests of the
U.S. that it must overlook many controversies in order to
prevent such a loss. Thus, Nixon had to change his policy of
unilaterally holding off the aid to Israel, in an attempt to
force a cease fire. Facing the massive Soviet airlift to
Syria (Oct. 10) and Egypt (Oct. 11), Nixon ordered the rapid
arms deliveries to Israel [212] .
d. The Distinction Between Short-run and Long-run Influence
The previous examples bring about an implicit conclusion
Israel vitally needs the aid of the U.S. for both the annual,
reasonable levels of the security assistance program, and in a
crisis. This can be achieved as long as the U.S. perceives its
interest in keeping Israel strong and secure. President Carter
expressed this commitment with the words: "We will remain
faithful to our treaty obligations and will honor our histori-
cal responsibilities to assure the security of the state of
Israel" [213]. The commitment of the U.S. to Israeli security
cannot be based only on the "historical responsibilities" be-
tween the two countries, and the support of the American Jews.
Israel cannot afford long run divergence from the common inter-
ests with the U.S. Therefore the state of the relations with
the U.S. is a significant ingredient for every Israeli decision-
maker. It was clearly put by Ex-Prime Minister Rabin in an
74
interview to an Israeli newspaper: "What is our alternative
besides leaning on the friendship of the U.S ... .U.S. -Israeli
understanding is a crucial condition for Israel's security
strengthening, and its political maneuvering freedom" [214] . No
wonder that in order to secure the U.S. long run commitment,
Israel wished to have a formal treaty with the U.S., including
offers of base rights, as stated by Prime Minister Begin in a
speech in the Knesset (Israeli Parliament) [215] . "I express
hereby our wish for a formal defense treaty, but I am not going
to raise the issue formally to the U.S. because I don't like
to be refused." Thus, in the long run a great deal of U.S.
influence is underlying the Israeli policy. This influence
involves what Quandt [217] calls "anticipated reaction", in
which the arms recipient anticipating an influence attempt on
the part of its supplier, decides to preempt by altering its
behavior to conform to its expectations of the supplier's
preferences. Each party feels that "something is happening"
that would not occur without the provision of arms.
aln fact, the issue has been raised in some way during Begin' s
visit to the U.S. in mid September 1981. As a result of the
Reagan-Begin talks, a new "strategic partnership" was
announced. As announced by Secretary of State Alexander M.
Haig Jr., "the strategic relationship, the strategic partner-
ship, the alliance, if you will...", is to protect the Middle
East from a common threat to the region — the Soviet threat.
The practical steps will be combined military exercises,
American military stockpiles in Israel, and strengthening the
ongoing strategic dialogue [ 216] . This is still short of a
formal defense treaty which the U.S., from its own perspecitve
does not want to have with Israel. But it is one more step
in tightening the relationship between the two countries.
75
On the other hand, the limits on coercion, and the
Israeli confidence in the long term commitment of the U.S. to
its security needs, leaves a lot of room for short term politi-
cal freedom. Thus, in the existing relations framework one
can easily come to the conclusion as put by the New York Times
editorial [210J, that "embargoes may buy. time but little else."
(This has not been perceived so by the Reagan Administration in
the F-16 deliveries suspension, unless we assume that it is
supposed to be a temporary suspension from the beginning, aimed
mostly to satisfy the U.S.'s Arab friends, and not so much to
punish or influence Israel.) What is the effect of the indig-
enous arms industry, and especially the AFA production, on the
short and long run political independence of Israel? That will
be explored in the next section.
e. The Contributions of the Israeli AFA to the Political
Independence of Israel
The Yom Kippur War experience indicates that in crisis
situations, indigenous industries may not be able to keep up
with defense needs [219 ] . It is estimated that the 18 day "Yom
Kippur" War in 1973 cost Israel $7,510 million. Virtually all
losses of war material have been replaced from U.S. stockpiles
and assembly lines [220 ] . The emergency assistance during the
war totaled $2,183 million [221], and FMS agreements in the
following year reached $2,455 million. Even if we take into
consideration that as a result of the 19 73 war, military
stockpiles have been increased significantly, and the indigenous
arms industry has developed as described before, there is still
a need for massive American aid in case of all-out war. At
76
least if the other side is supplied during that war would this
be true. This brings us to a more general conclusion that, in
the modern world, a country that is located in a strategic
region and is in a state of war or threat of war, cannot stand
alone without being "sponsored" by one of the superpowers. More-
over, a superpower cannot stay indifferent to such a country if
its adversaries are supported by the opponent superpower.
Therefore, neither a highly developed domestic arms industry
nor AFA production can free Israel from its substantial need
for U.S. assistance. This can be changed, if ever, only by a
major politico-strategic change in the region, namely, progress
toward resolution of the Israeli-Arab conflict. On the other
hand, indigenous arms industries may increase the short run
political freedom, which exists to a degree anyway. Short of a
crisis — indigenous arms industries may enhance the political
flexibility by compensating delays and embargoes [ 222j t The
latter have only a long run effect, but in the existing circum-
stances they don't stay in effect for very long. The economic
contribution of an indigenous arms industry may provide some sta-
bility to the security assistance flow. From another aspect, indi-
genous production of AFA or, say, cluster bombs, may resolve
controversies about the usage of American equipment, and Israel
would be able to maintain such understanding as it reached with
the U.S. as a resolution of the Iraqi reactor raid controversy
[ 223. (Though/ it is doubtful if Israeli AFA is capable of
such operations as the raid in Baghdad. Presumably Israel will
keep the freedom to use any equipment it possesses, for vital
purposes that cannot be executed otherwise.)
77
Paradoxically, because Israel cannot be completely self-
reliant in the foreseeable future, it has a considerable degree
of freedom to select those arms types it prefers to develop
and produce domestically. Since it cannot produce everything,
it can choose those arms that will enable it greater short run
political benefits, and are technologically and economically
preferred. Is the new Israeli AFA, the Lavi, a preferred
commodity in that sense? AFA indigenous production, as the
most sophisticated product of the conventional arms industry
reflects, perhaps more than any other system, the statement
that "Instead of creating independence, indigenous production
creates a new set of dependencies" [224] . The form of depen-
dence has shifted from arms transfers to technology for pro-
ducing arms transfers [225] . This is also true with respect
to the Lavi, especially concerning its engine. Actually, many
in Israel argue that the Lavi decision is not the right answer
to the dependence problem. The IAF Chief of Staff, Ma j .
General Ivri concludes comments about the Lavi with a question,
"Would the 'Lavi', without an indigenous engine, really give
the resolution we are interested in?" [226] . Among the opponent
to the Lavi production in the Security and Foreign Affairs Com-
mittee was also ex-IDF Chief of Staff, General Bar-Lev, who
argued that the investment is too high. It is doubtful if the
aircraft would be exported, and the dependence would remain
because of the components that would eventually be imported
[227] . A similar tune is heard from some of the commentators
in the Israeli press [228] .
78
To strengthen these arguments comes the fact that not
only is technology import required, but the Lavi develop-
ment depends to a great extent on American financing [229] .
But even those who argue that the dependence remains would agree
that the self-made AFA provides much greater short run political
flexibility than finished imported systems. Technology trans-
fers are harder to control and safeguard [230]. Even in cases
of imported components the control is necessarily looser. Al-
though the Kfir export could be blocked because of being equipped
with American engines, the U.S. has never defined Israel's usage
of Kfirs in PLO site attacks as "inappropriate use of U.S.-
made equipment", as it did with respect to fully U.S. -made
aircraft.
The lead time until delay or embargo starts to take
effect is much longer dealing with components to self-production
than in the case of completely imported products. It is easier
to bypass components' embargo by indirect supply routes, as
has been proved by Israel during the 19 67 French embargo.
And once you have the know-how, it is yours forever. Thus,
within the framework of the long term and crisis time dependence,
the Lavi would contribute to the short run, day-to-day politi-
cal flexibility of Israel. Thi; is true despite American tech-
nology, components and financing provisions for its development
and production. In the examination of whether there are other
weapon systems whose contribution to political flexibility would
be greater, several considerations should be taken into account
besides the level of technological independence in their production:
79
- What is their operational impact in current operations
and in all-out war, compared to an AFA?
- What are their relative political benefits besides the
dependence questions?
- What are the socio-economic impacts of their production,
and of giving up the AFA production?
It seems that the economic question is the most crucial one,
as explained in Chapter IX.
5. International and Internal Impacts of Indigenous Israeli
AFA Production
a. Overview
Besides the major issue of dependence, associated mostly
with the Israel-U.S. relationship, the indigenous AFA produc-
tion has several other significant impacts on the foreign and
domestic Israeli policy. This section addresses these impacts.
b. Political Benefits of Israel as a Supplier
It is generally accepted that Third World countries do
not search for political influence in their arms transfers.
Even the major European arms exporters do not. The predominant
motive for both categories is the economic benefit. As far as
Israel is concerned, some argue that Israel's indigenous arms
industry viability, like many others, depends upon exports.
Therefore, Israel must sell to all who are willing to buy, in-
cluding such outcasts in the international community as South
Africa and Chile [231]. As explained in detail in Chapter VI,
there are strong political motives behind the Israeli arms trans-
fers. These motives can be divided into three categories:
80
- Sales in attempts to break international isolation (South
America, Southeast Asia and African countries) .
- Sales as a part of mutual assistance between relatively
developed "pariah" states (South Africa, Taiwan) .
- Assistance to countries or movements who share a common
enemy with Israel (Lebanese Christians, Kurds in Iraq, and even,
perhaps, the current Iranian regime).
No doubt that AFA exports to the first two category countries
may benefit the political interests of Israel. The symbolic
perception of an AFA transfer amplifies these benefits. On
the other hand the special nature of the AFA may be an obstacle
to its export.
From another viewpoint these sales may jeopardize the
delicate Israeli international position. In the eyes of those
countries who are not aware (or prefer not to be aware) of
Israel's special situation, Israel is perceived after all as
having no political or moral restrictions in its arms sales.
This can detract from Israeli moral arguments against
European arms sales to some Arab countries. In any case the
potential political benefits of the AFA exports suggest that it
be produced, although by no means play a major role in the
overall considerations.
c. The Prestige and "Overall Power" Factors
Several authors count the prestige acquired by means
of indigenous arms industry as one of the motives for its de-
velopment [232]. An effective arms industry reflects a wide
range of resources, human and otherwise, that a state can
81
marshal, and it demonstrates a degree of self-reliance that
other nations cannot achieve. Arms industries may suggest a
"great power status" for the country, at least in its regional
context. It is hard to assess to what extend the Israeli
indigenous arms production capability contributes to its over-
all perception in the eyes of its neighbors. If it does con-
tribute, AFA production is a significant factor in this contri-
bution. But we can assume that in the Israeli-Arab context
the most prestigious factor is the total military power and the
combat capability of Israel, in which the indigenous arms indus-
try is not the major component.
d. The Domestic Socio-Political Factor
Perhaps more significant than external prestige is
the domestic socio-political effect of the Israeli AFA. Gold-
stein [2 33] writes that "the national arms industry may be little
more than a psychological support; nonetheless, it is strongly
associated with sovereignty and national strength". And truly,
in Israel, perhaps more than anywhere else, the national morale
and strength are crucial ingredients in standing under pres-
sures, in war and peace as well. The perception of the strength
and confidence counts more than the objective facts. According
to Moodie [234] while the degree of dependence on arms imports
remain quite strong in objective terms, in regard to perceptions
the state may feel greater flexibility, and in international
politics it is the perception that determines behavior. That
is the case with Israel too. The striving for self-reliance
is more than just pretension of leadership. The historic
82
experience of the Jewish people, together with an immediate and
potentially overwhelming threat at the time of independence
and today, has engendered strong "go-it-alone" sentiments, not
only in the leadership, but in the population as a whole [235].
