News Analysis – June 2019

General News Summary

Elections, Again

Israelis are due to go back to the polling stations on September 17, after Benjamin (Bibi) Netanyahu and his supporters won a majority in April’s elections but failed to assemble a viable government. Netanyahu will be facing some revelation of his effort to get Knesset Members from the opposition to defect, giving him the 61 or more votes necessary to form a viable government. He reportedly offered the Defense Ministry to a back-bencher from the Blue White party and also offered two senior ministries to Labor. The parliamentary opposition had little to no connection with Netanyahu’s failure to build a governing coalition: Responsibility fell inside his own camp, to his former ally and now bitter rival Avigdor Lieberman, who withheld the five Knesset votes, which would have led to a Netanyahu government.

It’s important to remember that Netanyahu and his supporters didn’t lose the April elections. They actually won, collecting 65 of the Knesset’s 120 seats. The rub was that five of those seats belonged to the Yisrael Beitenu party of Lieberman, who resigned as defense minister last year over differences with what he considered Netanyahu’s too-soft policy on Gaza terrorism.

Why did Lieberman, who repeatedly says joining a center-left coalition is out of the question, torpedo Netanyahu’s coalition-building attempts? Perhaps because he expects his party to win more seats in the re-run voting; perhaps because he envisions another deadlock in which frustrated right-wing parties, and elements inside Netanyahu’s Likud as well, turn to him as the most experienced alternative (after all, he’s been both defense and foreign minister). Perhaps out of pure animosity towards Netanyahu, his former patron and ally, under whom he first gained prominence as director general of the Likud party back in 1995.

Lieberman, not so incidentally, isn’t the only one anticipating tectonic shifts inside the right-religious camp in advance of the repeat elections in September. The new voting provides a second chance for the pro-cannabis, libertarian, right-wing Zehut party of Moshe Feiglin, who led a civil disobedience campaign against the Oslo Agreements with the Palestinians in the 1990s, and the New Right party of former Education Minister Naftali Bennett, both of whom fell just short of reaching the 3.25% of the popular vote required for a party to win any Knesset seats. It also may mean a new home for former Justice Minister Ayelet Shaked, who’s been widely touted as leaving New Right for another political party. Other permutations include Bennett’s return to the remnants of his former Jewish Home, now called the Union of Right-wing Parties, the emergence of Lieberman as champion of the militantly secular right at the head of a party that’s doubled its size or more, and the unification of the two major Israeli Arab parties into one large electoral bloc.

Some realignment also seems to be coming in the center-left. Avi Gabbay, who headed the Labor party to its worst-ever showing with just six seats in 2019, has announced his resignation. Will a new party leader seek to revitalize Labor, or prefer meshing into a single-ticket electoral alliance, or even a merger with either the farther-left Meretz or the more centrist Blue White? Will it make any difference, as early public opinion polls indicate that there’ll be no major shift away from the Netanyahu camp, and if anything, a larger number of right-religious members in the next Knesset?

Despite these signs, it’s too early to predict the outcome of the September voting. Will Gaza flare up again? What about current U.S.-Iranian tensions in the Gulf, and new revelations in the cases involving Netanyahu? In Israel and the Middle East, anything can happen.

Gaza Quiet…Briefly

It took hardly a month for tension to return to the Gaza border, with rocket and incendiary balloon attacks prompting a strong Israeli response and renewed talk of an impending Israeli military operation against terror attacks from the Gaza Strip.

For a brief period, it appeared that Israel and the Hamas rulers of Gaza had averted a major escalation after a series of clashes along the Gaza border, in early May. In the most violent confrontation since Israel’s Operation Protective Edge in 2012, Hamas and Islamic Jihad militants fired hundreds of rockets on Israeli targets; four Israelis were killed in the attacks, to which Israel retaliated with massive bombing of terrorist targets inside the Strip.

Israel’s Iron Dome anti-missile system again proved effective against the rocket attacks; defense sources said that about 90% of all rockets aimed at populated areas were successfully intercepted. A new tactic employed by the Gaza militants firing simultaneous barrages of rockets against a single target in hope of overwhelming Iron Dome’s capacity proved relatively ineffective due partly to improvements in the system. Other upgrades by the Defense Ministry together with Iron Dome developers Rafael Advanced Defense Systems and Israel Aerospace Industries, enhanced effectiveness against short-range mortar fire.

