Nazareth, Israel - Israel's secretive arms trade is booming as never before, according to the latest export figures. But it is also coming under mounting scrutiny as some analysts argue that Israel has grown dependent on exploiting the suffering of Palestinians for military and economic gain.

A new documentary, called The Lab, has led the way in turning the spotlight on Israel's arms industry. It claims that four million Palestinians in the West Bank and Gaza have become little more than guinea pigs in military experiments designed to enrich a new elite of arms dealers and former generals.

The film's release this month in the United States follows news that Israeli sales of weapons and military systems hit a record high last year of $7.5bn, up from $5.8bn the previous year. A decade ago, Israeli exports were worth less than $2bn.

Israel is now ranked as one of the world's largest arms exporters - a considerable achievement for a country smaller than New York.

Yotam Feldman, director of The Lab and a former journalist with Israel's Haaretz newspaper, says Israel has turned the occupied territories into a laboratory for refining, testing and showcasing its weapons systems.

His argument is supported by other analysts who have examined Israel's military industries.

Neve Gordon, a politics professor at Ben Gurion University, said: "You only have to read the brochures published by the arms industry in Israel. It's all in there. What they are selling is Israel's 'experience' and expertise gained from the occupation and its conflicts with its neighbours."

Another analyst, Jeff Halper, who is writing a book on Israel's role in the international homeland security industry, has gone further. He argues that Israel's success at selling its know-how to powerful states means it has grown ever more averse to returning the occupied territories to the Palestinians in a peace agreement.

"The occupied territiories are crucial as a laboratory not just in terms of Israel's internal security, but because they have allowed Israel to become pivotal to the global homeland security industry.

"Other states need Israel's expertise, and that ensures its place at the table with the big players. It gives Israel international influence way out of keeping with its size. In turn, the hegemonic states exert no real pressure on Israel to give up the occupied territories because of their mutually reinforcing interests."

Suggestions that Israel is exploiting the occupied territories for economic and military gain come at a sensitive moment for Israel, as it returns this week to long-stalled negotiations with the Palestinians. The commitment of Israeli Prime Minister Binyamin Netanyahu to the talks has already been widely questioned.

Booming arms sales



Israel's growing success at marketing its military wares to overseas buyers was highlighted in June when defence analysts Jane's ranked Israel in sixth place for arms exports, ahead of China and Italy, both major weapons producers.

However, Israel's own figures, which include additional covert trade, place it in fourth place ahead of Britain and Germany, and surpassed only by the United States, Russia and France.

Shemaya Avieli, the head of Sibat, the Israeli defence ministry's agency promoting arms exports, said at a press conference last month that the record figure had been a surprise given the "very significant economic challenge" posed by the worldwide economic downturn.

The [Israeli] defence minister doesn't only deal with wars, he also makes sure the defence industry is busy selling goods. - Leo Gleser, specialist in developing weapons markets in Latin America

The arms-related trade is reported to account for somewhere between one-tenth and one-fifth of Israel's exports. The main buyers are Asian countries, especially India, Europe, the US, Canada, Australia and Latin America.

The importance of the arms trade to Israel can be gauged by a simple mathematical calculation. Last year Israel earned nearly $1,000 from the arms trade per head of population - several times the per capita income the US derives from military sales.

Israel's reliance on the arms industry was underscored in June when a local court forced officials to publish data revealing that some 6,800 Israelis are actively engaged in exporting arms.

Separately, Ehud Barak, the defence minister in the previous Israeli government, has revealed that 150,000 Israeli households - or about one in 10 people in the country - depend economically on its military industries.

These disclosures aside, Israel has been loath to lift the shroud of secrecy that envelopes much of its arms trade. In recent court hearings it has argued that further revelations would harm "national security and foreign relations".

'People like to buy things that have been tested'



Feldman's film - which won an award at DocAviv, Israel's documentary Oscars - shows arms dealers, army commanders and government ministers speaking frankly about the way the trade has become the engine of Israel's economic success during the global recession.

Leo Gleser, who specialises in developing new weapons markets in Latin America, observes: "The [Israeli] defence minister doesn't only deal with wars, he also makes sure the defence industry is busy selling goods."

The Lab suggests that arms sales have been steadily rising since 2002, when Israel reversed its withdrawals from Palestinian territory initiated by the Oslo accords. The Israeli army reinvaded the West Bank and Gaza in an operation known as Defensive Shield.

