Beneath the surface of the submarines affair

Benjamin Netanyahu photo: Reuters

Why did the prime minister let Germany sell strategic submarines to Egypt? How many submarines does Israel really need? Will Michael Ganor regret not turning state's witness?

1. Did improper considerations overcome defense considerations?

The most alarming question in the submarines affair is the possibility that improper motives led the prime minister to consent to  sales of submarines by Germany to Egypt.

Last March, journalist Raviv Drucker reported on Channel 13 News that former Ministry of Defense director of policy and political-military affairs Maj. Gen. (res.) Amos Gilad told Israel Police that Prime Minister Benjamin Netanyahu was the one who approved Germany's sales of submarines to Egypt. Netanyahu later had to admit that he had withdrawn Israel's objection to the sale of this strategic weapon to Egypt. The report stated that Gilad had objected to the sales of the submarines to Egypt, and had contacted Christoph Heusgen, an adviser of German Chancellor Angela Merkel. Gilad told the police that Heusgen said that Netanyahu had approved the sale.

In any case, approval of the sale of the submarines to Egypt is surfacing now, after being featured in the previous turbulent election campaign.

In May 2015, President Reuven Rivlin visited Germany and met with Merkel. As part of a mission given him by then-Minister of Defense and former IDF Chief of Staff Moshe Ya'alon, Rivlin expressed concern about Germany's intention to sell advanced submarines manufactured by ThyssenKrupp to Egypt, and heard for the first time that Israel had approved the sale.

Ya'alon and then-IDF Chief of Staff Gabi Ashkenazi (now a leader of the Blue and White Party) later revealed that they had not even known about the approval given to the Germans, and that it had been done against their expressed opinion and that of the Ministry of Defense. Ya'alon even said, "The submarines affair is liable to implicate Netanyahu in treason."

What is the connection between Israel and the sale of submarines to Germany? Why was the Israeli prime minister asked to approve such a deal? This procedure became customary because of the special relations between Germany and Israel. Israeli prime ministers were previously asked to approve defense deals for countries liable to come into conflict with Israel, but no formal or legal procedure is involved.

Netanyahu initially consistently denied this sequence of events, and claimed that Germany had never asked for his approval. In response to reports about Gilad's statement to the police, he said, "This is an unavailing and desperate attempt to flog a dead horse."

Netanyahu later had to admit that he had withdrawn his opposition to the deal, but claimed that the reason was a defense secret that he could not reveal. Netanyahu claimed that he had disclosed the secret to the Attorney General, but Mandelblit stated that Netanyahu had said that he was willing to disclose it, but he himself believed that there was no need to do this at this stage.

2. A controversial deal

The agreement underlying the affair was signed in late 2016: Israel's purchase of three Dolphin submarines from Germany for €1.5 billion, and another deal for vessels to protect natural gas platforms for €430 million. These amounts put the deal at the head of the defense deals in Israel, even though a third of the price was paid for by a grant from the German government. The price for the deal is similar to the deal for the F-35 stealth fighters. In contrast to that deal, however, procurement of the submarines and the ships from Germany was mainly financed from the state budget, not with military aid.

The main point of contention in this context is the number of submarines that Israel needs. Representatives of the defense establishment, led by Gabi Ashkenazi, who was IDF chief of staff during the relevant period, say that the defense establishment's view was that five submarines were enough for Israel. Politicians, led by Netanyahu, pressed for the procurement of additional submarines, and planned to increase the total number of submarines to nine.

Procurement deals on such a scale are approved by the defense cabinet after consultation with the Ministry of Defense. Ashkenazi claims that he presented a view opposed to Netanyahu's but was rebuffed. Netanyahu says that procurement of this number of submarines was essential, and was properly approved.

In its draft indictment, the State Attorney's Office asserts that it is suspected that a number of parties pushing to close the deal with the Germans in exchange for bribes were behind the entire deal. The police recommended indicting Brig. Gen. (res.) Avriel Bar-Yosef, who was deputy head of the National Security Council; former Israel navy commander Eliezer Marom; Adv. David Shimron; David Sharan; and Shai Brosh.

3. Ganor - the state witness who became the leading accused

Michael (Miki) Ganor is a businessperson and former Israel Navy missile boat commander. He was first arrested and interrogated in July 2017 on suspicion of involvement in the bribery conspiracy called the "submarines affair." After the investigation was revealed, Ganor, currently the main accused in the case, signed a state's witness agreement in which he undertook to testify against his partners in the alleged bribery conspiracy. Ganor agreed to NIS 10 million penalty a one year prison sentence. In March 2019, however, he withdrew from the state's witness agreement and retracted his statement to the police. He began to claim that in contrast to his previous story, no bribes had been passed between the suspects. He was then arrested and questioned under caution, and again became the principal accused.

If Ganor is convicted of the offenses of which he is suspected, he is liable to pay a much higher price than he agreed to pay in the plea bargain reached with him, which was canceled.

4. Where's the money: The shares of Netanyahu and his US cousin

The police believed that a number of parties received financial benefits from the submarines deal, and recommended that they should be indicted. The Attorney General, however, announced at the beginning of the investigation that Netanyahu was not a suspect in the affair. New details surfaced in 2019 that again raised the question of whether Netanyahu could nevertheless have derived personal benefit from the deal.

Information revealed by Netanyahu himself in his request for financial aid in paying for his legal proceedings from US-based foreign businesspersons Spencer Partridge and Nathan Milikowsky (Netanyahu's cousin) show that until two years ago, Milikowsky held shares in a steel company that was a supplier of ThyssenKrupp, the builder of the submarines. It was learned that Netanyahu was also a minority shareholder in the company until 2010, when he sold his stake to Milikowsky for NIS 16 million. Netanyahu initially claimed that he bought the shares when he was a private citizen, then later changed his story, saying that he did it when he was leader of the opposition.

In any case, the Ministry of Justice is currently examining the information. Despite the long period of time that has passed, however, no investigation has been opened of Netanyahu concerning his holding of shares in ThyssenKrupp's supplier, and whether this gave him an interest in promoting the submarines deal with the company.

5. The next stage: A hearing for those involved

The police completed their investigation and recommended a series of indictments, putting the ball in the court of the State Attorney's Office, which filed the grave draft indictment against those involved. Following a hearing, the draft indictment is likely to become an actual indictment.

One person remains out of the picture - Netanyahu. Netanyahu continually repeats that the State Attorney's Office and the Attorney General said that he was not a suspect, was not involved, and knew nothing.

The main question is whether and why Netanyahu gave the go-ahead for Germany to supply submarines to Egypt, against the defense establishment's recommendation. The change in his explanation of the shares he and his cousin held in the steel company is also questionable.

Netanyahu commented on the matter during the election campaign, saying, "With respect to these slanders, they are really slanders made out of thin air. I didn't get a shekel from the submarines deal. The State Attorney's Office and the Attorney General went over the matter with a fine-tooth comb. They stated unequivocally that I was not a suspect in the case, and there was nothing wrong with my actions."

Published by Globes, Israel business news - en.globes.co.il - on December 5, 2019

© Copyright of Globes Publisher Itonut (1983) Ltd. 2019

Benjamin Netanyahu photo: Reuters
Benjamin Netanyahu photo: Reuters
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