Thus, an indigenous arms industry, especially with a prestigious,
highly sophisticated product such as AFA, may contribute a lot
to the internal immunity of the Israeli people. In many cases
indigenous arms are disclosed, usually on special occasions like
the Day of Independence and get a lot of publicity in the com-
munication media. In the June 1981 election campaign, politi-
cians of the ruling Likud Party cited the progress in arms pro-
duction and exports as one of the greatest successes of the
government. They even complained that they had to refrain from
disclosing more, and by that, missing one of their strongest
electoral attractions [236]. This does not suggest that the
government's prestige is a major ingredient in the decision
of the Lavi, since it is not compatible with Israel being a
progressive democracy. Rather, it emphasizes the significance
the Israeli public attributes to the issue.
In the media some argue that a "national project" like
a development and production program for AFA, would contribute
to better allocation of income, close social gaps, and affect
the quality and self-image of the Israeli society as a whole.
It would contribute to the public welfare more than direct
allocation of resources to welfare [237]. But, of course,
there are also some who fear from potential social effects of
such a grandiose project. Those argue that because of the bud-
getary burden the project imposes, there would not be sufficient
83
funds for lodging, health, education and welfare. Others
mention the moral aspect of being "the merchants of death",
or being identified with repressive regimes. Others warn
against the danger of creating an industrial-military complex,
which dictates decisions according to its interests which are
not necessarily identical to those of the society in which it
is acting [ 2 39 J . Again, the Israeli democracy is too deeply
rooted to reach such extreme levels, but even within a democracy,
there can be an aggressive struggle of interests. In general,
most of the sociological aspects are in favor of indigenous AFA
production. Those who oppose such production are mostly in-
direct issues concerning the export policy or the economic
ramifications. The latter are discussed in the next chapter.
6. Concluding Comments
The ideals of self-reliance and the striving for political
independence have always been substantial motives in Israeli
policy. But in the current and future circumstances it is un-
likely that Israel can afford to give up or reduce substantially
the American security assistance. Indigenous arms industries
cannot change the basic situation, and thus Israeli policy-
makers should be aware of maintaining the long run commitment
of the U.S. to Israel.
On the other hand, the degree of U.S. influence over Israel,
or Israel's political dependence on the U.S., are reduced by
American limits of leverage, and by the so-called "reverse
leverage" of Israel over the U.S. Within the long run commitment
84
arms flow is more or less assured, though not immune to tem-
porary delays and embargoes. In such cases, indigenous arms
industries, including AFA production, may contribute signifi-
cantly to short run political flexibility. In that sense, even
systems based on imported technology or components may help.
The recognition that the need for U.S. arms is a durable
one, paradoxically enables Israel to select the weapon systems
it prefers to develop and produce. The criteria for preference
are mostly economic and technological. This is not to say that
political considerations have nothing to do with the selection.
On the contrary, factors such as contribution to the political
independence, overall prestige, domestic morale and confidence,
and bridging to other nations, play a significant role in the
decision. But the economic considerations and especially the
domestic ones, are more crucial in this case. These considera-
tions are discussed in the next chapter.
35
IX. ECONOMIC CONSIDERATIONS
1. General
Economic benefits are major motives for maintaining indigen-
ous industry not only in Israel, but in worldwide arms pro-
ducing countries. Several economic incentives play a role in
the drive to maintain indigenous arms industries:
- Improving the balance of payments by substituting arms
imports for domestic production, and as a further step — by
exporting arms.
- The positive impact on employment.
- The contribution to the domestic industrialization.
- The spin-off effect on civilian products, technology and
sales [240] .
But there are economic problems as well, associated with
domestic arms production:
- Indigenous production frequently turns out to be more
expensive than originally estimated and is sometimes even more
expensive than buying the complete weapon abroad [241] .
- Shortage of economic resources.
- Negative effect on an ill economy by contributing to
inflationary process.
- High risks in devoting tremendous resources into develop-
ments with unknown results, and into production with unstable
markets. These benefits and risks are discussed below.
For supplementary data to this chapter, see Appendix C
86
2 . Balance of Payments
a. Overview
As mentioned before, indigenous arms industries, includ-
ing the AFA production, may contribute to the balance of pay-
ments in two ways:
- Creating foreign-exchange savings by substituting domes-
tic production for imports [242],
- Earning hard-currency through arms exports and by that,
offsetting balance-of-payment deficits [243].
In the Israeli realm, the balance of payments deficit
is one of the severe illnesses of the economy. This deficit
can be mainly attributed to the high defense expenditures,
half of them in foreign exchange, and the lack of natural re-
sources in the face of increasing world oil prices.
But there are some candles in the general darkness. The
surplus of imports over exports for FY 198 0/81 was predicted
as $3.3 billion, compared to $2.8 billion in FY 1979/80. In
fact, the deficit decreased to $2.3 billion, $1 billion less
than estimated. For the first time in Israel's history, 72%
of the imports of goods and services, including military imports,
were covered by exports. This is compared to only 50% in the
mid 1970's [244]. No doubt that this achievement is- attri-
buted mainly to the $1.25 billion military exports in that
same year.
The above facts verify Day's [24 5] words, saying that
the Israeli leaders see the export of weapon systems "as a quick
and profitable way to translate the nation's war experience
into economic advantage."
87
b. The Effect of Indigenous AFA Production on the Israeli
Balance of Payments
The first subject for examination is the saving of
foreign exchange by substituting domestic production for imports
On the face of it, it looks pretty obvious: by acquir-
ing over 150 "Kfirs" or 200 "Lavis" from its own industry,
Israel can save the expenditure of several billions of dollars
which might have been spent for buying American aircraft in-
stead. But don't forget that large portions of the Israeli pay-
ments to the U.S. are waived. Would Israel keep getting the
same amount of grants (or waived payments) if it reduces its
purchases from the U.S.? The rest of the financing program is
given as credits and loans. Is Israel ready for a change in
these conditions which are economically favorable?
In fact, American dollars, which are proposed for buy-
ing American arms only, are much more easily available than
the Israeli "Shekels" needed to be invested in the indigenous
AFA development or purchase. Moreover, inquiry of the FMS
agreements and deliveries tables [246] does not indicate any
decrease in dollars spent on arms purchases in the years of
the great growth of the domestic arms industry and especially
while large numbers of the Kfirs are acquired.
The answers to these questions are by no means
straightforward. Starting with the last one, it can be stated
that the contribution of the indigenous industry to foreign ex-
change savings is_ significant. It is indicated by the fact
that in spite of the inflationary devaluation of the dollar;
in spite of the arms race in the Middle East; in spite of the
extreme growth in arms prices — the nominal assistance dollar
88
amounts remained about the same in recent years. Without indi-
genous industries, dollar expenditures would increase signifi-
cantly, or the IDF would be less equipped. The waived payments
are a matter of policy. Israel should argue that the increas-
ing needs require keeping this policy in spite of the growing
self-sufficiency, which can hardly keep up with the arms race.
By itself, Israel should prepare for the worst case of changing
the financing policy with or without connection to the self-
sufficiency issue. This, for sure, favors the domestic pro-
duction of AFA.
The credit financing, although convenient and, in fact,
even vital in the short run, has severe implications in the
long run. In the Israeli 1981 budget proposal, 30% of the total
expenditures are debt payments. This percentage had an increas-
ing trend through the 1970 's, although slightly decreased from
1980 to 1981. Debt payments in foreign currency for FY 1981/82
amounts to nearly $2 billion, about twice as the total FMS
agreements projected to this year. About $540 million of that
huge debt are attributed to the FMS Financing Program annual
payment [247] .
The above figures emphasize what a heavy debt burden
lies on the Israeli economy. While some economists argue that
there is nothing wrong with a government's debt to its own citi-
zens, this is not the case when foreign debt is concerned. Here
the economic consequences are accompanied by political ones.
Cahn [248] argues that transactions such as credit sales, which
stretch over several years, provide multiple leverage points.
89
Thus, in the Israeli circumstances, decreasing or even stag-
nating the national foreign debt is a crucial task. AFA domes-
tic production can save large dollar expenditures, as a result
of being an extremely expensive commodity.
The second subject to examine is the export contribution
to the balance of payments. In terms of balance of payments
only, exports always contribute positively. But the question
of export profitability should be asked in a broader sense:
is it economically profitable, i.e., cover costs and even earn
some profit? In other words, does the competition require such
a low price that it is not justifiable to export any more?
According to Goldstein [249] some potential Third World
arms exporters may find it economically justifiable to export
arms even when sales are not, in a narrow sense, profitable.
In such cases exports are made in order to earn foreign hard
currency; demonstrate a level of technological sophistication;
gain access to another country's market for these or other pro-
ducts, or to gain a political benefit.
All the above arguments may apply to the Israeli AFA
case as well. On the other hand, in its hard-pressed economic
situation, Israel should strive to be profitable in the narrow
sense also. In this respect Israel has some advantages which
results in a competitive low price for its AFA in the inter-
national market:
- Israel has low labor costs: cost of labor in development
in Israel is about half of the equivalent American hourly rate
[250] . Cost of production or maintenance labor is about two-
thirds of the equivalent labor in the U.S. or Europe [251].
90
- Israel can exploit to the maximum the technology trans-
fer opportunities: it can leap-frog some of the earlier stages
of technology, allowing the more advanced states in technology
to underwrite the R&D costs, while learning from their achieve-
ment and mistakes [252]. Thus, the Lavi R&D costs are esti-
mated as one-half to one-third of its contemporaries in the
U.S. and Europe.
- The large amounts consumed domestically (even in European
terms) enable Israel lower export unit prices. (This effect,
of course, is a two-way street between exports and domestic
consumption. )
The prospect of the new Israeli AFA exports has already
been discussed in Chapter VI. In short, they are very vague
and wander somewhere between the great boom of the general
arms exports and the flop (so far) of the Kfir export attempts.
As explained in Chapter V, the domestic consumption of the Lavi
is likely to be large enough to justify the indigenous produc-
tion anyway. (This is, of course, under the assumption that the
expected costs would not overrun or be out of control.) Thus,
exports in this case may be considered as a bonus rather than as
a condition for the industry to survive. As a consequence, the
first contribution to balance of payments, i.e., foreign cur-
rency savings , is supposed to be thoroughly accomplished by
the AFA indigenous production. The second contribution of
earning hard currency by exports is still unknown, but if it
occurs, it can be accepted favorably as a significant bonus.
91
3 . The Inflationary Effect of the AFA Production
a. Overview
Perhaps the worst illness of the Israeli economy in
recent years has been inflation. It has reached peaks of three
digit figures such as 12 0%-130% at an annual rate. The near
term goal of the current government is to reduce inflation below
the 100% annual rate. The main reasons for such a tremendous
rate are:
- High defense expenditures.
- The rise in the world's oil prices.
- Wrong allocation of the labor force between the productive
sector and the public services, and low productivity of labor.
- Fast economic growth rate (although significantly reduced
in recent years) .
One can also argue about the extent to which various gov-
ernment decisions have accelerated or diminished the rate of infl
In any case fit is clear that a major step to counter inflation
is to reduce the real activities in the state budget [253] .
b. The Defense Expenditures in Israel
As mentioned before, the defense budget as a major
government expenditure, is one of the main reasons for inflation.
In the 1981 budget, it counts for 31% of the total budget [254].
This percentage has been stable in the late 1970 's and early
1980's, after a high of 49% in 1973 (the war year) [255]. As
such, Israel in 1978 was in fifth place in the world in the
ranking order of military expenditures as a percentage of the
central government total expenditures [256].
92
The military expenditures as a percentage of the total
Israeli GNP stabilized in recent years at around 25% [257] , com-
pared to 5.4%, 5.3% and 5.5% for the world totals, developed and
developing countries, respectively [258].
The effect of the defense budgets components is not
uniform. As previously mentioned, about half of the defense
budget is the American Security Assistance Program. This money
is spent for the most part in the U.S., for U.S. goods purchases.
Only 1/8 of it is not bound to specific purchases in the U.S.
Thus, the U.S. security aid does not increase the Israeli money
supply, and does not affect inflation significantly.
What does affect inflation is the part of the defense
budget which is aimed at local spending. This part counts for
about 13%-14% of the GNP [259] , which is still more than two-
fold of the world's average percentage. No wonder this
part of the defense budget has been targeted for cuts involving
hard debates between the treasury and the defense establishment.
The debate even caused the retirement of the Minister of Defense,
Ezer Weizman as a protest, after a large chopping of the
defense budget.
