Israel's F-35 offset agreement not what it seemed

The Minister of Defense has admitted to "Defense News" that its announcement on the subject was misleading.

At the end of August, an earth-shattering report appeared in "Defense News": the value of the work on the F-35 that manufacturer Lockheed Martin was prepared to give to Israeli defense companies, if Israel agreed to buy 20 of the stealth combat aircraft, could be close to 180% of the purchase price. Reciprocal procurement on that scale was considered unusually high for an international arms deal, and it aroused fierce criticism in the US.

The report was cited in "Globes", including the comment of Joel Johnson, a former vice president for international programs at the Aerospace Industries Association, Washington, that "a 150 percent or 200 percent offset is actually triple dipping; it's chutzpah on steroids." Johnson was referring to the fact that the aircraft would be purchased with US aid.

It now emerges that it was all much ado about nothing. Israel, or, to be more exact, the Minister of Defense's bureau, wanted to boast of an impressive deal with the Americans, but the deal described by the bureau was not the one the Americans were aware of. What's more, Israel's self-preening aroused anger in Canada, which has also bought F-35s. How come the Israelis managed to extract so much from the Americans and we didn't, the opposition in Ottawa fulminated, in highly publicized parliamentary sessions, after the version of Israel's Minister of Defense Ehud Barak began making headlines in Canada.

In its latest edition, "Defense News" says that the August article about the Israeli deal was based upon an announcement by the bureau of the Minister of Defense and on information supplied by the Ministry of Defense spokesperson. The bureau's announcement said that Israel had reciprocal procurement agreements to the tune of $4 billion, and that talks were taking place with relevant companies to reach agreements that would lead to Israeli participation worth up to $5.3 billion.

Now, after the uproar in Canada and declarations by Lockheed Martin denying the Minister of Defense bureau's version, Ministry of Defense officials have admitted to "Defense News" correspondent Barbara Opall-Rome that the initial information from Barak's bureau was incomplete, and potentially misleading. However, the officials stressed that the announcement was not made from political motives, and that the exaggerations it contained were not an effort to persuade members of the cabinet to approve purchase of the aircraft.

"Defense News" points out that the initial information received from the Minister of Defense's bureau stated that Israel intended to buy 20 F-35s for $2.75 billion. There was no mention of the fact that the announcement by the US administration to Congress in 2008 spoke of 75 aircraft. The Minster of Defense did not at the time respond to requests for further information, on the grounds that negotiations with Lockheed Martin were still going on.

However, following the protests in Canada, and demands by other Lockheed Martin customers for benefits like those supposedly received by Israel, Ministry of Defense officials have admitted that the industrial cooperation agreements with Lockheed Martin were conditional upon Israel eventually buying all 75 aircraft, and that implementation of the agreements was meant to be proportionate to the number actually bought.

Published by Globes [online], Israel business news - - on December 22, 2010

© Copyright of Globes Publisher Itonut (1983) Ltd. 2010

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