As usual, Israel has not acknowledged reaching a cease-fire agreement with Gaza’s terrorist rulers. But after the fighting stopped in early May, Israel relaxed restrictions on what it allows to enter Gaza and on the offshore fishing zone. In mid-June, Israel again closed off the Gaza fishing zone in response to a rash of incendiary balloon and drone attacks on Israeli farms and villages near the Gaza border.

The Road from Bahrain

The Bahrain Economic Workshop, sponsored by the U.S. and touted as the first concreted step on the way to President Trump’s “deal of the century” Israel-Palestinian peace effort, seems set for attendance by an all-star cast of moderate Arab states. Egypt, Jordan, Saudi Arabia, Morocco, the United Arab Emirates lead the list of those who have signed on for the meetings. Israel is expected to get an invitation, and accept it, before the meetings convene in Manama, the Bahraini capital, on June 26.

But the one notable exception, the Palestinian one, leaves the conference with a status that some observers term “a wedding without a bride.” Not only has Palestinian President Mahmoud Abbas decided to stay home in Ramallah and continue to eschew any contacts with the Trump administration, he has called on other Arab states to do so as well. Saeb Erekat, a senior Palestinian official long in charge of what negotiations there have been with Israel, has ridiculed the conference, predicting that it will be “the biggest setback and embarrassment” for Trump’s son-in-law, the administration’s point man in developing its long-awaited peace proposal.

Full details of the plan-in-the-making have not been disclosed, but the Palestinians are refusing to even talk about it because they’re convinced its proposals will be tilted towards Israel, offering the PA economic benefits rather than political gains. That view seemed to be reinforced in early June when David Friedman, the U.S. ambassador to Israel and a long-time supporter of the settler movement, said that Israel “has the right” to annex parts of the West Bank.

Formal presentation of the plan has been held up, apparently until Israel finally elects and swears in a new government. Such a government, Israeli observers note, is almost certain to include a large settler element to whom any political concessions to the Palestinians are anathema.

All of which means that there are no likely takers for the kind of deal Trump and Kushner seem ready to propose. That the road from Bahrain is likely to lead where all other Western attempts to broker Israeli-Palestinian peace have led to – nowhere.

“Emergency” Replacement

Chief of Staff Lt. Gen. Aviv Kochavi has replaced the commander of an Intelligence Corps unit which provided faulty information leading to the interception of an IDF undercover unit sent into Gaza to plant monitoring devices. The incident, labeled a major fiasco, resulted in the death of a senior IDF officer and removal of the commander of Sayeret Matkal, who had overall command of the failed operation. According to various reports, an IDF officer who previously commanded the intelligence unit was called out of retirement as an “emergency” replacement.

Surprise! Tel-Aviv Congested

Tel Aviv ranked 19th on Amsterdam-based TomTom International’s list of the world’s most congested cities, released in early June. The dubious honor of the top three positions on the most-congested list went to Mumbai, India, Bogota, Colombia and Lima, Peru; Los Angeles, at 24th, was the most congested in the U.S., among European cities, Bucharest, Romania, was number 11, Lodz, Poland – 15, Edinburgh – 27, Rome – 31, London – 40 and Paris – 41.

Fertile Israel

Israel’s fertility rate, at 3.1 childbirths per woman, is the highest in the OECD, according to a report by Israel’s Taub Center for Social Policy. The rate is considerably higher than other developed nations. Other countries with similar fertility rates average one-fifth of Israel’s per capita GDP.

The Economy

Rapid Growth

Israel’s GDP grew by an annualized 5.2% in the first quarter of 2019, according to preliminary figures released by the Central Bureau of Statistics in mid-May. The figure compares with 3.9% in the last quarter of 2018, and 2.8% in 2018’s third quarter. An exceptionally large rise in vehicle imports, of about 600%, was a major factor in the increase.

OECD Lowers Forecast

The Organization for Economic Cooperation and Development has lowered its 2019 growth forecast for Israel from the 3.5% figure published last November to only 3.1%. The organization of the world’s top economic powers, of which Israel is a member, predicts Israeli GDP growth of 3.1% in 2020. The revised forecasts are part of a general downgrading of growth predictions, due to U.S.-Iranian and U.S.-Chinese tensions and signs of an impending world economic slowdown. At the same time, the OECD said that the Israeli economy itself remained relatively strong.

