WASHINGTON – Israel Aerospace Industries chairman Yair Shamir is concerned about
the rise of the teaparty movement in the United States; he believes the skies
are the limit for IAI in the civilian market; and he says the reason the IAI
delivered four UAVs to Turkey after the deterioration of relations between
Turkey and Israel is that “we do not have the luxury of making deals conditional
on political requirements.”
In an interview with Globes, Shamir also
touched on breaking into the Russian market, Colombia’s growing reliance on
Israeli arms companies, the business model he hopes IAI will adopt in the not
too distant future, big projects with high entry barriers of manpower and
finance, and the possible future privatization of IAI.
Shamir traveled to
Washington for the AUSA (Association of the United States Army) 2010 Annual
Meeting & Exposition the last week of October, where IAI had a large
exhibition booth. Other Israeli defense companies, including Rafael, Israel
Military Industries and Elbit Systems Ltd., also had exhibits.
budget US Secretary of Defense Robert Gates constantly talks of vitally needed
cuts in the US defense budget. Do such potential cuts worry you? Could they harm
IAI sales? “We hardly sell any military products in the US. Altogether, our
sales to the Americans amount to between $800 million and $1 billion annually.
Only a third of that, at a rough estimate, is military sales, mainly components
and subcontracting work.
“Taking a broader view, cuts in the US defense
budget could have interesting global consequences. If the Pentagon stops buying
from the big US defense companies, those companies will start directing their
marketing efforts outwards, to the international market. Competition in the arms
market will rise considerably, but then the Americans will also have to reveal
technologies to customers as a condition of making a sale, as is normal in the
market, and I’m not sure that the regulators in Washington will rush to approve
“On the other hand, if the US reduces its global
military involvement as a result of budget cuts, there will be more wars in the
world, and then, of course, suppliers like us will be able to sell more arms to
customers worldwide. For the time being, I don’t see immediate cuts.
US arms industry has a very strong lobby, and in the current economic climate,
with high unemployment, I don’t think that Congress will decide to cut the
Pentagon’s budget, which would bring in train massive layoffs.”
rise of the tea-party movement must also be taken into account. It could be that
many legislators sympathetic to the tea party will be elected to Congress, and
this is a movement that advocates extreme isolationism, as well as deep cuts in
“The strengthening of the isolationist tendency in
the US will be a grave danger for the entire world, if this is, in fact, what
happens as a result of the growth of the tea party.
The US has led the
campaign for improvement in human rights on a global scale, and if it decides to
drop out, because of the tea party and suchlike phenomena, what has been
achieved in this sphere will collapse, and we will be left with a very ugly
world. And of course, from Israel’s point of view, an isolationist America would
be a difficult problem.”
Are you worried at the prospect that US military
aid to Israel may be reduced or canceled because of the rise of the tea party?
“If we reach a situation in which we don’t need to accept aid from the
Americans, that will be so much the better for us. All aid is corrupting. Its
disappearance will only help Israeli industry.”
‘Israel has lost Turkey’
What about Turkey? There are those in Israel who have not yet lost all hope
“An interesting article in [a recent] edition of The Economist
asks whether the West has lost Turkey. I don’t know whether the West has lost
Turkey, but Israel has. Turkey has decided that its place is in the Arab world:
that the equation with Israel doesn’t suit it.”
criticism was heard in Israel of IAI’s decision to deliver four UAVs to Turkey
at a time when Israel’s relations with Turkey had deteriorated to a low from
which, in fact, they have not recovered.
“There was no justification for
breaking the contract with the Turks.
This is a question of business
We constantly declare to the world that we do business
regardless of politics; if you buy missiles from us, we won’t demand that you
vote for us in the UN. So we do not have the luxury of coming to the Turks with
political demands as a condition for honoring a contract. Nevertheless, had the
state required of us not to transfer the UAVs to Turkey, we would have listened.
The fact is that the State of Israel did not forbid us to do so.”
are reports of growing arms procurement in Colombia.
realizes that it has two enemies on its borders – Venezuela and Ecuador – it
starts looking for solutions. The Colombians still buy more from the Americans,
but they know that with us they will find cheaper products and better treatment.
They want to buy everything – from UAVs to aerial defense systems – and they can
Robots On the other side of your booth at the defense
exposition is IRobot. Is that something that interests IAI? “Robots as force
multipliers is a subject that has interested me for years. The IDF has
capabilities in this area, but it will take time until it integrates them. For
example, a short time ago the Lebanese shot dead an Israeli officer leading a
group that was clearing wild undergrowth on the border, and a new conflict
almost broke out. That job can be carried out by a robotic ‘Caterpillar’ that
the IDF has. Why should a human being have to sit on the vehicle? The relevant
departments in the IDF are aware of the technologies, and they are available,
but when a solution has to be found from one day to the next, they go for what
is known and familiar.”
There has been criticism in Israel of the
decision to buy F-35 aircraft, because of their astronomical price. Some have
described them as expensive toys. On the other hand, Israeli defense companies
are due to receive large reciprocal procurement orders. So is the plane good or
bad for Israel? “If the commander of the Israel Air Force says he needs F-35s,
who am I to say he’s wrong? If there is confidence in the commander, he should
be given what he wants. If there isn’t, he should be removed. As far as
reciprocal procurement is concerned, if you want routine maintenance, that
requires a local industrial infrastructure that isn’t always available in the
US. I’m aware of the criticism of the scale of the reciprocal procurement work,
but, as far as we know, it’s reasonable.”
In the past year, IAI has
signed an agreement to supply UAVs to Russia.
“Russia is a virgin market.
Up to now, we have never sold it anything.
We had engineering connections
with Russian companies but no large deals. So I hope that the sale of IAI UAVs
to Russia, a deal worth $400 million, will be the first step in a long journey.
From Israel’s point of view, Russia is a special country, because it supplies
arms, although defensive ones, to our enemies. However, the UAV deal creates an
opportunity to engage in a dialogue with the Russians, which could become
broader than arms deals.”
You’re not concerned about technology leaks?
“That could happen in India as well. We work within very clear limits, and we
are subject to strict supervision by the regulators in Israel.”
products Is Russia a potential market for civilian products too? “I hope that in
Russia, as in other markets, IAI will get into new civilian areas, and then the
sky is the limit.
Then there will be no more political restrictions. I’m
thinking of clean energy, large turbines, alternative energy in general, water
desalination techniques. In my view, the main theme should be big projects with
high entry barriers of manpower and finance. These and other areas are
characterized by fewer political barriers, and that is what is attractive about
them. Military projects are always wrapped in political
“I seek a new layer of activity for IAI, after the blow
our civilian aircraft market sustained because of the latest financial crisis.
At one time, we were not far from equilibrium between our military and civilian
activities, but we have fallen back to a ratio of 70:30. I hope we will regain
equilibrium, and we have decided to press ahead in green energy and large
When will IAI be privatized and become IAI Ltd.? “We
are still at the talks stage.
There are gaps between us and the workers
that have to be closed.
Beyond that, the rules of the game need to
change. I should like us to operate on the model of the banks when they were
owned by the state, by State of Israel Properties. The banks belonged to the
state, but they operated like banks. We ask that they should let us operate like
a defense company, but the state opposes that.
Privatization in another
five years? That’s certainly possible.”