The Israeli defense industry is facing a difficult period ahead, as the new military aid agreement, signed during Obama's last days in office, gradually phases out the Israeli Defense Ministry's ability to use American money to buy supplies from Israeli companies.

As other large markets, such as China and the Arab world, are closed to them, Israeli firms have little choice but to focus on expanding sales in the United States. Thankfully for them, the U.S. military budget dwarfs those of any other countries: Washington spent $680 billion on defense in 2018, with Beijing a far second with just $250 billion. And with the world seeing an arms race surge and the U.S. military needing to bolster its capabilities as the situation worldwide seems increasingly volatile, new avenues for growth might have opened.

At the same time, under new rules set up by the Trump administration as part of its America First policy, the American military is required to buy weaponry made in the U.S., which has Israeli players scrambling for solutions.

Israel Aerospace Industries, for one, is investing tens of millions of dollars in its North American operations. It recently inaugurated new offices in Washington in the presence of members of Congress with the aim of winning new contracts in the United States. Its American headquarters was consolidated with production facilities in Mississippi and Maryland to create a single organizational unit. And if that were not enough, the company has budgeted about half a billion dollars for new corporate acquisitions, with these investments likely to be made in the United States too.

Open gallery view Inside the AUSA 2019 exhibition. Credit: DefenseWebT YouTube channel

Joe Lieberman to the rescue

IAI also recently hired the services of former U.S. Senator Joseph Lieberman, a former vice presidential candidate, to help the company promote its interests with the Trump administration and in Congress. According to Kasowitz Benson Torres, the law firm where Lieberman serves as senior counsel, the senator will strategically advise IAI in its activities in the U.S. and its relations with the Department of Defense.

IAI Chairman Harel Locker recently stated that the company is hoping to substantially increase sales in the United States, which last year amounted to about a billion dollars. At the same time, the presence of Israeli representatives of the company in the United States was reduced, saving IAI tens of millions of shekels a year, and curbing the accumulated losses that the company’s American plants generated over the course of many years.

Open gallery view Benjamin Netanyahu and Ambassador David Friedman watch Arrow 3 test launch, Jerusalem, July 28, 2019. Credit: Kobi Gideon/GPO

In April, Elbit Systems purchased the night-vision division of L3Harris Technologies. Elbit now has nearly 2,500 employees in the United States at five production and development centers – in Texas, Virginia and Florida. It also has close relationships with American defense contractors such as Raytheon, Lockheed Martin, Boeing and Collins Aerospace.

Rafael Advanced Defense Systems, which manufactures Israel's Iron Dome missile defense system, has made sales of its signature product to the U.S. a major goal. It suffered a setback in mid-October when a top U.S. military official told reporters that the U.S. army had no plans to buy additional Iron Dome anti-missile batteries, beyond the two it already had.

U.S. Brigadier General Brian Gibson, who is responsible for the acquisition of aerial and missile defense systems, had praise for Iron Dome’s capabilities. But although he didn’t rule out such purchases in the future, he said the system was not a long-term solution for the American army.