Israel's largest-ever defense deal: $3.5 billion sale of Arrow-3 missile defense system to Germany approved

The United States approved a $3.5 billion sale of Israel's Arrow-3 missile defense system to Germany, in what will be Israel's biggest-ever defense deal, the Israeli defense ministry said on Thursday.

Israel and Germany will sign a Letter of Commitment, with a $600 million initial payment, to commence work on the projectץ The full contract is set to be signed by the end of 2023, with Germany expecting the Arrow 3 system to be delivered in the final quarter of 2025.

The U.S. is a partner in the Arrow project, which was developed jointly by the Israel Missile Defense Organization and the United States Missile Defense Agency.

Arrow missile launch.

The Arrow-3 is designed to intercept ballistic missiles outside of the earth's atmosphere.

It is the top layer of Israel's missile defense array, which extends from Iron Dome that intercepts short-range rockets to Arrow-3's long-range missiles that destroy any non-conventional warheads at a safe altitude.

Russia's war in Ukraine has laid bare a shortage of ground-based air defense systems such as Raytheon's Patriot units or the more recently developed IRIS-T in many Western nations.

While Patriot and IRIS-T cover the medium layer of air defense, Arrow-3 - produced by Israel Aerospace Industries (IAI) - offers protection for the higher layer.

“This is a significant decision, which will contribute to Israel’s force buildup and economy. It is also particularly meaningful to every Jewish person that Germany is acquiring Israeli defense capabilities,” Israel Defense Minister Yoav Gallant said in a statement. “Arrow 3 is a groundbreaking system, the most advanced of its kind in the world, as well as a force multiplier in Israel’s air defense, soon in Europe as well.

“Our cooperation with the U.S. government is essential to the system’s development process and to the achievement of this significant agreement. This reflects once again the powerful defense ties between the US and Israel.”

The director general of the Defense Ministry, Brig. Gen. (res.) Eyal Zamir said the “landmark deal, the largest defense export agreement in our country’s history, will propel Israeli defense exports to a new record, following last year’s remarkable achievement of $12.5 billion.”