Unemployment Falls

March unemployment reached the record low since last year, falling to 3.9% from February’s 4.1% in figures published by the Central Bureau of Statistics. The shortfall was attributed to lower government revenues during the first four months of 2019 and increased government spending over the same period.

Budget Deficit Jumps

Israel’s 12-month budget deficit jumped to 3.8% of GDP, according to the Finance Ministry’s revised budget performance figures for April. The shortfall was NIS 14.1B, almost tenfold the NIS 1.5B of the preceding 12 months.

Lots of Tourists

Over 2.03 million tourists visited Israel in the first five months of 2019, raising expectations that the total for all of 2019 will break the record of 4.12 million tourists since last year. May tourism, at 466,000, was up almost 10% from May 2018, despite the disappointing number of visitors for the Eurovision Song Contest.

Credit Exposure Worries S&P

The S&P ratings agency has expressed concern over Israel banks’ level of exposure to the real estate sector. According to Globes business daily, credit for mortgages, construction and real estate accounted for 46% of the total credit extended by Israeli banks in September 2018, increasing risk in the eventuality of a crisis in the housing market, particularly since real estate credit continues to expand.

Trade War Threat

The impending trade war between the U.S. and China poses a serious threat to Israeli exports, according to a report released in early June by Israel’s Economy Ministry. Ohad Cohen, who heads the ministry’s Foreign Trade Administration, described the danger of a trade war to Yediot Aharonot media group: “If global economy is on the path towards a slowdown due to the trade war, it could create a situation where both developed and developing markets will see their growth slashed in ways we have not previously seen or anticipated—and Israeli export will feel the effects.”

The warning mars an otherwise positive picture, with Israel’s exports rising by 7% to $110.6B in 2018, compared to the previous year. Export of merchandise, at $60.6B, was slightly lower than the record $61B set in 2012.

Traffic Incentives

The Ministry of Transport is launching a pilot program based on incentives for drivers who avoid peak traffic periods. A monitoring device will track participants’ vehicles and driving habits, according to a report in Calcalist, the economic supplement of Yediot Aharonot newspaper. Participating drivers will receive an annual budget of NIS 4,500 ($1,250), from which money will be subtracted for actions like driving in peak rush hours and added for good behavior, including carpooling. At the end of the year, the participants will pocket whatever is left in their budgets, as long as it doesn’t exceed NIS 2K ($555).

Going to Dubai

Israel is one of the 192 countries that has been invited to participate in next year’s Expo 2020 Dubai, the Foreign Ministry announced in late April. The international exhibition in the Gulf State is due to open in October 2020.

Flug Joins Democracy Body

Karnit Flug, former governor of the Bank of Israel, has joined the Israel Democracy Institute. As vice president for government and economy of the independent research institute, she will deal with research on prosperity and economic stability, social mobility, productivity and long-term growth.

Amazon Hits Mall Shares

The price of shares of leading Israeli shopping mall operators dipped in early May after press reports that Amazon, the online retail giant, was moving towards opening direct operations in Israel. According to the reports, Amazon, which currently makes deliveries from warehouses in Europe through the Israeli Postal Service, is in talks with a local delivery service, at the same time encouraging local suppliers to begin marketing their products to local Israeli customers.

According to a report by Yediot Aharonot, online shopping is on the rise in Israel. The postal service delivered over 65 million packages weighing a total of 14.1 tons from outside the country in 2018, up 6.6% in volume and 22% in weight over 2017.

Regulating Rental Scooters

The Tel Aviv Municipality is planning to issue new regulations covering the use of short-term rental scooters and bicycles on city streets. According to a report in Globes, the new rules will require companies renting out the vehicles to provide service in all parts of the city, not just in well-to-do areas, require rental companies to make sure their bikes and scooters are not left in the middle of city streets, and do not block access to residences or other buildings. Several local and international operators now rent out bicycles and scooters in the city.

Israel Willing to Talk

Yuval Steinitz, the outgoing minister of National Infrastructure, Energy and Water, has agreed to discuss Israel’s maritime border with Lebanon aimed at facilitating each country’s offshore gas and oil fields. Steinitz made the commitment in a late May meeting with David Satterfield, the U.S. Principal Deputy Secretary of State for the Near East. The two countries, which have no diplomatic relations, claim ownership of an area of 860 square km thought to hold large quantities of gas, similar to those of Israel’s Tamar reservoir, and have awarded conflicting exploration rights – Lebanon to a consortium including Eni of Italy, Novatek of Russia, France’s Total, and Israel to Delek Drilling and Noble Energy.