This lengthy description is to emphasize in what environ-
ment the Lavi decision has been taken, since its funding comes
mostly from the local spending part of the defense budget,
c. The Inflation Consideration in the Lavi Decision
It is now clear that a flow of about SI billion through
the next 8 years [260] for the Lavi development with returns
only starting, hopefully, in 1988, may result in several out-
comes, alternatively or simultaneously:
93
- Severe cuts in any other expenditures in the "Shekels"
defense budget, in order to finance Lavi development. As a
consequence, vital security needs can be severely hurt.
- Insufficient financing of the Lavi development and by
that causing, presumably, delays or even inadequate design
results.
- Increasing the budget by "printing" money or otherwise,
and by that inflaming the hyperinflation.
With this background one can understand the demands of
some senior military officers to cancel the project [261], or
from the industry side to mobilize funding through collaborations
or exchange of the U.S. aid into Israeli "shekels".
Buying American-made aircraft only, apparently frees
Israel from the painful selection between the above-mentioned
all-bad alternatives.
Thus, the budgeting problem and the inflationary effect
represent the most acute problems for the Israeli AFA .
4 . Technological and Industrial Base Implications and the
Spin-off Effect
a. Overview
Arms industries in the Third World countries are often
viewed as leading the way in a country's effort to further its
industrialization [262 ] . In fact, even in the developed coun-
tries, the arms industries and their derivatives (e.g., space
research) lead the technological advance and the innovative
research. Arms industries not only contribute to the techno-
logical know-how of a country, but they require and thus maintain
a wide industrial base.
94
Arms industries in many cases contribute to the general
commercial industry of a country by the spin-off effect. The
technology innovated for arms is used in commercial products.
Military sales may promote sales in the commerical arena [263] .
All these phenomena strongly exist in the Israeli realm, and
serve as a driving motive for indigenous arms industry in
general, and AFA production in particular.
b. AFA Effect on Technological Advance and Industrial
Base in Israel
Several commentators in the Israeli press emphasize the
tremendous contribution of the aeronautical industry to the
Israeli general technological capability [264] . It has already
been mentioned that the IAI with its 22,000 workers is the largest
single plant in Israel. Its 2000 engineers are the largest de-
sign group in the country. No further illustrations are needed
to understand what portion of the Israeli industrial infrastruc-
ture IAI and its subsidiaries take.
AFA development and production in Israel will give a
great push to the technological advance and the industrial base
of the country. Substitution of AFA production by less demand-
ing arms (e.g., small and medium range missiles, electronics,
etc.) would not provide the same scale, and thus, from this
respect would be less effective. Coproduction or any other way
of collaboration with large American firms might occupy the pro-
duction lines, but leave the domestic design force with much
fewer challenges (since, naturally, most of the design would
be done in the sponsoring company) .
95
c. AFA Production's Spin-off Effect
The spin-off effects work both in the technological
and sales areas.
The technological spin-off is very straightforward within
the aeronautical industry itself, where it is a two-way street
between the military and the civilian products. In 197 6
Mr. Shimon Peres, at that time the Minister of Defense, said that
the investments in the civilian models of the Arava and the
Westwind had helped in production of the Kfir [265] . But it
also worked in the reverse way.
With respect to the sales' spin-off, Lorbar [266] says
that the reputation of the Kfir (though not yet exported) and
the sales of the Gabriel missile, assisted the sale of Israeli-
made electronic medicine devices (area in which Israel is one
of the world leaders) .
Thus, this aspect clearly favors the domestic production
of the Israeli AFA.
5 . Labor Force and Employment Implications
a. Overview
According to Cahn [2 67] , the conventional arms industry
employs between 1 to 1.5 percent of the working population in
the major West European arms-supplying countries. In Israel,
this percentage is much higher. According to one source, the
production of the new Israeli AFA would create a situation in
which every tenth worker in the industry would be connected
directly or indirectly with the aerospace industry [268] . Even
today, the 22,000 workers of the IAI and the additional 5000
96
in its subsidiaries, count for a large portion of the industrial
labor force in Israel.
In Israel, more than in many other countries,
the creation and the expansion of the aerospace industries
has not been driven by the need to provide employment. For more
than a decade Israel had enjoyed full employment. But once
the industry had been developed, and jobs had been created, it
achieved its own momentum. Such a huge labor force employed in
this industry is not flexible enough to be transferred to other
sectors. And no government can ignore its responsibility to
provide projects to keep this labor force working. This is even
more so when the industry is government-owned as in Israel and
in most European states.
b. Employment and Social Rights
In the Israeli social environment, workers are highly
secured against dismissal, by formal rights and by the general
power of the trade unions. It is also a primary commitment of
the government to prevent unemployment. Consequently, Lorbar
[269] argues that what happened in the U.S. between 1968-1972
in the aerospace industry cannot take place in the Israeli
reality. According to Lorbar, as a result of an ebb in the
U.S. aerospace industry, 90,000 workers were fired. As a
ramification of this huge firing, a total number of 220,000
employees lost their jobs in that period. These firings saved
the firms about $7.5 billion. Such a thing (of course on a
relative scale) is very unlikely to happen in Israel.
The Indian example is more compatible with the Israeli
environment. When HAL terminates a particular program, workers
97
are shifted to other projects rather than laid off, despite the
uneconomical nature of the practice. According to Air Marshal
S.J. Dasture [270], HAL Chairman, "You have to be pretty des-
perate to lay off workers in a public sector organization".
In fact, the labor force considerations have been the
crucial ingredient in the Swedish government's decision to go
ahead with the B-3LA program [271] .
Not to undertake the Lavi project would mean wide dis-
missal, or what is more likely, keeping over-capacity workers
on smaller projects. In the latter case, the labor costs, which
are 60%-80% of a modern weapon system R&D costs, would be in-
curred anyway, and the relief to the sagging defense budget
would not be as significant as expected [272] .
c. The Effect of AFA's Decision on Skilled Manpower
By its nature, AFA development and production involves
relatively high concentrations of skilled manpower — engineers,
technicians and management personnel. Such skilled labor,
temporarily released, may be lost forever [273]. Moreover, the
IAI expressed its fear of "brain flight", i.e., engineers emi-
grating to other countries — something which is perceived very
severely in the Israeli environment.
In this repsect, coproduction is not enough. As stated
by an Israeli key military planner [274] , "We have a very solid
offset production -wise on the F-15 — but not for engineers. The
interests of the Israeli aerospace industry are not only eco-
nomics. Our industry has good engineers who need challenges
in development and research". No doubt that indigenous AFA
98
can provide R&D challenges on a higher level and larger scale
than any other project.
6 . Some Economic "Awkward Problems"
a. General
Several "awkward problems" with respect to the indigen-
ous AFA are raised in the general literature, which apply to
the Israeli case. They are presented in the following paragraphs.
b. "All the Eggs in One Basket"
Some authors warn about the risk in allocating such a
large portion of the national resources — budgets, manpower, in-
dustrial base — to one single industry [2 75] . They found some
parallel characteristics in that sense between Israel and Wash-
ington State in the U.S. In Washington, with a population of
3.5 million (a little less than Israel as a whole), 50,000
people work in the Boeing Corporation. The feeling in that
state is that the fate of the state highly depends on the status of
Boeing. But, the "only" difference is that behind Washington State
still stands the federal government of the most powerful country
in the world to compensate downturns in the aerospace indus-
try. This is not the case with Israel (although one can joke
that the same federal government stands behind Israel too...).
A sudden cut in IAI production may cause a collapse of
the whole Israeli economy. These authors emphasize the great
fluctuations of the arms market because of rapid innovations in
technology; economic tides and ebbs; political changes and the
tendency of governments to procure such weapons as aircraft
from particular firms in a short two-or-three year period, every
99
ten years or so [276 ] . The Israeli market is especially sensi-
tive to such fluctuations because of its limited selection of
potential customers.
No doubt that these fears are real and are of great
concern to the decision-makers. On the other hand, in the
aerospace industry, as explained in Chapter III, if the risks
are high, so are the opportunities.
The "insurance" against market fluctuations in the
Israeli case is the large domestic consumption, which is unfor-
tunately, determined by the circumstances,
c. The Burden on the Economy
Another claim against indigenous arms industries is
that those industries place burdens on their countries ' econo-
mies and result in the diversion of scarce resources from badly-
needed economic and social development [277] . The question
accompanying this claim is usually, "what could have been the
shape of the national economy if all these resources would have
been invested in commercial products and services, rather than
in the arms industry?" As an example , usually raised is the
Japanese example — how a nation freed from high defense burdens
(as a result of World War II) could use its resources to develop
tremendously successful industries. Moreover, to contradict the
assumption that arms exports bring about a spin-off effect of
increasing commercial sales to the same customers, the Japanese
example is brought up again. Since the fourfold oil price
increase in 197 3, Japan's total exports showed the largest in-
crease— 82%, compared to increases of 51% to 61% for the other
100
leading Western nations. Yet for the same period, Japan's
negligible arms exports actually declined from $17 million in
1973 to $8 million in 1976. A similar picture is seen in
examining the West German exports to OPEC countries (although
in that case arms sales increased too, but at a much slower pace)
[278] . In return, one can argue that Japan and West Germany are
special phenomena in the industrial world. Also, the above
example does not suggest that the spin-off effect does not work
for those who do supply arms.
In any case, for the Israeli case the answer is clear.
Here, arms are not just an easy way to make economic profits, but an
essential need. Resources should be allocated to arms purchases
anyway. There are authors who think that "in developing coun-
tries, U.S. arms aid and purchases could have harmful economic
consequences" [279], since it saps the limited financial resources
of the recipient that could be better spent furthering the eco-
nomic development of that society [280]. Thus, both alternatives
facing Israel absorb large resources and may harm its economy.
Buying outside is more convenient in the short run, but creates
long run debt burdens. Producing domestially squeezes the
short run resources, but is promising in the long run. There
is no third alternative in the Israeli circumstances, thus, the
Japanese example just is not valid for Israel.
7 . Concluding Comments
Indigenous production of AFA in Israel has been found
favorable for the economy from most aspects:
101
- It contributes to favorable balance-of-payments by
saving foreign currency spendings, and potentially, by earning
such currency through exports.
- It expands and advances the technological base and
industrial infrastructure of the country.
- It has positive spin-off effects on commercial products,
technology and sales.
- It provides employment, keeps in existence the largest
industry Israel possesses, and prevents "brain flight" and loss
of skilled manpower.
- The large domestic market is insurance against the world
market fluctuations.
The paramount obstacle to the project is the Israeli hyper-
inflation. The project may inflame the inflation or, in ex-
change, not obtain adequate funds and, thus, lag or even
fail (or be canceled) .
It is this problem the Israeli policy-makers have to cope
with in order to proceed with the Lavi program, or in any
future similar program, at least in the next decade. Actually,
that is what the current "debate on the Lavi" is all about, and
presumably that will be the case in the coming years.
The author of this paper feels that it is beyond his scope,
capabilities and data available to suggest concrete suggestions
on how to cope with the above problem. He views his task as
enabling the reader to focus on the acute issues.
102
X. CONCLUSION
The past performance and the current capabilities of the
IAI provide solid proof of its ability to cope with the
challenge of development and production of advanced fighter
aircraft (AFA) . From the industry viewpoint, it has been
rational to define its future aircraft as relatively unsophis-
ticated, not pretending to be state-of-the art. Moreover,
such a type of aircraft will be needed in large amounts in
the IAF by the 1990' s.
But the Israeli AFA does not free the IAF from acquiring
American advanced fighters in the foreseeable future. This
fact is only one component in the long term dependence of
Israel on the U.S., stemming from the Middle East conflict.
This dependence, or one can say — relationship — is implemented
in terms of political support, financial assistance, arms
supply, and aid in crisis time. The degree of that long term
dependence can be changed by two major developments:
- Calming the Mid-East conflict.
- Securing the American commitment by more formal alliance.
The indigenous arms industry/ including an AFA production,
does not much affect Israel's long term dependence. On the
other hand, Israel has a great extent of short run political free-
dom, enabled by U.S. limits of leverage, and the reverse leverage
of Israel over the U.S. The short run independence can be
significantly strengthened by the indigenous arms production.
