Israel Aerospace Industries will receive a multi-year contract from Lockheed Martin to manufacture up to 900 wing pairs for the F-35 Joint Strike Fighter under a new industrial co-operation agreement.
The expected pact will follow the signature of a letter of offer and acceptance (LOA) by Israel to purchase 20 F-35s for its air force.
Israeli defence minister Ehud Barak has rejected a demand by finance minister Yuval Steinitz to review the proposed $2.75 billion deal, and the LOA was due to be signed in late August.
The deal with IAI will form part of a wider industrial agreement now being finalised. This is expected to see Israeli companies secure work on the JSF programme worth around $4 billion.
© Lockheed Martin
On 30 August, a senior IAI source said the company is "very satisfied" with the proposed arrangement. However, the exact number of wings to be manufactured by the company has yet to be determined with Lockheed.
Under US law, a country such as Israel that benefits from Washington's Foreign Military Financing (FMF) framework cannot make direct offset agreements with US companies that manufacture military hardware.
However, Israeli defence contractors have received huge contracts in return for the purchase of US-made systems by the Israeli defence ministry over recent years. "This is the reason that the parties involved prefer to use the term 'industrial co-operation' and not 'offset'," notes another Israeli source.
IAI and Elbit Systems will secure a large proportion of the work linked to the F-35 acquisition, with the former expecting the manufacture of wings and fuselage parts to eventually total around $1 billion.
Elbit forms part of the Vision Systems International company that will produce the F-35's helmet-mounted cueing system.