Gas from Israel’s offshore Tamar field was due to begin flowing to Egypt in late June. Pending final testing, the gas will flow through the 90-km underwater pipeline from Ashkelon on Israel’s southern coast to El Arish in Egyptian Sinai; the pipeline, bought by gas field operators Noble Energy and Delek Drilling and their Egyptian partner, East Gas, was previously used for the transport of Egyptian gas to Israel.

Israel Electric Corp., the government-owned entity, has contracted with Delek Drilling for the purchase of 4B cubic meters of gas from the Leviathan field over the next two years. The deal is valued at $700M. According to IEC estimates, the deal will save the entity about $175M, compared to purchases from other sources.

Delek Buys North Sea Fields

The Delek Group, controlled by Israeli billionaire Yitzhak Tshuva, is acquiring Chevron North Sea Ltd. for $2B. The purchase adds 10 North Sea operating fields to the portfolio of the Israeli firm, which already owns several offshore Israeli gas and oil fields. The acquisition, through Delek’s Ithaca subsidiary is being funded through an upsized $1.65B Reserve-Based Lending senior debt facility, a $700M acquisition debt financing facility, an equity investment by Delek and existing cash resources.

Aerospace & Defense

Defense Exports Dip

Israel’s defense exports declined by $1.7B in 2018, totaling $7.5B compared to 2017’s $9.2B. The Defense Ministry’s Defense International Defense Cooperation Directorate, better known by its Hebrew acronym SIBAT, said that one quarter of 2018 defense exports came from missile and missile-defense systems, followed by unmanned aerial vehicles, with 15%.

Did Rampage Evade S-300?

Israel reportedly used Rampage supersonic long-range air-to-surface missiles in an April attack on Iranian weapons facilities in Syria. The missiles, developed by Israel Aerospace Industries and the former IMI Systems, are said to be capable of evading the advanced S-300 air-defense system which Russia has provided to Syrian forces. The Rampage, which carries a double warhead and has an effective range of almost 150 km, is said to be extremely accurate.

Mossad Wins Defense Prize

The Mossad team which stole files demonstrating that Iran had been engaged in a clandestine operation to develop nuclear weapons has been chosen for the 2019 Israel Security Prize. In the clandestine operation inside Iran last year, Mossad agents stole Iranian nuclear archives in the Islamic Republic’s capital of Teheran and smuggled thousands of documents to Israel. The content of the files showed that Iran had in the past worked to develop nuclear weapons.

India Orders Spikes, Spice

The Indian Army placed an immediate order in May for 240 Spike anti-tank missiles and 12 launchers, according to Indian media reports. The deal is worth tens of millions of dollars to Rafael Advanced Defense Systems, developer of the Spike. According to a report in Globes, the emergency order stems from an assessment of the Indian military’s immediate needs, and slow development of the Indian-made NAG-190 missile. The Indian Defense Ministry, which was interested in promoting the NAG-190, forced cancellation of a $500M order for Spikes in 2011; Prime Minister Benjamin Netanyahu sought to revive the deal during his 2018 talks with his Indian counterpart, Narendra Modi.

In early June, Indian media said India’s Air Force was urgently procuring more than 100 advanced SPICE (Smart Precise Impact Cost Effective) 2000 bombs from Rafael. SPICE is an electro-optics/GPS-guided guidance kit for converting air-droppable unguided bombs into precision guided bombs. Deployed by the Israel Air Force where it is called “steel hailstones,” SPICE is designed for air-to-ground missiles weighing 900 kilos.

Jane’s, the authoritative defense publication, has reported that the Indian Air Force plans to equip its Sukhoi Su-30MKI multirole fighters with Rafael’s I-Derby ER (extended range) air-to-air missile. The new missiles will replace the aging Russian-made Vympel R-77 (AA-12 ‘Adder’) AAMs by 2021-22.

The latest developments come after the fire-and-forget I-Derby ER missile, which features a software-defined radar seeker and a dual-pulse solid rocket motor, was selected to be the primary AAM to arm India’s Tejas Light Combat Aircraft following successful test-firings in July 2018.

Howitzer Deal?

