Israel may seek a new partner for the development of a next-generation stealth fighter jet by 2028. As global defense dynamics shift, Israel's role in the defense export market faces both opportunities and challenges.
In 2024, European nations increased their Israeli weapon purchases by about $8 billion, making up 54% of Israel's total defense exports.
Leading the charge were Israeli defense giants like IAI, Elbit Systems, and Rafael Advanced Defense Systems. Meanwhile, Russian President Vladimir Putin continued his role as a sales agent for Russian defense industries, securing various contracts. On Monday, Elbit announced a $260 million deal to supply defense systems for the German Air Force’s transport aircraft.
On the other side of the Atlantic, US President Donald Trump served as a sales agent for American defense firms, urging Israel to purchase US-made products. His administration's push included weapons systems worth an estimated $600 billion over the coming years.
Israeli defense companies are often in direct competition with American firms. For instance, Israel’s IAI clinched a $3.5 billion deal to sell the Arrow 3 missile defense system to Germany, despite competing against US offerings. Israeli firms benefit from offering lower prices, faster delivery times, and, in some cases, better performance.
However, as European nations increasingly purchase US-made systems, Israeli companies may struggle to secure major contracts.
For example, Israel's Rafael recently signed a $2.1 billion deal to sell its SPYDER air defense system to Romania. This trend may become more common, especially as procurement shifts toward systems like the Patriot missile defense, which Ukraine urgently needs to counter Russian missiles.
Nonetheless, countries that are satisfied with Israeli technology are unlikely to fully replace these systems with US-made alternatives.
US Influence on Israel's defense
Trump's influence on Israel’s defense policies may intensify if a new security assistance agreement is not signed. The current deal, which provides Israel with $3.8 billion in aid annually, expires in 2028.
The aid primarily funds the purchase of advanced Air Force assets, such as a third squadron of F-35s, more F-15EX fighters, refueling aircraft, and the replacement of the Sikorsky CH-53K King Stallion helicopter. Some of this procurement already falls outside the scope of the current agreement. Without a new deal, Israel will have to cover the entire cost from its defense budget.
At the same time, American defense companies, such as Boeing, continue to lobby for new contracts. Boeing is advocating for the US Air Force to purchase the F-47 fighter jet, a long-range, twin-engine stealth aircraft expected to cost $300 million per unit – more than double the cost of an F-35.
Set to enter service in the early 2030s, the F-47 could provide an answer to the Gulf states' purchase of F-35s. However, integrating Israeli systems into the F-47 may present more challenges than the F-35 integration.
If Israel is forced to purchase the F-47 without US credit assistance, the nature of US security aid will become more transparent. The US administration reportedly plans to ask for the cancellation of reciprocal procurement obligations as part of a new trade agreement, which could prompt Israel to explore other options.
Seeking new partners for fighter jet development
Lockheed Martin is also preparing to launch a new version of the F-35, the F-55. This variant is expected to feature enhanced range, stealth, and systems but will likely come at a lower price than the F-47. The affordability of the F-55 could make it an attractive option for Israel, particularly if it struggles to secure favorable financing terms from the US.
Alternatively, Israel may look to foreign partners – or multiple partners – to co-develop a new fighter jet. This new aircraft, partially produced in Israel, would incorporate as many Israeli systems as possible. This strategy could prevent Israel from repeating the mistakes of the Lavie fighter jet program, which was canceled in 1988.
The main error was failing to secure foreign partners who could share the financial burden and increase production numbers. Foreign funding helped Israel succeed in major defense projects, such as the Iron Dome and David's Sling air defense shield.
Today, IAI's leadership is more open to collaboration. Opportunities for partnerships are abundant. For example, India, which is working on developing its own stealth fighter, has a strong relationship with Israel’s defense industries.
The Global Combat Air Programme (GCAP), a joint initiative by Japan, Britain, and Italy, also presents a potential opportunity for cooperation. Meanwhile, Germany's Future Combat Air System (FCAS) project with France is facing significant challenges, and Sweden will soon need to replace its aging Gripen fighter jets.
Strategic shift of Israel’s defense industry
As countries like Turkey and South Korea develop their own stealth fighter jets, Israel's participation in such programs could have far-reaching consequences.
Not only would it provide Israel with crucial economic benefits, but it would also stimulate its local defense industries, creating thousands of jobs and reducing reliance on future US aircraft purchases. This strategy could position Israel as a key player in global defense development.