103
But since Israel is still far from being completely self-suf-
ficient, it is not bound in its selection of what weapons to deve
and produce. From the Israeli-U.S. relationship angle, the
AFA does not necessarily have the greatest impact on the short
run independence, since it still requires American engines, and
since other aircraft should be purchased from the U.S., anyway.
Thus, although indigenous AFA does contribute to the Israeli
political flexibility, it is not necessarily the preferred pro-
duct to concentrate on as a result of this aspect. That conclu-
sion slightly weakens the political motive of the indigenous
AFA, although the political motive for indigenous arms industry
as a whole is as strong and solid as ever.
The above analysis shifts the weight in the decision-making
to the economic area. In the economic area almost all factors
are in favor of the domestic production of the AFA:
- It contributes favorably to the balance of payments, even
without being exported.
- It expands and enhances the technological base and the
industrial infrastructure.
- It has positive spin-off effect on commercial industry.
- It provides employment, and maintains a concentration of
skilled labor.
The major weakness of the indigenous AFA is its inflationary
effect. An effort should be made to cope with this weakness.
Even an increase in short run political dependence by using U.S.
aid funds for the project, or collaboration with U.S. firms are
desirable. It is justified to undertake short term liabilities
104
•
in order to acquire long term assets. The employment of the
workers as well as the deployment facilities in the already
existing aeronautical industry is a crucial consideration.
Exports are not a matter of survivability in the indigenous
AFA case.
This paper analyzed a variety of areas and factors affect-
ing the decision. All of them should be considered, but by no
means with equal weight for the decision. An attempt to rank
factors may lead to the following "rough" conclusions:
- The technical capability has the lowest impact on the
decision. Since the Israeli industry is safely above the re-
quired minimum capability for such a project, it does not matter
so much how this capability is related to the major world's
aircraft producers.
- The political aspects are less important than people tend
to think since the AFA does not change significantly the exist-
ing long run dependence, and short-run political freedom exists
anyway. It may contribute to the short run flexibility, but
other indigenous arms instead (while all aircraft are imported)
may do as well. The prestige effect — external and internal —
have relatively minor impact on the decision.
- The greatest weight is attributed to the economic cate-
gory. Balance of payments, inflation and employment are the
most important with respect to the subject under discussion.
The critical issue is the inflation or in exchange--the funds
availale to the program. Being under the threshold in this
area may cause the whole program to fail.
105
So this is the area to be emphasized in any decision-making
about an Israeli AFA in the next decade. Issues like political
independence, export opportunities or difficulties, and others
which are used to support or contradict the indigenous AFA,
may get less weight than they are actually given, though
they should not be ignored.
The bottom line is: Israel should undertake the demanding
commitment of indigenous AFA, unless it views no way to pro-
vide the adequate funds through the development phase. The assum]
tion is that this question has been assessed thoroughly before th<
decision about the Lavi has been made. But it will continue to
be the crucial one at any future milestone, or in a decision
about another Israeli AFA initiation some 5, 8 or 10 years ahead.
One final comment: From a practical viewpoint, one can
argue that this paper attempts to analyze considerations for
a decision, while the decision has been already made. Accord-
ing to this approach the circumstances underlying the analysis
are good only for this case.'-s timeframe, so it can be used in a
best case as a posterior assessment of the decision. But in
fact, a major acquisition decision is not of a "one shot" type.
Through the many years of the acquisition cycle, on milestones
and between them, there are several iterations of the decision.
In addition, within the acquisition cycle of one aircraft, the
new one starts to roll on. That can happen — and not too late
to make this analysis completely obsolete. Thus, beyond the
"academic" interpretation of the past decision, which is impor-
tant for its own right, this paper might have, perhaps, some
practical applications for future decisions as well.
106
APPENDIX A
Arms Imports and Exports
1. World Arms Imports, 1978 (by region) 108
2. World Arms Imports (Developed, Developing
Countries) ■ 108
3. Leading Countries in Arms Imports 109
4. Value of Arms Exports: 1969-1978 109
5. Military Expenditures, GNP , Central Govern-
ment Expenditure, etc. 110
6. Armed Forces, Population, Physicians, etc. 112
7. Value of Arms Transfers and Total Imports
and Exports, etc. 114
Comment: The tables consist of sample countries
only. For complete details, see the
source.
Source: ACDA, World Military Expenditures and
Arms Transfers [47]
107
World Arms Imports, 1978
Shares by Regions
LATIN AMERICA, 5%
SOUTH ASIA 3%
MIDDLE
EAST 37%
j
AFRICA 25%
m
NATO 9%
WARSAW
PACT 10%
lifTncMh OTHER EUROPE** gf
PACIFIC 8%
SBI
22
World Arms Imports
LLIONS (constant '77)
/
df\/fi nppn
20
19 3
"19.2
18
1
DEVELOPING
176.
-174-
1U
15*
16
'. •» .
t
',
* • _^%
14 7
1"3 14fl
I*
- — —
t -i
■ >.
-'A
12
in
lit
■
12 9
9 5
-9 4- -
8
a.u
10.3
=
10.2
mi
6.9^
6
4
2
0
6.3
6.4
— |
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
CI
CX
1978
JRREI
DLLAf
^T
IS
108
Table A. Value of Arms Exports: 1969-1978
(In millions of constant 1977 dollars)
Total Global
Deve
oping World
Arms Exports
Arms ExDorts*
1969
9519
276
1970
9036
370
1971
9362
404
1972
14680
1256
1973
17625
427
1974
14334
378
1975
14029
701
1976
17352
952
1977
19300
750
1978
19177
837
%of
Global Exports
2.9%
4.1%
4.3%
8.6%
2.4%
2.6%
5.0%
5.5%
3.9%
4.4%
Developing World
% of
Arms Exports exc.
PRC
Global Exports
49
.51%
62
.69%
37
40%
57
.39%
120
.68%
208
1.5%
501
3.6%
804
46%
640
3.3%
707
3.7%
Total:
144414
6351
4.4%
3185
2.2 0/<
'Including the People s Republic of China
Sources US Arms Control and Disarmament Agency. World Military Expenditures ind Arms Transfers 1969-1978
Leading Countries in Arms Imports, 1978
$ BILLIONS (currant)
1 0
m ■
fej mi
r . - _• V*
'■'■ '■■■ &?'■
IRAN
LIBYA
IRAQ ETHIOPIA SAUDI.
ARABIA
ISRAEL SYRIA
SOVIET ALGERIA REPUBLIC
UNION OP KOREA
•
■j.
109
TABLE I. Military Expenditures. GNP, Central Government Expenditures, Public Health Expenditures,
and Public Education Expenditures, 1969-1978. By Region, Organization, and Country
Mill
AflV
GHOSS NATION*!.
OQOOUCT
GNP1
B-Mrondo'tafS-1
1 ENTflAl
L.OVF «NMFNT
T XP£NDlT|iRfS
(T.Et
PUBl IC
H£ AL TM
E^Pf Nn'Tl)«FS
PUBt IC
eni'CAri'iN
ExPFNOiTu»( S
•
MH_f ■
■
Mil! >
iE
H
E
VILEXI
Q'liion dollars*
,NP
GNP
.'IP
M E •
YfAft
C u"*nt
Constat
•977
_ I Conjiaol
1
8.ii,
"inCi>"S»a"t '-J'T -loliars
WORLD TOTALS
1969
236
0
383
4
3537
5746
1 145
4
120
6
275
5
6
7
33
5
2
1
4
8
103
1970
247
5
382
3
39 12
6043
1208
5
139
0
293
0
6
3
31
6
2
3
4
8
1 13
197 1
259
8
38 1
8
4293
6310
1288
0
154
3
315
2
6
1
29
6
2
4
5
0
123
1972
278
7
393
4
4704
664 1
1364
2
167
6
323
0
5
9
28
8
2
5
4
9
124
1973
301
2
402
1
5314
7095
1428
3
177
3
350
9
5
7
28
2
2
5
4
9
131
1974
339
5
4 14
2
595 1
7259
1468
2
191
5
359
5
5
7
28
2
2
6
5
0
133
1975
383
0
426
5
6599
7348
1708
0
21 1
6
38 1
8
5
8
25
0
2
9
5
2
139
1976
4 1 1
5
435
4
7284
7707
1785
2
224
7
408
7
5
6
24
4
2
9
5
3
145
1977
439
1
439
1
8010
8010
1863
4
237
0
427
0
5
5
23
6
3
0
5
3
151
1978
479
9
446
7
8967
8348
199 1
0
253
5
44 1
1
5
4
22
4
3
0
5
3
155
OFVELOPED
1969
197
3
320
4
2892
4698
940
5
108
3
24 1
1
6
8
34
1
2
3
5
1
109
1970
202
2
312
4
3172
4900
985
7
125
7
255
0
6
4
31
7
2
6
5
2
121
197 1
209
8
308
4
3464
5091
1033
3
139
7
272
7
6
1
29
8
2
7
5
4
133
1972
224
0
316
2
3783
5340
1083
1
151
6
275
7
5
9
29
2
2
8
5
2
135
1973
238
5
318
5
4248
5672
1 1 19
6
159
9
300
9
5
6
28
4
2
8
5
3
144
1974
268
2
327
2
47 17
5754
1 130
6
173
9
309
6
5
7
28
9
3
0
5
4
147
1975
295
4
328
9
5172
5759
1308
9
192
4
323
5
5
7
25
1
3
3
5
6
156
1976
314
0
332
2
57 12
6043
1365
2
204
6
346
9
5
5
24
3
3
4
5
7
166
1977
339
3
339
3
6256
6256
1425
6
216
1
362
7
5
4
23
8
3
5
5
8
170
1978
370
3
344
7
697 1
6490
1528
7
231
0
374
2
5
3
22
5
3
6
5
8
175
DEVELOPING
1969
38
8
63
0
645
1048
205
0
12
3
34
5
6
0
30
7
1
2
3
3
74
1970
45
2
69
9
740
1 143
222
7
13
3
38
0
6
1
31
4
1
2
3
3
73
1971
50
0
73
4
829
1219
254
7
14
5
42
5
6
0
28
8
1
2
3
5
77
1972
54
7
77
2
921
1301
281
1
16
0
47
3
5
9
27
5
1
2
3
6
82
1973
62
6
83
6
1066
1423
308
7
17
5
50
0
5
9
27
1
1
2
3
5
80
1974
71
3
87
0
1233
1505
337
6
17
6
49
9
5
8
25
8
1
2
3
3
77
1975
87
6
97
6
1427
1589
399
1
19
2
58
3
6
1
24
5
1
2
3
7
79
1976
97
6
103
2
1572
1663
420
0
20
1
61
8
6
2
24
6
1
2
3
7
79
1977
99
8
99
8
1754
1754
437
9
2 1
0
64
3
5
7
22
8
1
2
3
7
85
1978
109
6
102
0
1996
1858
462
2
22
5
67
0
5
5
22
1
1
2
3
6
87
110
TABLE I. Military Expenditures, GIMP. Central Government Expenditures Public Health Exoenditures
and Public Education Expenditures. 1969-1978, By Reg.on. Own^ntcZXfiwUnu*
Mil l! AMY
f if* NMiimi •
Mil ( ■
Mill. on U\"U'$*
- "c :■:;?'
GNPi
L
1 196
194 3
5883
1663
2569
6620
1752
2575
7707
1721
2430
9026
3768
5032
9918
3287
4010
1 1535
4 111
4577
12973
4424
4681
13521
4312
4312
1434 1
39 14
3643
16123
( NTHil
iOVI UNMl M
i <Pf NdilKHf ,
Cat I
e
',(■ Al IH
I >t>( NDH Ml '.