According to unconfirmed media reports in the Indian media, Israel’s Elbit Systems is the winner of a tender to supply its ATHOS (Autonomous Towed Howitzer Ordnance System) 2052 to the Indian Army. In early June, there had been no official notice of the deal, valued at about $1B. The bid from Elbit and its Indian partner, Bharat Force, reportedly was significantly lower than that of French Nexter, which offered the Trajan gun jointly with its Indian partner Larsen & Toubro.

The entire order is for 1,580 towed guns, but due to Indian Defense Research and Development emphasis on local Indian production, it’s possible that Elbit will manufacture only 400 of them.

India Radio Contract

Elbit Systems has been awarded a $127M three-year contract to supply vehicular tactical radio systems to a South Asian country’s army. Name of the purchaser was not announced, but Globes, quoting market sources, said the sale of the radios, to be installed in fighting vehicles including APCs and tanks, was made to India.

According to a report in Globes, Elbit is also in advanced talks with the German Air Force on a $200M sale of DIRCM (Directional Infrared Counter Measures) aircraft protection systems. DIRCM will protect the German Air Force’s fleet of A400M transport and refueling aircraft from man-portable air defense (MANPAD) missiles, using infra-red beams to divert hostile missiles from its airborne target.

IAI in India Satellite

TecSar radar made by Elta Systems, a subsidiary of IAI, is a key component of the RISAT-2B satellite launched by India in late May. According to the Israel Defense website, the radar apparently is based on the same technology and co-developed by IAI and the Indian Space Research Organization (ISRO).

Mortar Deal

Elbit Systems has been awarded a $30M, two-year contract to supply its STYLET precise Guided Mortar Munition (GMM) to an Asia-Pacific country. According to the manufacturer, STYLET is accurate to within 10 meters at ranges of from 1,000 to 8,500 m.

Shaldags to Africa

Israel Shipyards has launched the first of four Shaldag Fast Patrol Craft ordered by an African country. The deal with the country thought to be Cameroon, includes three Shaldag MK II and one Shaldag MK V vessels, crew and maintenance training and technical support.

The Shaldag FPC, which is used by the Israel Navy, is designed for naval security operations requiring high intercept speeds; in the past, Israel Shipyards was contracted to sell four Shaldag vessels to Nigeria.

Iron Dome Proposal

A bill introduced in the U.S. House of Representatives in mid-June would fund the purchase of two Iron Dome missile-defense systems to protect U.S. forces in the Middle East. The proposal was sponsored by U.S. Reps. Mike Sherrill, a New Jersey Democrat, and Joe Wilson, a South Carolina Republican.

Elbit on the Rise

First-quarter revenues of Elbit Systems were up sharply, reaching $1.02B compared to $88M for the parallel quarter in 2018. Elbit’s orders backlog also rose sharply, to $9.6B on March 31, 2019 compared to $8.04B on March 31, 2018. 59% of the backlog came from non-Israeli orders. Elbit president and CEO Bezalel Machlis noted that the 25% revenue increase was attributable in part to Elbit’s recent acquisition of IMI Systems, the former Israel Military Industries, in a privatization sale.

In a separate development, government-owned Israel Aerospace Industries (IAI) reported a net profit of $14M on sales of $1B in 2018. Although sales grew by 13.5%, net profit was unchanged from 2017 and attributed in IAI’s annual report to a temporary decline in the conversion of passenger aircraft to cargo configurations.

Naval Maintenance

M7 Aerospace, a subsidiary of Elbit Systems, is one of several firms chosen to provide maintenance, modification, aircrew and related services (CMMARS) for the U.S. Navy. M7 Aerospace will provide logistical support and maintenance for various U.S. Department of Defense aircraft for all phases of the acquisition life cycle.

Legal Adviser

Tamar Luz has been named legal adviser at IAI. According to an IAI announcement, Luz has more than 20 years of experience in the legal aspects of corporate finance, mergers and acquisitions, and other areas. She has law degrees from the Hebrew University of Jerusalem and Georgetown University in Washington, D.C.

Philippine Deal Near

Israeli defense sources expect Elbit Systems to sign a $180M contract for various kinds of unmanned aerial vehicles with the Philippine army in the coming weeks, according to a report in Globes. The UAVs involved are long-range Hermes 900 and Hermes 450, capable of sustained flight, as well as Skylark 1 and Skylark 3 tactical UAVs designed mainly for use by field units for real-time observation missions.

