A military industrial complex is born Israel was born out of war. Its very independence was achiev ed through the use of force, which endowed Israel with a victory over its surrounding Arab countries. Ben Gurion, in a speech he addressed as the war ended, praised the industrial and technological capability of the fledgling state as a factor that cont ributed in supplying arms to the state’s army and hence had an important part in the victory. “W e should nurture and enhance th is advantage of ours”, he stated 1. And so we did.

The building of a domestic military in dustry was based, at least in its incept ion, primarily upon fear. The Jewish state was established in the midst of a hostile environment by a Holocaust-traumatized nation th at was determined to never again be led “as lambs to the slaughter” 2. The main preoccupation of the state was to keep the IDF prepared for any attack 3. During Israel’s first years as a state, France realized Israel’s major dependence on arms suppliers. In June 1967, France declared an arms embargo on Israel in r esponse to Israeli actions in the Six Day War. That was a watershed in arms production in Israel. The state decided not to rely any longer on foreign suppliers and started investing capital in establishing a large-scale arms indust ry. Within a few years, Israel had a highly advanced and technologically sophisticated arms industry, unparalleled am ongst developing countries, an industry that could well underpin the self-reliance policy

What have we got? Inventory:

Ninety-five percent of the arms produced in Israel are ma nufactured by 6 companies, thre e of which are state-owned. The state-owned companies includ e Israel Aircraftt Industries (IAI), Israel Military In dustries Ltd (IMI) and the National Armaments Development Authorit y (Rafael). In the private sector th e largest company is Elbit Systems. Tadiran and Elisra make good profits as well

The first military company, IMI, was founded as early as 1933. By now, the well-establi shed industry with an ever- increasing level of sophistication consists of an impressive variety of instruments of death. The weaponry includes small arms; ammunition for heavy and small arms as well as for aircraft and helicopters; artillery rockets; unmanned aerial vehicles; aircraftt; electronic and anti-electronic warfare syst ems; tanks; missiles boats an d more. Some of the renowned products of the Israeli industry include: The Galil rifle; The Kfir fighter jet; the battle tank ‘Merkava’ and the Arrow, a missile defense system. In recent years, the arms producer s have specialized in upgrading old weapons with advanced electronic components.

Notwithstanding its refusal to officially confirm it, Israel appare ntly possesses nuclear and chem ical weapons. There are various estimates as to the size of Israel’s capability, rang ing from 75 to as many as 400 nuclear weapons, including warheads for mobile Jericho-1 and Jericho-2 missiles and bombs for Israeli aircraft An historical understanding between Israel and the U. S. allowed Israel to develop its nucle ar capability as long as it maintained a low profile, and relieved pressure on it to sign the Non-Proliferation Treaty (NPT). Israel has not signed it until today

Why not thinking big? Exports:

As noted, the industry in its early stages was designed to keep the domestic defense system well-equipped. But in order maintain efficiency and to reco up production costs, there was a need to ex pand the industry through exports. Exporting weapons proved to have immense potential for economic gr owth and for lightening the burden of the defense budget 9. Hence, a military equipment exports industry developed ra pidly, and Israel joined th e international arms market. Since then Israel has become one of its preeminent members.

Today, the arms industry in Israel is based on exports, with 70% of it s output being exported, and only 30% bought by Israel’s defense ministry 10. It has a share of $3.1 billion out of $16 bi llion industrial export revenues in Israel per year 11. It was the only industry that kept flourishing during the economic crisis in the 1980s 12, and it is perceived as an industry that can reinforce the ec onomy in the current economic recession. Since the outbreak of the Al-Aqsa Intifada, Israel’s economy has suffered from a blow that severely hurt the tourism and high-tech industries. Yet arms exporting, being an industry based on fore ign currency flows, can sti ll thrive in times of crisis while at the same time meeting the domestic needs of strong armed forces 13

Who gives the money? Clientele:

Israel’s arms industry has an excellent reputation. It is acclaimed for its high level of expertise and its innovations in state-of-the-art equipment. The missile defe nse system is hailed the planet’s most sophisticated. Even the U. S. military considers Israel as a source of advanced technology 14. In addition to its skilled perso nnel, Israel has another advantage over competing arms producers: Freque nt wars and the ongoing conflict with the Palestinians present available opportunities to test the equipment an d to demonstrate its effectiveness.

