Geopolitical change and the impact on the arms trade

The global arms trade is subject to political change – and that sometimes puts Israeli defence companies in problematic positions.

A little history: years ago, when the Shah ruled Iran, the country was a major customer. Then the Ayatollahs took over, and the market was eliminated overnight.

South Africa was also once a major buyer for Israeli-made weapon systems. When the Apartheid regime was abolished, this market also collapsed.

The most recent change was in Turkey. Once a big customer for Israeli defence industries, this country was also eliminated from the customer list.

All of the above happened as a result of regime change – as countries went from “unfriendly” to “hostile” in relation to Israel.

This complex situation is made even more complicated by actions taken by some countries. The most recent such complication is directly connected to actions taken by Russia in Ukraine.

The Israeli ministry of defence has ordered all Israeli companies that manufacture unmanned air systems (UAS) not to begin or continue negotiations for new contracts with Russia.

The decision is a result of Russian intervention in Ukraine, and Washington allegedly played a major role in making it.

In the past, Israel Aerospace Industries and Aeronautics Defense Systems have signed contracts in Russia. The air vehicles and related equipment covered by these contracts have been delivered or are in the process of being supplied, and “the directive is about new contracts only”, one industry source says.

“Follow-ups” related to existing contracts will be permitted – including the supply of spares and system upgrades – the source adds.

Russia has included the transfer of technical knowledge in every contract the nation has signed with Israeli UAS manufacturers, the source notes, adding that even before the new directive was issued there were limitations on the types of UAS cleared for export to Moscow.

The USA was not happy with Russian-Israeli co-operation on UAS, but did not act to undermine it. However, allegedly Washington has now changed its attitude and demanded the change in Israeli policy.

While the new US stance may have been a key reason for the Israeli decision, sources say some European countries have also “showed concern” about the future sale of Israeli-made UAS to Russia, citing “the new reality in eastern Europe”.

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