Analysis: It’s about the Navy, not submarines

In the defense establishment, particularly in the navy, there is concern that the affair may lead to a decision by Germany to suspend, or even cancel the submarine deal.

A dolphin-class submarine constructed by German company Howaldtswerke- Deutsche Werft for the Israel Navy (photo credit: AMOS BEN GERSHOM, GPO)
A dolphin-class submarine constructed by German company Howaldtswerke- Deutsche Werft for the Israel Navy
(photo credit: AMOS BEN GERSHOM, GPO)
Attorney-General Avichai Mandelblit’s decision to open a police investigation into what is wrongly termed the “submarines affair,” has dragged many in the media to suspect, or even accuse Prime Minister Benjamin Netanyahu of corruption.
But Netanyahu is not a corrupt politician. He does not need to be, with casino tycoon friends such as American Sheldon Adelson and Australian James Packer, who would be more than happy to offer him top jobs with plenty of money if he retired and joined their organizations.
Many things can be said about the prime minister: that he loves the good life of posh hotels, premium whiskey and high quality cigars; that he and his family confuse the private and public spheres; or that he sometimes tries to imitate Louis XIV, the French king who said, “L’etat c’est moi,” I am the state.
For someone so powerful, Netanyahu often feels victimized.
But corrupt he is not.
Yet, this latest saga indicates that he is careless about selecting his confidantes, and may even be blind to seeing when they exploit, manipulate and use state secrets to advance their own interests. Two of them are at the center of the police investigation: his own and his family’s personal attorney David Shimron, and former deputy head of the National Security Council Brig.-Gen. (Res.) Avriel Bar Yosef.
There are four parallel and interwoven aspects to what should more accurately be called the “navy affair.” They are: submarines, new corvettes, the maintenance, and the role of agents and middleman.
Israel has a fleet of five operational submarines, all of which were built since the 1990s by German shipyards, with generous subsidies from the German government totaling $1.5 billion, 50% of the cost. The sixth will arrive by 2019. The submarine fleet serves to patrol Israeli territorial waters, gather intelligence and deploy special forces in enemy lands.
According to foreign reports, they are equipped with missiles carrying nuclear warheads, and thus provide Israel with a second- strike nuclear capability, if and when Iran also develops nuclear weapons.
The shelf life of a submarine is about 30 years and to build them takes 10. So the time has arrived to order three new, more advanced submarines, in preparation for when the three old ones will leave the service in around 2025.
This will also be the time when the nuclear deal between Iran and the world powers will expire. Fearing the Islamic Republic will then renew its efforts to assemble a nuclear bomb, the prime minister decided to order the three submarines.
There are some experts and politicians, though, who think that Iran does not pose an existential threat, and that the submarine budget could have been allocated to other military projects. The debate on this matter is legitimate, with strong arguments on both sides. Netanyahu’s decision is reasonable, and surely he is the ultimate authority to make it.
Nor was there anything wrong or corrupt in making it. It is very likely that anyone serving as prime minister would have made a similar decision.
As for the four corvettes which the navy is acquiring from Germany, the decision- making process has been scandalous. This is an ancient sin that began with government negligence long ago.
More than a decade ago the government granted concessions to drill for gas in the Mediterranean.
But the government forgot to demand from the companies who won the concessions – Israeli Delek and US Nobel Energy – to also cover the cost of defending those enterprises.
Thus, the burden fell on the Israeli taxpayer.
The four corvettes are built by the German ThyssenKrup Corporation, which also builds the submarines. The construction cost for the four ships is $500 million. The contract was granted to the German company, after German Chancellor Angela Merkel approached Netanyahu and asked him to reciprocate for German generosity with the submarines.
Netanyahu and his then-defense minister Moshe Ya’alon, who in the meantime resigned, agreed to do so, canceling an international tender which was in preparation.
Was it a corrupt decision? No. The corvettes are not the only weapon system which Israel purchases without bidding or tender. This is the way all IAF planes are purchased in the US, and recently how the IAF bought its training planes from an Italian company.
ThyssenKrup has been represented since 2009 by Micky Ganor, a real estate businessman and a former major in the navy. According to a report in one German newspaper, his commission for the submarine and corvettes deals is between €10m. and €30m.
But it seems that Ganor’s financial appetite has no borders.
He hired attorney David Shimron to represent him.
Shimron is a reputable Israeli lawyer, but no doubt he was approached by Ganor, not only because of his professional skills, but most probably also because of his access to Netanyahu.
The two went to Histadrut labor federation Secretary-General Avi Nissenkorn with a proposal that maintenance should be privatized. The submarines are maintained by the navy shipyards in the port of Haifa. Because of their strategic nature, the IDF and the navy do not want anyone without top security clearance to be able to get a close look at them.
Nissenkorn’s spokesman told me that in the meeting, Shimron and Ganor asked that both the submarines and the corvettes be taken care of by a private company, which the German corporation would create. Shimron denied that, telling me that they did not discuss the submarines, but only the ships, and in any case it was a very preliminary conversation. Whatever the truth, Nissenkorn rejected the request, because he opposes to privatization.
Ganor is one of hundreds of Israeli agents, dealers and middlemen who represent international corporations that hope to clinch civilian or military deals in Israel. They serve as door-openers and lobbyists. In return, they are handsomely paid under such definitions as salaries, dividends, commissions and success fees.
In almost any sale of foreign- made weapons, be it of planes, ships, intelligence equipment, or components for missiles, an Israeli middleman gets a cut.
You may say that this is the way of the world in doing business.
The problem in Israel, however, is that transparency and supervision by the government barely exists. Being a small and intimate society where everyone knows everybody, Israel witnesses the “revolving door” phenomenon.
Army or intelligence officers work on top secret projects while in service and later join the companies with which they worked. This opens many doors to potential corruption.
Israel society was once considered “unbribeable.” Not any more. From a small and unimportant military branch, the navy became a big and powerful organization with a budget of billions. No wonder it attracts people like Ganor and Ben Yosef, among others.
Embarrassed by the media attention, ThyssenKrup said this week that they will open an internal inquiry to see whether Ganor operated according to their guidelines.
It will be interesting to see whether the German giant will express trust in its Israeli agent or replace him.
The Israeli police mission is much more complicated. It will have to find out whether Shimron, equipped with inside information, acted to enrich himself. And more importantly, whether Netanyahu knew about it or even encouraged him. Both Shimron and Netanyahu deny it.
In the defense establishment, particularly in the navy, there is concern that the affair may lead to a decision by Germany to suspend, or even cancel the submarine deal. If that happens, Israeli security will be suffer the consequences.