Israeli defense giant looks to salvage $850m Indian missile deal

Cancellation of such a large deal is liable to deal Israel's Rafael Defense Systems a serious blow.

Firing the SPIKE missile system (photo credit: RAFAEL ADVANCED SYSTEMS)
Firing the SPIKE missile system
(TNS) Rafael Advanced Defense Systems Ltd. CEO Major General (res.) Yoav Har Even is one of the business people accompanying Prime Minister Benjamin Netanyahu, who left yesterday on his state visit to India. Har Even's participation in the visit is important, given the many reports in the Indian media questioning whether Rafael's $850 million sale of missiles to the Indian army will go through. Rafael has undertaken to supply the Indian army with 8,000 Spike anti-tank missiles and hundreds of adapted launchers and accompanying systems.
Cancellation of such a large deal is liable to deal Rafael a serious blow. There is a dispute in India concerning the deal, because the local defense industries are pressing the Indian Ministry of Defense to cancel the deal, so that they can sell a new anti-tank missile that they have developed to the Indian army. At the same time, it is clear that the Indian army wants to procure the Israeli missiles sold by Rafael to dozens of armies throughout the world. Rafael's missiles are regarded as the best in the world.
"The presence of the CEO on the prime minister's official and very important visit is crucial right now," an Israeli defense source told Globes.
The Prime Minister's Office refused yesterday to say whether Netanyahu intended to bring up the question in his meeting with Indian Prime Minister Narendra Modi.
RAFAEL"s Spike LR2 Missile (YouTube/Rafael Advanced Defense Systems Ltd)
Har Even is not the only senior defense company figure accompanying Netanyahu on his visit. Israel Aerospace Industries Ltd. (IAI) (TASE: ARSP.B1) CEO Joseph Weiss and senior executives from Elbit Systems Ltd. (Nasdaq: ESLT; TASE: ESLT) and Aeronautics Ltd. (TASE:ARCS) are also taking part in the visit. Aeronautics is currently under a police investigation.
India has been considered one of the world's leading purchasers of arms in recent years, and the Israeli arms manufacturers are struggling for a foothold and to compete in this market for large-scale deals. IAI last year made the largest arms deal in the history of Israel defense industries, selling Barak 8 defense missile systems to India for $2.5 billion. These missiles were jointly developed by IAI and DRDO, the Indian Ministry of Defense's defense research and development agency.
The business delegation accompanying the prime minister to India is headed by Manufacturers Association of Israel president Shraga Brosh. He is due to sign a memorandum of understanding tomorrow with the president of the Indian industrial confederation for the promotion of a free trade agreement between the two countries. Brosh said, "A free trade agreement will facilitate for the first time the removal of trade and standards barriers, coordination of investments and taxation, and more. Such an agreement will give Israeli exporters a real opportunity to develop in the Indian market and integrate into the Indian economy, which is one of the world's largest economies, with high growth rates."
Israeli exports to India totaled $1.5 billion in 2016, almost 13% less than in 2015. Imports from India totaled $800 million in 2016, consisting mostly of diamonds.

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