With this splendid reputation, Israel’s clientele is big. IAI alone does business with 70 countries. In the last decade, the IAI has upgraded entire fleets of the air forces of Sp ain, Canada, Croatia, Romania and Thailand, among other countries 15. The IMI and Elbit Systems have also signed numerou s international deals for upgrading othe r countries’ tanks. 16 Israel’s clientele consists of whoever is willing to pay—and there are many, includ ing military juntas, civil war-struck countries and known human rights abusers. Al so, Medellin drug barons in Colombia and Haiti, Nicaragua under Samoza, and the military junta in Burma (t o mention but a few) were an d are all clients of Israel. At times Israel has sold arms in violation of UN embargos and by so doing achieved advantage in the arms market. Such was the case in apartheid South Africa, as we ll as in Rwanda during the genocide in 1994 17

A special friend: the Unit ed States of America

One unique client of Israel is the United Sates. Israel’s biggest arms producers all make deals with the giant producers in the U. S., such as Boeing and Lockheed Martin 18. In 2002, Israel ordered from the latter 102 F-16s, supplementary to the 250 ones already in its possession, ma king Israel’s F-16 fleet the largest outside of the U. S. 19

The U. S. is not merely a loyal client, but it also plays a pred ominant role in actively buttres sing Israel’s arms industry. Israel was the first non-NATO country to participate in Re agan’s $26 billion “Star War s” program, or the Strategic Defense Initiative (SDI) as it was formally called. For Is rael, it meant a large source of funding for research and development projects 20 .

The principal U. S. assistance to Israel’s arms industry com es in the form of frequent grants that have replaced the forgiven military loans that the Americ ans have been giving Israel since 1967 21. Israel currently gets $3 billion a year from the U. S., two-thirds in the form of Foreign Military Assistance (FMA) and the rest in the form of Economic Support Funds (ESF) 22. The latter supports indirectly the arms industry as well, since it allows the Israeli government to use part of its own budget for milita ry programs. Furthermore, Israel is the on ly state that is allowed to use about a quarter of its military aid to wards its own arms manufacture 23 .

There are several interests behind the ma ssive U. S. funding of an industrialized and well-off country like Israel, which has a per capita income of $19,530 24. Indeed, the arms industry relationship between Israel and the U. S. is symbiotic rather than strictly beneficial to Israe l. The first interest has to do with capi tal. Israel provides a lucrative market for the United States. The latter replaced France as the major arms supplier to Israel, in terms of both equipment and technology, following the Six Day War 25. Many American arms manufacturer s—Boeing, Lockheed Martin, General Electric and American Ordnance, for exam ple—benefit greatly from this alliance. In 2001 alone, Israel bought from U. S. companies $2.95 billion in arms 26 .

Secondly, military funding assures politica l benefits. Israel’s strategic location ma kes it a desirable friend for the United States. Financial assistance, hand in hand with the consis tent political backup, ensures that Israel will remain a committed ally in the political arena. The fact that Israel consults on arms sales with the U. S. and refrains from selling military systems “that upset the Pentagon” (as t he director general of Israel’s finance ministry said 27) reflects how Israel helps maintain U. S. supremacy.

Getting the full picture

The combination of the above-mentioned facts gives a clear picture: Israel, ho me to 6.3 million people 28, has a massive arms industry, now the world’s 10th largest 29. The five biggest Israeli arms producer s are ranked in the list of top 100 arms-producing companies in the 2002 Stockholm Interna tional Peace Research Institute (SIPRI) Yearbook. IAI was ranked as the world’s 26th largest arms producing company 30. With this much capital involved, the significance of this industry to the Israeli economy is overwhelming. Mi litary commerce makes up one third of all domestic sales 31. It supports technologically the high-tech industry, another fi eld of great economic importance for the Israeli economy 32. The arms industry also plays a pivotal role in the aspect of employment. With as many as 60,000 employees, it makes up 20% of industrial sector employment 33. IAI is the biggest employer outsid e of government, with 14,500 employees 34. Some economists who prepared a report termed “The Military Industry as an Accelerator to the Growth of the Economy” even advise the ministry of de fense to support a merging of the arms producers and thereby to create a huge company (or rather corporation) with turn over of $4.2 billion, hence making it the tenth largest arms producing firm in the world. The size matters, they say, and they cite recent merges such as Lo ckheed and Martin as models of success 35

The centrality of the arms indu stry in Israel’s economy has grave political an d social implications. It is a state business par excellence, with the ministry of defense governing its management. This implies an obvious relationship between politics and the arms industry, whic h adds to the existing overlap betw een the army and t he state in Israel 36, and increases the dangerous influence of weapon s barons on Israel’s foreign policy. The critical role of arms exports dictates with which countries Israel chooses to have diplomatic rela tionships, according to arms sa les considerations. It also dictates with whom Israel prefers to stay in war, whether it be cold war—as is the case with Syria—or very hot one, as is the case with the Palestinians.