""81" -
' "" »"ON
.... ,., ."H ,1
M..i...n . ... ,i .,..) . ' ' i.,.. „ ,
•
9558
4631
182
494
20
3
42
0
1 9
5
2
)4
10226
5393
203
563
25
1
47
a
2 0
5
5
:i
1 1327
61 18
21 1
676
22
7
42
i
1 9
6
0
14
12741
674 t
262
762
19
1
36
0
2 1
6
0
i 2
13243
9577
408
887
38
O
52
5
3 1
6
7
25
14072
9267
506
964
28
5
43
3
3.6
6
9
,6
14445
10572
527
985
31
7
43
3
3 6
a
8
33
14 307
I 14 18
51 1
g
938C
32
7
4 1
0
3 6
6
6
1 i
14341
12381
670
o
1213c
30
1
34
B
4 7
8
5
43
15010
11 128
NA
NA
24
3
32
7
NA
NA
NA
7391
7832
8316
8874
9687
374 10803
375 12209
376 13362
377 14965
378 16587
12008
12099
12222
12526
12935
13179
13594
14 138
14965
15442
169674
188652
20908 1
230109
255967
289538
317928
350279
382138
422852
275633
291409
307295
3248 12
341773
353216
353993
37062 1
382138
393655
61319
61548
64305
65648
68131
75906
82375
80403
83093
84873
NA
NA
NA
1055 1
NA
12820
14215
15413
16042
18445
NA 1706 1 d
19681 19580
20445 2 1395
NA 22011
NA NA
4.4 19.6
4.2 19. 7
4 0 19.0
3.9 19.1
3 3 19.0
3. 7
3.8
3 8
3 9
3.9
17 4
16 5
17.6
18.0
18. 2
NA
NA
NA
3.2
NA
NA
5.6
5 5
NA
NA
4 .7
4 9
5.0
4 .9
5.4
4 8
5. 5
5 8
5.8
NA
STATES
81443
77854
74862
77639
78358
132303
120260
1 10028
109592
104625
938800
985800
1067 700
1 175400
13 1 1200
1525066
1522749
1569244
1659145
1750745
2997 17
303684
310703
327481
329933
f
39799
42169
46149
49404
5 1806
k
96656
99786
104058
106008
1 15630
8 7
7.9
7 0
6 6
6 0
44
39
35
33
31
2 6
2 8
2 9
3.0
3 0
6 3
6 6
6 6
6 4
6 6
103
1 18
136
14 1
160
1974 85906 104799 14 19800 1732054 276435
1975 90948 101265 1537000 1711355 363092
1976 91013 96298 17094OO 1808670 386831
1977 100928 100928 1896 100 1896 10O 4019OO
1978 108357 100875 2117700 1971480 419673
56848 111379
62018 112123
65918 117128
69300 120700
72707 119162
6 1 37 9
5 9 27 9
5 3 24 9
5 3 25. 1
5 1 24 0
3 3
3 6
3 6
3 7
3. 7
6 4
6 6
6 5
6 J
6 0
160
172
190
188
190
1536
2496
1681
2597
1798
2642
1909
2695
202 1
2699
2247
274 1
2424
2699
2532
2680
2668
2668
2932
2730
227
370
282
436
249
367
280
396
536
716
499
609
924
1029
965
1022
1047
1047
1 176
1095
42132
46675
489 1 1
51763
5662 1
64482
7 1 120
75638
77760
85373
2247
24 17
2779
3225
3478
45 13
5585
631 1
67 17
7503
68443
72098
7 1887
73067
75602
78663
79188
80030
77760
79478
365 1
3734
4085
4553
4644
5506
62 19
6678
6717
6985
20398
21 139
22303
NA
18793
21699
23185
25007
25716
281 19
1009
1 160
1260
1334
16 12
2019
3036
3164
3284
3076
3005
3390
3790
3996
4020
5513
5553
5735
5791
5827
3 6 12 2
3 6 12 3
3 7 118
3 7 NA
3 6 14 4
4449 5837 3 5 12 6
4780 5859 3 4 116
4962 6198 3 3 10 7
46 10 5 656 1 3 4 10 4
4960 g 6840C 3 4 9 7
'J A
NA
23
18
i 1
13
25
34
29
NA
d
144
149
155
165
175
10 1
1 1 7
9 0
8 7
15 4
J 6
29
29
4 J
180 Ml 30 2
255 16 6 33 9
405 15 3 32 3
209C 15 6 319
NA 15 7 35 6
4 4
4 7
5 3
5 5
5 3
5 7
6 0
6 2
5 9
6 2
MA
NA
0 6
0 4
0 2
0 2
O 4
0 5
O 4
NA
8 1
7 7
a o
7 9
7 7
7 4
7 4
7 7
8 4
8 6
4 0
4 0
3 a
3 6
3 8
3 3
4 1
6 1
3 1
NA
111
TABLE II. Armed Forces, Population, Physicians, and Teachers, 1969-1978,
By Region, Organization, and Country
armed
FORCES
Thousand
TACHERS'
PHYSICIANS
AHMED
FORCES
PFR
TOO
PEOPLE
TFACHERS
PER
•000
PEOPLE
PHYSICIANS
PER
•ooo
PEOPLE
ARMED
FORCES
PHYSICIANS
ARMED
FORCES
CJNP
PER
CAP'TA
<tT7
Constant
rjonafs
MILE-
PER
CAP'TA
37'
Constant
mnats
WORLD TOTALS
1969
3552
6
24830
22284
2400
8
7
0
6
.3
0
7
89
7
9
.7
1617
107
1970
3625
9
24916
23452
2500
9
6
9
6
.5
0
7
94
. 1
10
.0
1666
105
1971
3697
7
2544 1
24340
2636
2
6
9
6
.6
0
7
95
.7
10
4
1706
103
1972
3845
5
25697
25499
2718
1
6
7
6
6
0
7
99
2
10
6
1726
102
1973
392 1
7
26077
26386
2820
a
6
5
6
7
0
7
101
2
10
.8
1809
102
1974
3999
6
27287
27320
2964
9
6
8
6
8
0
7
100
1
10
.9
1815
103
1975
4089
7
26447
28489
3022
5
6
5
7
0
0
7
107
7
1 1
4
1796
104
1976
4169
5
26297
29136
3263
3
6
3
7
0
0
8
1 10
a
12
4
1848
104
1977
4247
6
26259
29709
3388
0
6
2
7
0
0
a
113
1
12
9
1885
103
1973
4314
9
26639
29898
3471
6
6
2
6
9
0
8
1 12
2
13
0
1934
103
OEVELOPED
1969
988
6
1 1830
1 1391
1598
5
12
0
1 1
5
1
6
96
3
13
5
4752
324
1970
997
1
1 1565
1 1668
1649
9
1 1
6
1 1
7
1
7
100
9
14
3
49 14
313
1971
1006
4
1 1332
1 1927
1753
5
1 1
3
1 1
9
1
7
105
3
15
5
5059
306
1972
1015
0
1 1033
12 160
1791
1
10
9
12
0
1
3
1 10
2
16
2
526 1
31 1
1973
1024
2
1 1003
12491
1848
5
10
7
12
2
1
a
1 13
5
16
8
5538
31 1
1974
1032
6
10987
12740
1974
2
10
6
12
3
1
9
1 16
0
18
0
5573
316
1975
104 1
0
10983
1304 1
1999
6
10
6
12
5
1
9
1 18
7
18
2
5532
315
1976
1048
4
10731
13426
2172
1
10
2
12
a
2
1
125
1
20
2
5764
316
1977
1055
8
10633
13947
2246
3
10
1
13
2
2
1
131
2
21
1
5925
32 1
1978
1063
0
10755
14448
2275
8
10
1
13
6
2
1
134
3
21
2
6 105
324
OEVELOPING
1969
2564
0
13000
10892
802
3
5
1
4
2
0
3
83
8
6
2
108
24
1970
2628
3
13351
1 1784
35 1
0
5
1
4
5
0
3
88
3
6
4
435
26
1971
2691
3
14 109
12412
882
7
5
2
4
6
0
3
88
0
6
3
453
27
1972
2830
5
14664
13338
927
0
5
2
4
7
0
3
91
0
6
3
■159
27
1973
2897
5
15074
13894
972
3
5
2
4
8
0
3
92
2
6
4
49 1
28
1974
2967
0
16300
14571
990
7
5
5
4
9
0
3
89
4
6
1
507
29
1975
3048
7
15464
15448
1022
9
5
1
5
1
0
3
99
9
6
6
521
32
1976
3121
1
15566
15710
1091
2
5
0
5
0
0
3
100
9
7
0
533
33
1977
3191
8
15626
15761
1 141
7
4
9
4
9
0
4
100
9
7
3
549
31
1978
3251
9
15884
15449
1 195
8
4
9
4
3
0
4
97
3
7
5
571
31
112
TABLE II. Armed Forces, Population, Physicians, and Teachers, 1969-1978
By Region, Organization, and Country • continued
1
PEOPLE
I
ABMEO
FORCES
TEACntBS*
■
physicians
■ 1
ARMED
'ORCES
PEB
'000
PEOPLE
fEACMEBS
PEB
•TOO
PEOPLE
OH.SlClANS
PEB
'000
PEOPLE
T~
1 'EA..MEP.S
fOBCES
P«»S'C ASS
fOBCES
v.p
PEB
.APiTA
-•
»EAB
Million
T"Ou»A"d
Triousano
r^ouseno
'
•»7?
