Arms cooperation with Israel
Israeli defence firms are setting up a rapidly growing array of factories in Germany. Joint ventures will both help German military build-up and secure arms supplies for Israel’s wars.
BERLIN/TEL AVIV (our own report) – Israeli defence contractors are increasingly moving into Germany, setting up a rapidly growing number of arms factories. Rafael, for example, plans to manufacture components for its air defence systems at what was Volkswagen’s automobile plant in Osnabruck. Meanwhile Elbit has announced the establishment of “up to eight” new production sites in Germany, which are expected to employ “well over a thousand” people. On the one hand, the new arms factories will contribute to the rapid rearmament of Germany’s Bundeswehr. On the other, they enable Israeli companies to manufacture the weapons needed by the Israeli armed forces at a safe distance. This strategy secures Israel’s arms supplies should the conflict in the Middle East escalate still further. It offers additional backing in the event, for example, of another war of aggression against Iran. The new forms of German-Israeli arms cooperation build on a longstanding partnership between the two countries’ arms sectors, which goes back as far as the mid-1950s. The Federal Republic can benefit, not least, from access to some of the high-end, high-tech capabilities of Israel’s powerful and battle-tested defence industry.
Israel’s defence industry
In the early 2020s, experts estimated the number of companies in Israel wholly or at least partly involved in the production of armaments and military hardware at between 600 and 700. In total, they were employing almost 100,000 people and providing livelihoods for just under a quarter of all Israeli manufacturing workers.[1] The three largest of these companies are the privately owned Elbit group, with an annual turnover of around US$8 billion, the state-owned Israel Aerospace Industries (IAI), with a turnover of US$7.4 billion, and Rafael, with a turnover of 6.8 billion dollars (all figures for 2025). By way of comparison, Rheinmetall, which is Germany’s largest defence contractor, recorded a turnover of nearly 10 billion euros in 2025. In order to generate attractive long-term profits, the Israeli defence industry as a whole is, despite the constant war-related pressures on the Israeli armed forces, heavily reliant on exports. In recent years Israeli arms exports have regularly accounted for as much as 75 per cent of the sector’s turnover. Around 7.5 per cent of all Israel’s exports come from its defence industry, which experts calculate as eight times the global average.[2]
Tested in Gaza
Insiders attribute the success of the Israeli defence industry and its appeal to arms buyers around the world to several factors. Regularly cited is Israel’s push to always be better equipped and technologically more advanced than anyone else in the region, including Iran, Turkey and Arab states. Another factor commonly discussed is the technological advantage of having such close links between defence companies and the Israel Defence Force (IDF) – links that help to optimise weapons systems. In this respect, new weapons often emerge from a highly developed ecosystem of technological innovation. A prime example is Unit 8200, an Israeli intelligence corps unit that specialises in signals intelligence and clandestine cyber operations of all kinds. Soldiers who leave the unit after three to five years’ service are considered highly qualified for corporate military R&D and feed their know-how into an Israeli tech start-up scene that some even compare to Silicon Valley.[3] Furthermore, Israeli weapon systems are generally battle-tested. For instance, at the end of 2025, government officials from several countries, including Germany, were shown videos at a conference sponsored by Israel’s Ministry of Defence depicting drones striking a building in the Gaza Strip. The point was to encourage them to procure the apparently effective and deadly Israeli drones.[4]
High-tech weaponry for the Bundeswehr
German defence companies have been collaborating with Israeli arms manufacturers for decades. In addition to the usual bilateral arms trade, which took off as early as the mid-1950s (as reported by german-foreign-policy.com [5]), there have been specialised joint projects on high-tech weapons systems since at least the 1970s. Back then, the Federal Republic of Germany commissioned Israel to develop a radar jammer for use in the Tornado fighter jet. It could later be tested by the Israeli Air Force during the 1982 invasion of Lebanon and proved highly successful. “Electronic warfare”, noted a 2015 study on German-Israeli defence cooperation was “a field in which there are particularly close ties between Germany and Israel.”[6] In later years, the Bundeswehr has also procured advanced high-tech weapons from Israeli companies on a regular basis. For instance, the Bundeswehr’s first large drones – the Heron 1, which it deployed in Afghanistan – were supplied by IAI, an Israeli company that then cooperated closely with Rheinmetall on delivery and operation. The modern Arrow 3 air defence system, which the Federal Republic is currently acquiring, also comes from Israel. In that case the system is manufactured by IAI in collaboration with the US conglomerate Boeing.
