Indictments could sink future German submarine deals

Submarine affair Photo: Shutterstock ASAP Creative

Germany has supplied Israel with submarines for three decades, but an anti-corruption clause inserted into the option on further procurement is liable to bring that to an end.

The indictments issued today in the submarines affair, if they proceed after the hearings to widely-publicized trials, are liable to put an end to three decades of submarine deals between Israel and Germany. Historically, between a third and a half of the cost of procuring the submarines, amounting to many billions of shekels, has been financed by the German federal government. After widely reported allegations in the past two years, Berlin inserted a clause (still not fully revealed) into the option to purchase further submarines for the Israel Navy. The clause apparently makes progress in that respect conditional on no corruption being discovered in "the heart of the deal."

While the accepted interpretation is that the Germans wanted to make certain that the person actually making the decision on the procurement of the submarines, Prime Minister Benjamin Netanyahu, was not involved, everything depends on German goodwill. Now, if Netanyahu's cousin and confidant Adv. David Shimron is also put on trial (although on a lesser charge than was initially recommended) after the hearing on his case, the Germans could cancel the expected deal, worth €1.5 billion.

The question of whether they will do so is still open. Germany has considerable economic interest in selling submarines to Israel, even at a discount. It has done so consistently ever since the Gulf War, as compensation for the involvement of German firms in the Iraqi missile program. At first, basic submarines were given to Israel free. Now, super-advanced submarines are being sold for half a billion euros each.

If the indictments mature into legal proceedings, and these are reported in Germany, it will be hard for the German government to turn a blind eye. At the very least, reform and greater transparency will be required in the way submarines are sold to Israel. ThyssenKrupp has already changed the model at the basis of the allegations - an Israeli agent working on its behalf to promote deals - to a representative office run day-today by company employees and in accordance with German rules. For the time being, the German public has not shown undue excitement at the revelations of corruption. Whereas in Israel the affair goes to the top of the defense establishment, in Germany it’s perceived as "more news" of corruption in submarine sales. It was the same with Greece, with South Africa, and a long list of other countries.

There is one more threat - the legal proceedings initiated in Germany itself. An initial investigation was opened in March by the public prosecutor in Bochum to see what legal implications the proceedings in Israel might hold for companies and individuals in Germany. The public prosecutor's office in Bochum told "Globes" yesterday: "We cannot comment on progress in the investigation, or on when it will be completed."

Published by Globes, Israel business news - - on December 5, 2019

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

Submarine affair Photo: Shutterstock ASAP Creative
Submarine affair Photo: Shutterstock ASAP Creative
Twitter Facebook Linkedin RSS Newsletters גלובס Israel Business Conference 2018