Ittanl
30"A'f
•
' *
* •
RAEL
1969
1970
197 1
1972
1973
2 9
3 0
3 1
3 2
3 3
100
105
130
130
130
g
43
46
47
51
58
f
6 9
7 3
7 7
8 5
9 1
34 5
35 0
4 1 9
40 6
39 4
14 8
15 3
15 2
15 9
17 6
2 4
2 4
2 5
2 7
2 8
43 0
43 8
36 2
39 2
44 6
6 9
7 0
5 9
6 5
7 0
3296
3408
3654
398 1
4013
670
856
830
759
1525
1974
1975
1976
1977
1978
3 4
3 5
3 5
3.6
3 7
160
190
190
165
165
49
54
57
59
NA
8,1
NA
NA
NA
2 0
NA
47 1
54 3
54 3
45 8
44 6
14 4
15.4
16 3
16 4
NA
NA
NA
NA
0 6
NA
30 6
28 4
30 0
35 8
NA
NA
NA
NA
1 2
NA
4 138
4 127
4087
3983
4056
1 179
1308
1337
1 197
984
EDEN
1969
8 0
75
80
lO. 4
9 4
10 0
1 3
106 7
13 9
8555
3
1970
8 0
75
86
1 1 0
9 4
10 8
1 4
114 7
14 7
9012
3
1971
8 1
75
91
113
9 3
1 1 2
1 4
1213
15 1
8875
j
1972
8 1
75
92
1 1 9
9 3
1 1 4
1 5
122 7
15 9
9020
2
1973
8 1
75
96
12 6
9 3
1 1 9
I 6
128 0
16.8
9333
*
1974
8 2
75
98
13. 3
9 1
12 0
1 6
130.7
17 7
9593
-
1975
8 2
75
88
14 1
9 1
10 7
1 7
117 3
18 8
9657
-
1976
8 2
66
94
14 7
8 0
1 1 5
1 8
142. 4
22 3
9759
1977
8 3
68
NA
NA
8 3
NA
NA
NA
NA
9368
-
1978
8 3
68
NA
NA
8 3
NA
NA
NA
NA
9575
~
ANCE
8
1969
50.4
570
476
65 6
113
9 4
1 3
S3 5
11.5
5468
23
1970
50.8
570
499
68 0
1 1 2
9 8
1 3
87 5
1 1 9
5736
23
1971
51 3
565
520
71 0
1 1 0
10 1
1 . 4
92 0
12 6
5990
23
1972
51 7
560
535
74.6
10 8
lO 3
1 4
95 5
13 3
6282
24
1973
52 2
560
559
73.6
10 7
10.7
1 4
99.8
13 1
6547
24
1974
52 5
580
598
77 1
1 1 0
1 1 4
1 5
103 1
13 3
6727
25
1975
52 7
575
596
77 9
10.9
1 1 3
1 .5
103 7
13 5
6717
25
1976
52.9
585
603
NA
1 1 1
11.4
NA
103. 1
NA
7006
26
1977
53 1
502
682
86. 3
9 5
12 8
1 6
135 8
17 2
7 196
28
1978
53. 3
502
NA
NA
9 4
NA
NA
NA
NA
7385
28
[TED STATES
1969
203 0
3460
2809 303 0
17 0
13 8
1 5
81 2
8 a
7512
651
1970
205 0
3070
2914 3112
15 0
14 2
1 5
94 9
10 1
7428
586
197 1
207 0
2720
2892 318 7
13 1
14 0
1 5
106 3
1 1 7
7580
531
1972
209 0
2320
2932 333.3
1 1 1
14 0
1 6
126.4
14 4
7938
524
1973
210 0
2250
2997 338 0
10 7
14 3
1 6
133 2
15 0
8336
498
1974
2 12 0
2170
3047 35 1 0
10 2
1 4 4
1 7
140. 4
16 2
8170
494
1975
214 0
2 130
3 133 366 0
10 0
14 6
1 7
147 1
17 2
7997
473
1976
215 0
2 100
3140 379 0
9 8
14 6
1 8
149 5
18 0
84 12
J47
1977
217 0
2 100
3280 393 0
9 7
15 1
1 8
156 2
18 7
8737
465
1978
2 19 0
6 1
2286
3260 376 0
10 4
14 9
1 7
142 6
16 4
2 0
9002
598
460
IA
1969
75
g
40
1 5
12 3
6 6
0 2
53 3
1970
6 3
75
J 1
1 6
119
6 5
0 3
54 7
2 1
592
197 1
6 5
1 10
J6
1 7
16 9
7 1
0 3
4 1 8
1 5
628
1972
6 7
1 15
?2
1 9
17 2
7 a
O 3
45 2
1 7
S79
1973
6 9
1 15
55
2 4
16 7
8 0
0 3
47 8
2 1
673
'
1974
7 2
130
59
2 . 7
18 1
8. 2
0 4
45 4
2 1
764
1975
7 4
230
64
2 4
31 1
8 6
0 3
27 8
1 0
840
1
1976
7 7
230
72
NA
29 9
9 4
NA
31 3
NA
867
1
1977
7 9
225
JG
3 1
28 5
9 6
0 4
33.8
1 4
850
'
1978
8 2
225
NA
NA
27 4
NA
NA
NA
NA
85 1
i
113
TABLE III. Value of Arm* Transfers and Total Imports and Exports, 1969-1978
By Region, Organization, and Country
4 AMS IMPORTS
Mftt<oo iio"»-i
*RMS€XPORTS
total IMPOOTS
TOTAL EXPORTS
BMHon doNM
ARMS
IMPORTS
»RMS
EXPORTS
Million oottft
3»l''On OOI'«««
'0T4L
MPOR'S
~OT»L
EXPOR'S
(TEAM
cu-^. cor,v?m
Cu*»»«t
.»T7 C""W
Conntni
•»T7
'•
WORLD TOTALS
1969
5860
9519
5860
9519
279
453
270
4 39
2 1
2 2
1970
5850
9036
5850
9036
321
496
310
479
1 8
1 9
1971
6370
9362
6370
9362
357
525
346
508
1 8
1 8
1972
10400
14680
1040O
14680
422
596
412
581
2 4
2 6
1973
13200
17624
1320O
17625
581
776
570
762
2 3
2 3
1974
1 1750
14334
11750
14334
838
1023
827
1010
1 4
1 4
1975
12600
14029
12600
14029
890
991
869
968
1 4
1 .5
1976
16400
17352
16400
17352
1002
1060
985
1042
1 6
1 7
1977
19300
19300
19300
19300
1 144
1 144
1 121
1 121
1 7
1 7
1978
2060O
19177
2060O
19177
1330
1239
1302
1212
1 5
1 6
DEVELOPED
1969
2000
3249
5690
9243
222
360
218
354
0 9
2 6
1970
1730
2672
56 10
8665
256
395
25 1
387
0 7
2 2
1971
1670
2454
6095
8958
284
418
280
41 1
0.6
2 2
1972
3 100
4375
9510
13423
338
477
332
469
0 9
2 9
1973
3420
4566
12880
17 197
462
618
453
604
0 7
2 8
1974
3380
4123
1 1440
13956
647
790
598
730
0 5
1 9
1975
35 10
3908
1 1970
13327
666
742
646
719
0. 5
1 9
1976
4 170
44 12
15500
16400
761
805
715
756
0 5
2 2
1977
4 1 15
4 115
18550
18550
860
860
815
815
OS
2 3
1978
3910
3640
19700
18339
999
930
972
904
0.4
2 0
DEVELOPING
1969
3860
6270
170
276
57
93
52
84
6 8
0 3
1970
4 120
6364
240
370
65
100
59
91
6 4
0 4
1971
4 700
6907
275
404
73
107
65
96
6 4
0 4
1972
7300
10304
890
1256
84
1 19
79
1 1 1
8 6
1 2
1973
9780
13058
320
427
1 18
158
1 17
157
8 2
0 3
1974
8370
10210
310
378
190
232
229
280
4 . 4
0 1
1975
9090
10121
630
701
223
249
223
248
4 0
0 3
1976
12230
12940
900
952
240
254
270
285
5 1
0 3
1977
15185
15185
750
750
284
284
306
306
5 3
0 2
1978
16690
15537
900
837
331
308
330
307
5 0
0 3
114
TABLE III. Value of Arms Transfers and Total Imports and Exports, 1969-1978,
By Region, Organization, and Country • continued
»«MSf *PO«TS
Mill. on (1ni*«r9
E Constant
T
•oi«i ,MPOar<i
•»i ( ipopts
mpob'S
EIPOB'r>
■OT»t
MP'jOTS
*' ' At
f .1- ms
on <ioit*f\
M'llinn .In *>*
,
mv*ni
1
r ....... ' *n'
.it'*ni ...
ISRAEL
1969
1970
1971
1972
1973
160
230
260
270
230
259
355
382
38 1
307
5
5
0
10
20
8
7
0
14
26
1670
2090
2390
2480
4240
2712
3228
3512
3500
566 1
729
779
958
1 150
1449
1 184
1203
1408
1623
1934
9 5
1 1 0
10 8
10 8
5 4
0 7
0 6
0 0
0.9
1 4
1974
1975
1976
1977
1978
975
750
1000
1 100
950
1 189
835
1058
1 100
884
30
50
140
60
lOO
36
55
148
60
93
5440
60O0
5667
5787
7403
6636
6680
5996
5787
6891
182S
1940
2420
3084
392 1
2226
2 160
2560
3084
3650
17 9
12 5
17 6
19 0
12 8
1 6
2 6
5 8
1 9
2 6
SWEDEN
1969
1970
197 1
1972
1973
1974
1975
1976
1977
1978
10
10
5
20
20
20
20
30
40
30
16
15
7
28
26
24
22
31
40
27
0
10
50
50
lO
70
90
40
50
100
0
(5
73
70
13
as
10O
42
SO
93
5910
7010
7080
81 10
109OO
16700
17500
19628
20140
20535
9600
10828
10405
1 1447
14553
20372
19485
20767
20140
191 17
5700
6800
7480
8770
12200
1590O
17384
18435
19082
2 1806
9259
10503
10993
12379
16289
19396
19356
19505
19082
203OO
0 1
0 1
0 0
0 2
0 1
0 1
0 1
0 1
0 1
0 1
0 0
0 1
0.7
0 6
0 1
O 4
0 5
O 2
03
O 5
FRANCE
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
20
lO
10
20
20
20
30
50
50
40
32
220
357
17400
28266
15200
24692
0
1
1
J
15
200
308
19100
29503
18100
27958
U
0
1
l
1 4
150
220
2 1300
31305
208OO
30570
0
0
0
1
28
725
1023
27000
381 12
26500
37406
0
(J
2
1
26
850
1 134
37700
50337
36700
49002
u
0
2
J
:4
700
853
52900
64534
4630O
56482
0
0
1
5
3 J
700
779
54000
60125
53100
59123
u
J
'
3
52
1000
1058
64400
68 139
57200
6052 1
u
u
1
1
50
1300
1300
70497
70497
64997
64997
0
■J
2
0
37
1350
1256
81795
76147
79378
73897
u
u
1
i
115
TABLE III. Value of Arms Transfers and Total Imports and Exports. 1969-1978,
By Region, Organization, and Country • continued
■ . . .
ARMS IMPORTS
, . ■ ■ ,
AAMSf IPORTS
'OTAl
imports
TOTAL EIPOPTS
^— — . — — i
»»MS
»«MS
MPOfl'S
E'POP'S
TT»l
'QT»t
IMPORTS
E«PO«TS
Million dollars
«■.■■■<- rloHS'S
Million G0"«'»
M.M.on 4oH«ri
TEAK
Current
Zonstani
"*77
r.u«»eoi
Constant
1 "'• .
Cu''»nl
Constant
ru"mnt
I CO"*tani
| .,7-7
UNITED STATES
1969
220
357
3500
5685
38300
62217
38000
61730
0 5
9. 2
1970
190
293
3100
4788
42400
65494
43200
66730
0 4
7.2
1971
150
220
3400
4997
48300
70988
4410O
64815
0 3
7. 7
1972
160
225
4100
5787
58900
83140
49800
70295
0 2
8 2
1973
170
226
4 900
6542
7360O
98272
7 1300
95201
0 2
6 9
1974
120
146
4500
5489 108000
131752
98SOO
120163
0 1
4.6
1975
140
155
4700
5233 103000
114684 108OOO
120251
0 1
4 .4
1976
1 10
116
5900
6242 130OO0
137549 114992
121670
0 0
5. 1
1977
120
120
6900
6900 157560
157560 121212
121212
0 0
5.7
1978
120
1 1 1
6700
6237 183137
170492 143659
133739
0 0
4.7
BRAZIL
1969
50
81
0
0
2270
3687
2310
3752
2 2
0 0
1970
20
30
0
0
2850
4402
2740
4232
0.7
0.0
197 1
50
73
0
0
3700
5438
2900
4262
1 3
0.0
1972
60
84
0
O
4780
6747
3990
5632
1 2
0 0
1973
120
160
0
0
7000
9346
6200
8278
1 . 7
0 0
1974
60
73
0
0
14200
17323
7950
9698
0 4
0 0
1975
100
1 1 1
30
33
13592
15133
8670
9653
0 7
0 3
1976
180
190
80
84
13726
14523
10128
107 16
1 3
0 8
1977
140
140
20
20
13257
13257
12 120
12 120
1 0
0. 2
1978
160
148
90
83
15054
14014
12651
1 1777
1 .0
0. 7
SYRIA
1969
50
81
0
0
370
601
207
336
13 5
00
1970
60
92
0
0
361
557
203
313
16 6
0.0
1971
1 10
161
0
0
439
645
207
304
25.0
0.0
1972
280
395
0
0
540
762
298
420
518
00
1973
1300
1735
0
0
613
818
351
468
212 .0
0.0
1974
825
1006
0
0
1230
1500
784
956
67 0
0.0
1975
380
423
5
5
1690
1881
930
1035
22 4
05
1976
525
555
0
0
2360
2497
1065
1 126
22.2
O.O
1977
775
775
0
0
2658
2658
1063
1063
29 1
0.0
1978
825
768
0
0
2451
2281
1053
980
33 6
0.0
116
APPENDIX B
U.S. Security Assistance to Israel
(all tables are partial)
1. Near East & South Asia — Security Assistance
Program Summary 118
2. Israel Data Concentration for 1979-80-81 119
3. Foreign Military Sales Agreements 120
4. Foreign Military Sales Deliveries 121
5. FMS Financing Program 123
6. Licensed Commercial Exports 124
Sources:
1. FMS and Military Assistance Facts [165]
2. Security Assistance Programs [165]
117
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124
APPENDIX C
Data About Defense Expenditures and Debt
Payments in Israel
1. Government Expenditures as Percentage of
the State Budget ■ 126
2. Government Expenditures as Percentage of GNP 12 8
3. Functional Sorting of the Government
Expenditures 129
4. The Development of Debt Payments 129
Source: The Israeli State Budget Proposal for
FY 1981 [170]
125
main di^oti by jnxxinn rnnnsnn
1970-1981 (JlTHia^p) D*3W
The Development of Expenditures for Debt Payments in
the Years 1970-1981
i a -> j v
Total debt payments as % of budget 2-»x?imv \-z main D7>»n a"no
n ii » " " " sources nmponn
External debt payments as % D*jn->»Bn mnno my fa " vm nn^o oi>iwi
of exports] Internal debt nitnubn nojDnna - d'js
payments as % of national income 126
U2
nnxD ^d^dh nron ^b nxnnn
i974-i98i n^wa rspnntt
Government Expenditures as Percentage of the State
Budget in the Years 1974-1981
75
76
77
78
79
30
81 a~> iv
Years
ise jinvi
payment and credit subsidiz'tfflyN t103>01 m2in mbvn
=fer payments mivn imbvn
stments and capital expenditures
lian consumption
1 97
jm rnKyim mvpvn
nnxD 'Vd^dh jnron 'aV nxsinn
1974-1981 &2W2 r^nntt
Government Expenditures as Percentage of the GNP
in the FYs 1974-1981
%
50
40
30
20 -
10
/
74
75
76
— T'
77
7?
i
79
SO 51 D»|
Years
J1DV2
mivn ~>mbvn
defense
debt payment and credit subsidizing
transfer payments
investments and capital expenditures
civilian consumption
128
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129
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1. Sniff, Zeev, "The Aircraft: These Were the Considerations",
Ha'are tz (Israeli daily newspaper) (2 March, 1980) .