The impact of the military industrial comp lex on policy in regard to the Israeli- Palestinian conflict is substantial. Since the arms industry constitutes a major source of capital for the Israeli economy, and since Israel is a capitalist country, it is constantly driven by the urge to expand. Expanding an export-based industry is achieved by increasing military exports. And here lies the vicious cycle: The most effective way to incre ase military exports is to increase the number of orders fr om the domestic security system 37. This cycle leads to surplus in the domestic arms industry. Fortunately, there is a way to waste th is surplus. There is a live la boratory to use and test the weapons: the Palestinian territories. This is one possible line of thought that propels the continuation of the Israeli- Palestinian conflict. Absurdly, and as th e conflict lingers on, powerful arms fo rces will always be needed, hence the domestic and exports industries will continue reinforcing each other, and the military indust rial complex will persist.

The arms barons:

In order to better understand the repercussions of this situation, it is instrumental to examine who holds the senior positions in the weapons industry, in terms of their political and professional affiliation an d the social circles they are part of. Here are a few examples: ƒ

Major General Ret. Ori Orr. : Chairman of the Board, IAI. Past positions: Managing Director of The Jewish National Fund, Member of the Board of Directo rs of IMI, a Council Member of the Israel Lands Authority, Deputy Minister of Defe nse, Chairman of the Foreign Affair s Committee of the Knesset (Israeli Parliament) 38. ƒ

Colonel Ret. Jacob Toren: Chairman of Rafael. Holds several publ ic positions including Member of the Executive Committee of the Electronic Industries and of the Manufacturers’ Association, Chairman of the Israeli Defense Industry Forum, and board member of Elbit System s. Past positions: Senior positions in Elbit systems and in El-Op. Has 25 years ex perience in the Israeli Air Force and the security system. ƒ

Brigadier General Ret. Mizrachi, Arie: Chairman of the Board, IMI. Graduate, US Army Military School. Past Positions: Director General, Ministry of Housing & Construction, President of Armaz International Consulting Ltd 39 .

These generals and other powerful position holders 40 —along with other generals from the IDF, the foreign intelligence service (the Mossad), the General Secret Service (the Shin Be t), and the police—join toget her with the Prime Minister and other key political actors to create a powerful decision-making body as re gards the security related issues and foreign policy.

One annual prestigious event that brings to gether the security elite and other components of the Israeli elite (academia, businessmen, etc) is the “Herzliya Conference on the Balance of Israel’s National Security”. The Chair of the event is Dr. Uzi Arad, himself a former Director of Intelligence in the Mossad. The Herzliya Co nference has become a stage for announcing political agenda, culmin ating in the traditional Prime Minister ’s speech which reiterates that agenda 41. During the conference, think-tanks submit and discuss their reports. The arms barons naturally play an integral role in these think-tanks, and looking at th e contents of some of their recommenda tions may illuminate their interests and perspectives. One think-tank led by Maj. Gen. (res.) Ben-Eliyahu 42 submitted a position pape r entitled “The Security Budget and Force Building”. The member s acknowledge that the harsh socio-econ omic reality in Israel necessitates a significant reduction in the defense budg et and the allocation of more resources to social and economic problems. However, they recommend decreasing wages of public sec tor, among other things, rat her than decreasing arms development 43. In his paper “The Military Industries- an Indispensa ble Asset to the National Security of Israel and Its Economy”, Moshe Keret, CEO of IAI, holds that the ec onomic and strategic importance of the arms industry requires it to be defined as a national infrastructure and protected accordingly 44. Giora Shalgi, Rafael’s CEO, goes even further, advising that the budget required by this infrastr ucture be guaranteed by enactment 45; that would mean integrating the military industri al complex into the law system.