German-Israeli joint ventures
German and Israeli companies have, especially since the 1990s, also cooperated directly in the manufacture of defence equipment. In 1996, for example, Rheinmetall and Israel Military Industries, a group since taken over by Elbit, founded a joint venture to develop and produce ammunition.[7] Other joint ventures have served primarily to market Israeli weapon systems in Europe. Thus, EuroSpike, founded in Germany in 1998 by Rheinmetall (40 per cent), Diehl Defence (40 per cent) and Rafael (20 per cent), has facilitated the sale of anti-tank weapons manufactured by Rafael in Europe. EL/M-2084 radar systems, produced by IAI, are sold by the Israeli group in partnership with Rheinmetall Canada. Customers include the Canadian armed forces (in 2015) and the Hungarian military (in 2020). Hero kamikaze drones, meanwhile, are being manufactured by Rheinmetall Italia in partnership with the Israeli company UVision. At the end of 2025, both companies were awarded a contract to manufacture a “significant number” of Hero drones for a NATO member state, said to be worth a three-digit million-euro sum.[8]
Eight new Elbit sites
Israeli weapon makers are now taking the next step: going beyond the export of weapon systems to Germany and joint production deals with German arms manufacturers, they are expanding their own production activities in Germany. This move is a response to the rapidly expanding demand for military hardware, both in Israel and, in particular, in European countries. In the face of limited production capacity at home, Israeli defence companies want to meet this demand by setting up factories abroad – first and foremost in the Federal Republic of Germany. At VW’s plant in Osnabruck, for example, car making will be replaced by arms production. Rafael will be manufacturing components and systems for air defence. For this purpose, Volkswagen is selling its factory to an investor, Aurelius Capital, and to the Lower Saxony state government.[9] Rafael is best known for the development and roll-out – in collaboration with IAI – of Israel’s Iron Dome air defence system. Elbit also has big plans. As confirmed by the chairman of Elbit Germany, Marian Rachow, a former Airbus manager, the company will establish “up to eight new sites” over the next few years and employ “well over 1,000” people in Germany. One of these sites, in Sangerhausen near Halle, has already sparked protest.[10]
“Long-term partner”
When asked why Israeli defence companies are currently prioritising investment in Germany, a former head of finances in the Israeli Defence Force was recently quoted as saying, “Germany is the most important industrial hub in Europe and maintains close ties with Israel. That makes it a partner with whom we can plan for the long term.”[11] Furthermore, the German government is making huge sums of money available for rearmament. Bastian Ernst, a CDU Member of the Bundestag who sits on the parliamentary defence committee, describes the construction of factories by Israeli defence contractors in Germany as “preparedness … in two directions” : “For Israel, it provides the security of having a production site from which they can source supplies should they become embroiled in a conflict;”[12] and the Bundeswehr also has security “if we have this technology in Germany and can make use of it”. In other words, it amounts, on both sides, to close cooperation in preparation for war. Ernst, by the way, worked, prior to entering parliament last year, first at Rheinmetall and then at Dynamit Nobel Defence, a company now owned by Rafael.
[1], [2] Yoram Evron: Israel’s defence industry: adaptation and growth in a changing arms market. In: Defence Studies vol. 25/2. 2025. p. 301-321.
[3] Raf Sanchez: Exclusive: Inside access to Israel’s secretive cyber spy agency – which headhunts recruits at 16. telegraph.co.uk 17.06.2019.
[4] Anat Peled: Israel’s Latest Military Tech: Tested in Gaza, Wanted by the West. wsj.com 04.12.2025.
[5] See: ‘In Germany’s national interest’ (II).
[6] Marcel Serr: Zur Geschichte der deutsch-israelischen Rüstungskooperation. In: Aus Politik und Zeitgeschichte 6/2015. 2. Februar 2015. S. 23-29.
[7] Otfried Nassauer, Christopher Steinmetz: Rüstungskooperation zwischen Deutschland und Israel. Berliner Informationszentrum für Transatlantische Sicherheit (BITS) Research Report 2003.1. Berlin, September 2003.
[8] Rheinmetall supplies NATO customer a significant number of HERO Loitering Munitions – order worth in the three-digit-million Euro range. rheinmetall.com 26.11.2025.
[9] Lazar Backovic, Roman Tyborski: Rüstung statt T-Roc – So rettet VW sein Werk in Osnabrück. handelsblatt.com 07.09.2026.
[10] Hunderte demonstrieren gegen mögliche Rüstungsansiedlung. mdr.de 30.08.2026.
[11], [12] Steffi Hentschke: Iron Dome, made in Osnabrück. zeit.de 08.09.2026.