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Recommends to Produce Fighter Aircraft with Investment of
$440 Million", Haaretz, (2 Feb. 1978) .
3. Jane's All the World's Aircraft 1980-81 (Jane's, London,
New York, Sydney, 1980), p. 110.
4. "The Lavi Will Exchange the Skyhawk and the Kfir" , Ba ' avir
(May 1980) , p. 8.
5. Shiff (note 1 supra) .
6. Sivan, Meir, "The Rationale Behind the Israeli Fighter",
Sh' hakim, No. 66 (Dece. 1980) .
7. "The Lessons Under Their Light the Lavi is Designed",
Baia'af (March 1980), p. 12.
8. Shiff (note 1 supra) .
9. Ba'avir (note 4 supra).
10. Elitzur, Yuval, "The Arie Will Not Take Off in the 1980 's",
Ma ' ariv (21 April 1978) .
11. Sivan (note 6 supra) .
12. Ibid.
13. Ma'aian, Josef, General Director of the Ministry of Defense,
quoted in "$1 Billion Will be Invested in the Lavi in the
Next 8 Years", Ma 'ariv, (13 Feb. 1981).
14. Borovik, Yehuda, "The Jet Engines Industry in Israel",
Baia'af (May 1979) , p. 15.
15. Moodie, Michael, "Sovereignty, Security and Arms", The
Washington Papers, Vol. VII, No. 67 (Sage Publication,
Beverly Hills, 1979), p. 33.
16. "Israelis Pick F-40 4 For New Fighter", Aviation Week & Space
Technology (10 March 1980), p. 12.
17. Shiff, Zeev, "G.E. Delegation Arrives to Discuss the Pro-
duction of the Lavi's New Engine", Ha'arezt (13 Oct. 1980).
130
18
19
Egozi, Arie, "The Government Will Purchase All Shares in
Beit-Shemesh Engines", Yediot Aharonot (15 July 1981).
Rabin, Isaak, Ex-Israeli Prime Minister in an interview
Ma'ariv (14 Aug. 1981) .
20. Ibid.
21. Erez, Ya'akov, "Two American Companies State their Conditions
for the Lavi's Coproduction", Ma'ariv (18 Nov. 1980).
22. Shiff, ze'ev, "Northrop Proposes Coproduction of the Lavi" ,
Ha'aretz (27 Nov. 1980) .
23. "Middle East Market Picture to Clarify After Israel Defines
New Figher Needs", Aviation Week & Space Technology (11
June 1979), p. 314. '
24. Shiff (note 1 supra).
25. Erez, Ya'akov, "P&W Refused Partnership in Beit Shemesh
Engines", Ma'ariv (25 Aug. 1981) .
26. Moodie (note 15 supra), p. 44.
27. Sivan (note 6 supra).
28. Day, Bonner, H., "Israel's Quest for Military Independence",
NATO's Fifteen Nations (Dec. 1978-Jan. 1979), p. 55.
29. Kozicharow, Eugene, "Europeans Agree on New Fighter",
Aviation Week & Space Technology (7 April 1980), p. 14.
30. Hadad, Amos, "The Battle on the Lavi's Engine", Ha'aretz
(12 Jan. 1981) .
31. Sivan (note 6 supra). Day (note 27 supra), p. 55.
32. Eliztur (note 10 supra) .
33. Shiff (note 1 supra) .
34. Kemp, Geoffrey, Miller, Steven, "The Arms Transfer Phenomenon",
Pierre, A., ed., Arms Transfers and American Policy (New
York University Press, New York, 1979), pp. 31-32.
35. Moodie (note 15 supra) , p. 62.
36. Moodie, Michael, "Defense Industries in the Third World:
Problems and Promises", Neuman and Harkavy, eds . , Arms
Transfers in the Modern World (Praeger, New York, 1980) ,
p. 307.
37. Shillinglaw, Gordon, Managerial Cost Accounting, (Richard
D. Irwin, Inc., Homewood Illinois, 1977), pp. 105-107.
131
38. Borovik (note 14 supra), p. 15.
39. Ibid.
4 0 . SIPRI, World Armament and Disarmament: SIPRI Yearbook 1978,
(Crane, Russuk & Company, Inc. New York, 1978), p. 228.
41. Moodie (note 15 supra) , p. 16.
42. Nicholson, Walter, Microeconomic Theory (The Dryden Press,
Hinsdale, Illinois, 1977), pp. 345-364.
43. Goldstein, Donald J., "Third World Arms Industries: Their
Own Slings and Swords", (Unpublished paper, has been reviewed
by the CIA) , p. 12.
44. Ibid. , p. 13.
45. Baia'af (note 7 supra), p. 13.
46. Mayer, Laural A., "U.S. Arms Transfers Data Source and
Dilemmas", International Studies Notes, Vol. 7, Iss. 2
(Univ. of Nebraska, Lincoln, Summer 1980), p. 6.
47. Moodie (note 15 supra), p. 7.
48. ACDA, World Military Expenditures and Arms Transfers, 19 69-
1978 (U.S. Arms Control and Disarmament Agency, pub. 108,
Dec. 1980) , pp. 19-21.
49. Moodie (note 15 supra), pp. 14-16.
50. Moodie (note 36 supra) , p. 301.
51. Aviation Week & Space Technology (29 May 19 78), p. 16.
52. Moodie (note 36 supra), p. 295.
53. Ibid. , p. 301.
54. SIPRI, The Arms Trade with the Third World (Humanities
Press, New York, 1971), p. 29.
55. Kolodziej , E., "France and the Arms Trade", International
Affairs (1980), p. 65.
56 . Ibid. , p . 61 .
57. ACDA (note 48 supra), p. 18.
58. Kozicharow (note 29 supra), p. 14.
59. Freedman, Lawrence, "Britain and the Arms Trade", Inter-
national Affairs, Vol. 54, No. 1 (July 1978), p. 386.
132
60. Kolodziej (note 55 supra), p. 65.
61. Cannizzo, Cindy, "Trends in Twentieth Century Arms Trans-
fers", Cannizzo, C, ed., The Gun Merchants (Pergamon Press,
New York, 1980) , p. 6.
62. ACDA (note 43 supra), pp. 95, 110.
63. Ibid. , pp. 53, 68.
64. SIPRI (note 54 supra), p. 30.
65. Moodie (note 15 supra) , p. 33.
66. Ibid. , pp. 33-34.
67. Zehavi, Eliahu, "The Arie and the B-3LA", Ha'aretz (23 Feb.
1978) .
68. Baia'af (note 7 supra), p. 12.
69. DMS, Foreign Military Markets (DMS Inc., Greenwich, CT,
1978), Israel Summary, p. 1.
70. SIPRI (note 40 supra), p. 242.
71. The International Institute for Strategic Studies, The
Military Balance 1980-1981 (London, 1980) , p. 43.
- DMS (note 69 supra) , Israel Force Structure, p. 1.
72. Guterman, Razi, "The Dogfight in Washington on the $1
Billion Deal", Ma ' ariv (14 Aug. 1981) .
- "Reagan Lifts F-16 Delivery Suspension", Aviation Week
& Space Technology (24 Aug. 1981) .
73. Aviation Week (note 23 supra), p. 314.
74. Jane ' s (note 3 supra), p. 110.
75. Aviation Week (note 23 supra), p. 314.
76. Ba 'avir (note 4 supra) , p. 8.
77. Shiff (note 1 supra).
78. Baia 'af (note 7 supra), p. 12.
79. "The Aircraft Will Leave Behind the Phantom and the Kfir",
IAI Quarterly (15 Feb. 1978) .
- Baia'af (note 7 supra) , p. 12.
80. SIPRI (note 40 supra) , p. 228.
81. Goldstein (note 43 supra), p. 8.
133
82. Moodie (note 36 supra), p. 302.
83. Lorbar, A., "Whether to Develop or Purchase Modern Weapon
Systems", Ma'arachot, The IDF Review, No. 266, (Oct. 1978),
pp. 48-49.
84. Day (note supra 28), p. 54.
85. Moodie (note 36 supra), p. 304.
86. Moodie (note 15 supra), p. 40.
87. Goren, Ran, "Multi-Attribute Utility Theory to Assist Top-
Level Acquisition Decision -Making" , A Master's Thesis (to
be published) .
88. Moodie (note 15 supra), p. 40.
89. Yelin-Mor, Nathan, "The Arie (lion) Roared — Who Would Not
Fear", Haa ' retz (8 Feb. 19 78) .
- Elitzur (note 10 supra) .
- IAI (note 7 8 supra) .
90. General Ivri, IAF Chief of Staff as quoted in Ha' aretz
(14 July 1978) .
91. Elitzur, Yuval, "The Step-By-Step Decision -Making Method
in the IAI", Ma ' ariv (2 7 May 19 77) .
92. Erez, Ya'akov, "F-18 Over the Horizon", Ma 'ariv, (13 Feb.
1981) .
93. Moodie (note 15 supra), p. 41.
94. Ibid. , p. 39.
95. Ibid., p. 25.
96. Goldstein (note 43 supra) , p. 19.
97. Moodie (note 15 supra) , p. 21.
98. Cannizzo (note 61 supra) , p. 8.
99. SIPRI (note 40 supra), p. 228.
100. DMS (note 69 supra), Israel Summary, p. 10.
101. Goldstein (note 43 supra), p. 19.
102. DMS (note 69 supra), Israel Summary, p. 12.
103. Moodie (note 15 supra) , p. 11.
104. Moodie (note 36 supra), p. 299.
134
105. SIPRI (note 54 supra), p. 771.
106. Ibid.
107. Ibid. , p. 773.
108. Moodie (note 36 supra), p. 299.
109. SIPRI (note 54 supra), p. 775.
110. Moodie (note 15 supra), p. 46.
111. Jane's, All the World's Aircraft 1977-1978 (Jane's, London,
New York, Sidney, 1977), p. 100.
112. Jane's 1980-1981 (note 3 supra), p. 110.
113. Borovik (note 14 supra), pp. 15-20.
114. Egozi (note 18 supra) .
115. Day (note 28 supra), p. 53.
116. Jane's 1980-1981 (note 3 supra), p. 110.
117. Aviation Week (note 23 supra), pp. 314, 317.
118. Day (note 28 supra), p. 53.
119. Elitzur, Yuval, "The Arie — The Fighter of the 1990' s",
Ma'ariv (27 Apr. 1978) .
120. Arkin, Dan, from Ma 'ariv archives (1978).
121. ACDA (note 48 supra) , p. 21.
122. "The Israeli Exports of Aircraft and Components In the
First 7 Months of the Year Reached $182 Million", Jerusalem
Post (16 Aug. 1981) .
123. Arkin, Dan, "Aircraft No. 500 Produced by the IAI Has Been
Sold to American Millionaire", Ma'ariv (11 May 1981).