Having control over a predominant capital source in Israel, being backed by economists who praise the essentiality of this source to the economy, and being ex-generals with connections to senior poli tical officials, the heads of the arms industry are extremely influential. Ev idently their recommendations involve v ested interests of warlords that are businessmen at the same time. They ar e spurring the Knesset and the government to take legislative measures to expand the arms procurement mechanism, the consequence of which would be inte nsify their impact on policy making. They are justifying their lobbying by arguments of economic desirability and by the sacred notion of “security reasons”, that same old notion that one is not allowed to argue with.

Apart from the evident interest in keeping their organizati on financially successful, apparently the arms barons share similar political world view as well. For the warlords among t hem, this perspective is shaped by years of serving in the army. For others, it is a standpoint molded by spending ye ars improving the killing efficiency of their product. The 5 language they articulate is the fierce language of force 46. One element embedded in this pe rception is the conviction that there is an ever-existing danger to the ex istence of Israel, and that the Arab worl d is still far from accepting it as a member of the Middle East, if it ever will 47. Thus, “only preserving the military might of Israel could be the prerequisite for achieving peace agreements” 48. Sometimes it seems we are not talk ing about a powerful country closely protected by the dominant power in t he world, but about the small and vuln erable state of Israel of the 1940s: “Keeping a strong security infrastructure provides indispensable deterrence capability, in a state that can not afford even one single failure” 49. The apocalyptic scenarios that the generals have be en presenting since Israel was born still prevail. In Ben-Eliyahu’s view, the threat of weapons for mass destruct ion against Israel has waned, but is still valid, and “the clock keeps on ticking towards its possible use” 50. The implication of a situation in which the leaders of the arms industry come from “Securitistic” points of view is straightforward. Looking at la st year’s budget reflects this militarist thinking. At 9.5%, Israel leads the worl d in military expenditure as a percenta ge of GDP. It is three times more than the U. S. (3.2%) and roughly fo ur times more than the UK (2.5%) 51 .

The obvious interest in keeping their bu siness profitable and the military backg round of many of the arms industry higher-ups encourages another co nclusion (or possibly a misleading assertion) —that the Israeli-Palestinian conflict is far from being solved by political mean s. Giora Shalgi, CEO of Rafael, dismi sses the assumption that there will be peace between Israel and its Arab neighbors as “naïve” 52, and contends that the goal of the leaders of the defense system is to “minimize the terror to a level that we can li ve with reasonably” 53. Thus using force as a political measure and marginalizing any political proc ess is fostered and legitimized.

These are some of the incentives that have helped hinder poli tical progress in the Israeli-Palestinian conflict for so many years. Furthermore, the fact that Israel is a strong player in the world’s arms market provides it with the flexibility to use these arms in massive violation of hu man rights without being cr iticized by the major powe rs of the world and their well-lobbied arms companies, companies wh o have an interest in Isra el as both a client and pr oducer of arms. As Keret reveals: “Israel’s military products ar e appreciated in the world market… it cr eates opportunities to counter pressures that stem from political positions” 54. In fact, the main beneficiaries from Israel ’s arms industry induce escalation of the conflict by selling Israeli arms. Moreover (and ironically), the U. S. is willing to give military aid to Israel as a reward for progress in the peace process 55 .

The military industrial complex in Israel, along with the support from international stakeholders that have interest in it, creates a cycle that keeps the Israeli-Palestinian conflict going. The centrality of the arms industry also encourages legitimization of the use of force instead of focusing on political me ans to solve the conflict. Re taining big arms industry for the betterment of the economy, as it were, affects adversely on the very reason to keep it, since it indirectly diminishes the standard of living. The stronger the arms industry is, and the more arms available fo r use, the longer the Israeli- Palestinian conflict continues. As the co nflict continues, the military expenditur e stays high, at the expense of social warfare services. Currently, the expenditure of the Israeli go vernment on security is 50 billion shekel ($10.8 billion), while for education the government spends 40 billion shekel 56 .

Thus a vicious cycle is perpetua ted, and the high price is paid by Israelis, Palestinians and the many voiceless victims of arms proliferation.

Addendum:

Several weeks ago, the ministers of finance and defense decided to dismantle the Israel Military Industries. Part of its factories will be unified with Rafael, whereas others will be offered for sale. The Israel Military Industries in the first government owned arms company that is to be privatized. During the last two decade s, IMI’s profit has decreased substantially).

The privatization is aimed at increasing profit wh ile maintaining the state’s interest by special mechanisms that will be establis hed as a part of the selling pr ocess. Foreign investors will be 6 allowed to participate in the purchase as long as the control of the privat ized company would be in Israeli investor’s hands.