There's a lot of hypocrisy: they condemn you politically, while they ask you what your trick is, you Israelis, for turning blood into money. - Yoav Galant, head of the Israeli army's southern command during Cast Lead

In parallel, many retired army officers moved into the new high-tech field. There they found a chance to test their security ideas, including developing systems for long-term surveillance, control and subjugation of "enemy" populations.

The biggest surge in the arms trade followed Operation Cast Lead, Israel's month-long attack on Gaza in winter 2008-09 that provoked international condemnation. More than 1,400 Palestinians were killed, as well as 13 Israelis. Sales that year reached $6bn for the first time.

Benjamin Ben Eliezer, a former defence minister turned industry minister, attributes Israel's success to the fact that "people like to buy things that have been tested. If Israel sells weapons, they have been tested, tried out. We can say we've used this 10 years, 15 years."

Nonetheless, The Lab's argument has proved controversial with some security experts. Shlomo Bron, a former air force general who now works at the Institute for National Security Studies at Tel Aviv University, rejected the film's premise.

"It may be true that in practice the military uses the occupied territories as a laboratory, but that is just an unfortunate effect of our conflict with the Palestinians. And we sell to other countries only because Israel itself is too small a market."

The film highlights the kind of innovations for which Israel has been feted by overseas security services. It pioneered the airborne drones that are now at the heart of the US programme of extra-judicial executions in the Middle East.

Israel hopes to repeat that success with missile interception systems such as Iron Dome, which was much on display when rockets were fired out of Gaza during last year's Operation Pillar of Cloud.

Futuristic weapons



The Lab also underscores the Israeli arms industry's success in developing futuristic weapons, such as the gun that shoots around corners. The bullet-bending firearm caught Hollywood's attention, with Angelina Jolie wielding it - and effectively marketing it - in the 2008 film Wanted.

Halper believes that Israel has made itself useful to powerful states not just in terms of developing weapons systems, but by becoming particularly successful at what he terms "niche-filling".

"The United States, for example, knows better than anyone how to attack other countries, as it did with Iraq and Afghanistan. Israel can't teach it much on that score. But the US doesn't have much idea what to do after the attack, how to pacify the population. That is where Israel steps in and offers its expertise."

This point is underscored in The Lab. Its unlikeliest stars are former Israeli officers turned academics, whose theories have helped to guide the Israeli army and hi-tech companies in developing new military techniques and strategies much sought-after by foreign militaries.

Shimon Naveh, a military philosopher, is shown pacing through a mock Arab village that provided the canvas on which he devised a new theory of urban warfare to deal with the second Palestinian intifada, after it erupted in late 2000.

In the run-up to an attack in 2002 on Nablus' casbah, much feared by the Israeli army for its labyrinthine layout, he suggested that the soldiers move not through the alleyways, where they would be easy targets, but unseen through the buildings, knocking holes through the walls that separated the houses.

Naveh's idea became the key to crushing Palestinian armed resistance, exposing the only places - in the heart of overcrowded cities and refugee camps - where Palestinian fighters could still find sanctuary from Israeli surveillance.

Another expert, Yitzhak Ben Israel, a former general who is now a professor at Tel Aviv University, helped to develop a mathematical formula for the Israeli military that predicts the likely success of assassination programmes to end organised resistance.

Ben Israel's calculus proved to the army that a Palestinian cell planning an attack could be destroyed with high probability by "neutralising" as few as one-fifth of its fighters.

This merging of theory, hardware and repeated "testing" in the field has had armies, police forces and the homeland security industries lining up to buy Israeli know-how, Feldman argues. The lessons learned in Gaza and the West Bank have also had applications in Afghanistan and Iraq.

Yoav Galant, the head of the Israeli army's southern command during Cast Lead, however, criticises the double standards of the international community.

"While certain countries in Europe or Asia condemned us for attacking civilians, they sent their officers here, and I briefed generals from 10 countries," he says. "There's a lot of hypocrisy: they condemn you politically, while they ask you what your trick is, you Israelis, for turning blood into money."

A spokesman for the Israeli defence ministry called the arguments made in The Lab "flawed and illogical".

"Our success in defence industries reflects the fact that Israel has had to be resourceful and creative faced with an existential threat for more than 60 years as well as a series of wars with the Arab world."