124. Jane's 1980-1981 (note 3 supra), pp. 110-114.
125. Aviation Week (note 23 supra), p. 317.
126. Moodie (note 15 supra) , p. 62.
127. Ibid.
128. Arkin (note 120 supra).
135
129. Kraar, L. , "Israel's Own Military-Industrial Complex",
Fortune (13 March 1978), p. 73.
- Lock, P., Wulf, H., Register of Arms Production in
Developing Countries (Hamburg: Study Group on Armament
and Underdevelopment, 197 7) .
130. DMS (note 69 supra), Israel Summary, p. 10.
131. Cannizzo (note 61 supra), p. 15.
132. DMS (note 69 supra), Israel Summary, p. 8.
133. SIPRI (note 40 supra), p. 229.
134. SIPRI, World Armament and Disarmament: SIPRI Yearbook
1980 (Humanities Press, New YOrk, 1980), p. 86.
135. Ibid. , p. 85.
136. Zipori, Mordehy, Dep. Minister of Defense, quoted in
Ma'ariv (11 Nov. 1980) .
137. Zipori, Mordehy, Dep. Minister of Defense, in interview to
Ma'ariv (3 April 1981) .
138. ACDA (note 48 supra), p. 137.
139. Ibid. , p. 117.
140. Ross, A.L., "Conventional Arms Production in Developing
Countries: An Overview" (Unpublished paper, Cornell Univ.,
1980) , p. 13.
141. ACDA (note 48 supra), p. 137.
142. Moodie (note 15 supra), p. 66.
143. Segev, Shmuel, "Jerusalem Request to Establish the U.S.-
Israeli Group for Weapon Exports Approvals", Ma 'ariv (14
March 1977) .
144. SIPRI (note 40 supra), pp. 258-279.
145. Zipori (note 136 supra) .
146. Yelin-Mor (note 89 supra).
14 7. "Israel: Peace With Egypt, But a Boon in Arms Sales",
Business Week (2 April 1979), p. 40.
148. SIPRI (note 134 supra), p. 86.
149. Kraar (note 129 supra).
136
150. Salinger, Pierre, Report on the ABC Nightline TV Program
(20 Aug. 1981) .
151. Jane's 1980-1981 (note 3 supra), p. 110.
-Segev (note 14 3 supra) .
152. Ibid. (Jane's only).
153. DMS (note 69 supra), Israel Summary, p. 9.
154. Moodie (note 36 supra), p. 307.
155. Arkin (note 120 supra).
156. Griffiths, David R. , "Complex Factors Spur Mirage Choice",
Aviation Week & Space Technology (20 July 1981), pp. 86-87.
157. Elitzur (note 119 supra).
158. Zipori (note 137 supra) .
159. Mihalka, Michael, "Supplier-Client Patterns in Arms Trans-
fers: The Developing Countries, 1967-76", Neuman and
Harkavy, eds . , Arms Transfers in the Modern World (Praeger,
New York, 1980) , p. 53.
160. ACDA (note 48 supra), p. 7.
161. Ibid. , p. 17.
162. SIPRI (note 40 supra), p. 232.
163. DMS (note 69 supra), p. 6.
164. ACDA (note 48 supra), p. 160.
165. Aviation Week (note 23 supra), p. 315.
166. ACDA (note 48 supra), pp. 117, 137.
167. FMS and Military Assistance Facts (Department of Defense,
Security Assistance Agency, Dec. 1979).
- Security Assistance Programs (Congressional Presentation,
FY 1981) , p. 99.
168. DMS (note 69 supra), Israel Summary, p. 2.
169. SIPRI (note 40 supra), p. 234.
170. FMS and Mil. Asst. Facts (note 157 supra).
171. Sec. Asst. Pgms. (note 167 supra), p. 119.
172. The State Budget — Proposal for FY 1981 (Presentation to
the Knesset , Feb. 1981), p. 37.
137
173. Sec. Asst. Pgms (note 167 supra), p. 118.
174. Moodie (note 36 supra), p. 298.
175. Ibid.
176. Washington Post (18 Dec. 1977) , p. 1.
177. Moodie (note 36 supra) , p. 298.
178. Goldstein (note 43 supra), p. 4.
179. Moodie (note 15 supra), pp. 24-25.
180. Kemp (note 34 supra), p. 46.
181. Ibid. , p. 47.
182. Lewis, William, H. , "Political Influence: The Diminished
Capacity", Neuman and Harkavy, eds . , Arms Transfers in the
Modern World (Praeger, New York, 1980), p. 186.
183. Quandt, Willaim, B. , "Influence Through Arms Supply: The
U.S. Experience in the Middle East", Ra'anan., Pfaltzgraff
and Kemp, eds., Arms Transfers to the Third World (Westview
Press, Boulder Col., 1978), p. 47.
184. Kemp (note 34 supra), p. 47.
185. Ibid. , p. 50.
186. Quandt (note 183 supra), p. 129.
187. Cahn H. Ann, "United States Arms to the Middle East 1967-
76: A Critical Examination", Cannizzo, C. ed. , The Gun
Merchants (Pergamon Press, New York, 1980), p. 110.
188. Kolodziej, Edward A., "Arms Transfers and International
Politics: The Interdependece of Independence", Neuman
and Harkavy, eds., Arms Transfers in the Modern World
(Praeger, New York, 1980), p. 11.
- Kemp (note 34 supra), p. 48.
189. SIPRI (note 40 supra), p. 252.
190. Cahn (note 187 supra), p. 113.
191. Lewis (note 182 supra), p. 186.
192. Freedman (note 59 supra), p. 378.
193. Kolodziej (note 188 supra), p. 11.
194. Ibid.
138
195. Quandt (note 133 supra), p. 126.
19 6. Gwertzman, Bernard, "The War Jets: To Begin With Kid
Gloves, The New York Times (19 Aug. 1981), p. A22.
19 7. Wheelock, Thomas, R. , "Arms for Israel: The Limit of
Leverage", International Security (Fall 1978) , pp. 123-137.
193. Quandt (note 183 supra), pp. 123-127.
199. Wheelock (note 197 supra), p. 125.
200. Ibid. , p. 127.
201. Moodie (note 15 supra), p. 78.
202. Cahn (note 187 supra) , p. 108.
20 3. Farley, P., Kaplan, S., Lewis, W. , Arms Across the Sea
(The Brookings Institute, Washington, D.C., 1978), p. 40.
204. Gwertzman (note 196 supra).
205. Ibid.
- Aviation Week (note 72 supra) , p. 17.
- Guterman (note 72 supra) .
206. Ben-Gad, Isaak, "The Dangerous Precedent", Ma ' ariv (6 Aug.
1981) .
207. "Releasing Plans Is No Mideast Policy", The New York Times,
editorial (19 Aug. 1981), p. A22.
208. Zak, Moshe, "After the Fighter Will Takeoff", Ma' ariv (14
Aug. 1981) .
209. Day (note 28 supra), p. 53.
210. Quandt (note 183 supra), p. 126.
211. Ibid.
212. Ibid. , p. 125.
213. DMS (note 69 supra), Israel Summary, p. 9.
214. Rabin (note 19 surra).
215. Begin, Menahem, Israel's Prime Minister, as reported in
Ma 'ariv (5 Aug. 1981) .
216. The Western Edition of the CBS Evening News (10 Sep. 1981) .
- Monterey Peninsula Herald (Daily, 10 Sep. 1981) .
217. Quandt (note 183 supra), p. 122.
139
218. The New York Times (note 207 supra).
219. Moodie (note 15 supra), p. 38.
220. DMS (note 69 supra), Israel Summary, p. 2.
221. Wheelock (note 197 supra), p. 126.
222. Moodie (note 15 supra), p. 38.
223. "Understanding With the U.S.: Israel Will Not Operate
American Warplanes For Strike Missions", Ma 'ariv (16 Aug.
1981) .
224. Cahn, A.H., Kruzel, J. J. , "Arms Trade in the 198 0's",
Controlling Future Arms Trade (McGraw Hill Book Co. , New
York, 1977), p. 78.
225. Moodie (note 36 supra), pp. 300-301.
226. General Ivri (note 90 supra).
227. "The Defense Ministry Has No Connection to the Lavi Planning"
Ha'aretz (8 Feb. 1978) .
228. Elitzur (note 91 supra) .
229. Shiff (note 1 supra).
- Segev (note 143 supra) .
- Aviation Week (note 16 supra) , p. 12.
230. Moodie (note 15 supra), p. 75.
2 31. Kemp (note 34 supra) , p. 81.
232. Moodie (note 15 supra), p. 25.
- Goldstein (note 4 3 supra), p. 4.
2 33. Ibid. , p. 3 .
234. Moodie (note 15 supra), p. 84.
235. Moodie (note 36 supra), p. 298.
236. Zipori (note 137 supra).
237. "The Arie and the Welfare Policy", Ha'aretz (15 Feb. 1978).
238. Yelin-Mor (note 89 supra).
239. Cohen, Shlomo, "Between the Lavi and the Shekel", Ha 'aretz
(10 March 1980) .
140
240. Kemp (note 34 supra), pp. 59-65.
- Moodie (note 15 supra) , pp. 28-29.
241. Cahn and Kruzel (note 224 supra), pp. 77-78.
242. Moodie (note 36 supra), p. 299.
243. Kemp (note 34 supra), p. 59.
244. The State Budget (note 172 supra), p. 29.
245. Day (note 28 supra), p. 53.
246. FMS (note 167 supra) .
247. The State Budget (note 172 supra), pp. 34, 143, 199.
- Sec. Asst. Pgms. (note 167 supra), pp. 118, 119.
248. Cahn (note 187 supra), p. 115.
249. Goldstein (note 43 supra), p. 11.
250. Sivan (note 6 supra).
251. Arkin (note 120 supra).
252. Goldstein (note 4 3 supra), p. 13.
253. The State Budget (note 172 supra) , p. 27.
254. Ibid. , p. 13.
255. Ibid, p. 60.
256. ACDA (note 48 supra), p. 4.
257. The State Budget (note 172 supra), p. 51.
258. ACDA (note 43 supra), p. 33.
259. The State Budget (note 172 supra), p. 58.
260. Ma'aian (note 13 supra).
261. Erez (note 92 supra).
262. Moodie (note 15 supra), pp. 28-29.
263. Kemp (note 34 supra), p. 63.
264. Nisim, Eliahu, "The Arie— A Vital Aircraft", Ma'ariv (28
Feb. 1980) .
- Elitzur (note 119 supra) .
- IAI (note 79 supra) .
141
265. "Commercial Aircraft Developmen Helped the Kfir Design",
Ma'ariv (6 Aug. 19 76) .
266. Lorbar (note 83 supra).
267. Cahn, Ann Hessing, "The Economics of Arms Transfers",
Neuman and Harkavy, eds . , Arms Transfers in the Modern World
(Praeger, New York 1980), p. 179.
268. Elitzur (note 91 supra).
269. Lorbar (note 83 supra).
270. Moodie (note 15 supra), p. 43.
271. Zehavi (note 67 supra).
272. Lorbar (note 83 supra).
273. SIPRI (note 54 supra), p. 29.
- Nisim (note 264 supra) .
274. Aviation Week (note 23 supra), p. 314.
275. Elitzur (note 119 supra).
- Elitzur (note 91 supra) .
276. SIPRI (note 54 supra), p. 29.
277. ACDA (note 48 supra), p. 21.
278. Cahn (note 267 supra) , p. 176.
279. Farley (note 203 supra), p. 37.
280. Kemp (note 34 supra), p. 84.
142
Bibliography
Cahn, Ann H. , The Gun Merchants (Pergamon Press, New York,
1980) .
Farley, P., S. Kaplan and W. Lewis, Arms Across The Sea
(The Brookings Institute, Washington, D.C., 1978).
Moodie, Michael, "Sovereignty, Security and Arms", The
Washington Papers, Vol. VII, No. 67 (Sage Publication,
Beverly Hills, 1979).
Neuman, Stephanie G., and Robert E. Harkavy (eds.), Arms
Transfers in the Modern World (Praeger, New York, 1980) .
SIPRI, The Arms Trade With the Third World, (Humanities Press,
New York, 1971) .
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