Latest UAVs

IAI was due to unveil T-Heron, the latest in its family of unmanned aerial vehicles, at the Le Bourget Air Show in Paris in mid-June. Designed for tactical missions on the battlefield, the T-Heron is expected to be used extensively by ground troops and coastal guards, as well as by other protection forces.

IAI was also due to introduce the next generation ELM-2084 Multi-Mission Radar (MMR). MMR is already a key component in Israel’s Iron Dome and David’s Sling anti-missile systems and IAI’s Barak. The latest version fuses additional sensors to the main MMR system to provide an active, passive, and combined Air Situational Picture (ASP).

Also, at the Paris show, Elbit Systems was due to introduce its Hermes 45 Small Tactical Unmanned Aircraft System. Elbit Systems says Hermes 45 offers a unique combination of extended range and duration with point launch and recovery from land and maritime platforms, creating enhanced capabilities for intelligence, surveillance, target acquisition and reconnaissance (ISTAR) at the brigade and division levels and for naval squadron units.

V-22 Computers

Elbit Systems has been awarded an order to supply 132 advanced avionic processors for V-22 Osprey vertical take-off aircraft of the U.S. Navy and Air Force. The order, valued at just over $13M, will be filled by the Israeli contractor’s U.S. subsidiary.

Joint Exercise

The Israel and U.S. Air Forces conducted a joint exercise of Israel-made Iron Dome and U.S.-manufactured Patriot air defense systems at a base in central Israel in mid-April. The exercise, targeted at an assortment of smaller drones and unmanned aerial vehicles, was part of an annual training program of the IAF air-defense system responsible for defending Israel’s airspace using both ground forces and aircraft. These include the last line of defense against some aerial threats and the first line of defense against other threats including ground-to-ground missiles, ballistic missiles and rockets.

IDF’s Pegion

The Israel Defense Forces has unveiled Pegion, a new smart electro-optic sight designed to ease targeting of incendiary balloons and kites by a standard-issue assault rifle. The sight, developed in conjunction with Smart Sight, a company based at Kibbutz Yagur, and the Defense Ministry‘s Weapons and Technology Infrastructure Administration, employs computer algorithms to follow rapidly moving targets and determine when the weapon should be fired to assure a first-time hit. According to Globes, Pegion has already been tested by soldiers of the IDF’s Golani, Givati and Paratroop brigades in a pilot project.

In a parallel development, Skylock Industries, an Israeli company with headquarters in Azusa, California, has unveiled a suitcase-sized jamming device that garbles the navigation systems hostile drones at ranges of up to 500 meters. The trolley-sized devices, which weighs 60 kg and is priced at $300K, was unveiled at the IDEF defense show in Tel Aviv in early June.

IAI’s OPAL

IAI has launched OPAL, which it bills as an innovative system capable of redefining the modern battlefield by coordinating all manned and unmanned platforms. The interconnected system can be installed in attack helicopters, advanced fighters, refueling aircraft, unmanned aerial vehicles, naval craft, command and control centers and military positions. According to a report in the Jerusalem Post, OPAL was recently tested by the IDF’s Gideon Battlegroup dealing with the possibility of open hostilities with Hizballah, the Iran-backed Lebanese Shi’a Muslim military force.

Beresheet Evaluation

Analysis of data from Beresheet, the Israeli lunar lander which crash-landed on the Moon, indicates a malfunction in technology measuring the spaceship’s acceleration. Beresheet failed to decelerate for a soft landing on the Moon, hit the surface with full force, and disintegrated. According to earlier reports, Morris Kahn, the founder of Amdocs and principal donor for SpaceIL, the private organization that launched the Beresheet program, is already raising funds for a second attempt at a lunar landing.

ThyssenKrupp Hires Crisis Firm

ThyssenKrupp, the German firm involved in a police investigation of possible corruption in the ordering of submarines from it, has retained the services of BBDO IM, the crisis-management firm of Israel’s Gitam BBDO advertising agency. Reporting on the deal, Yediot Aharonot noted that the German firm was seeking to bolster its image with the Israeli public. Police have recommended indictment of 12 suspects.

In late May, ThyssenKrupp announced the name of the first of four Sa’ar 6 corvettes it is building for the Israel Navy. The IMS Magen is due to be delivered to Israel next year. In all, Israel has contracted to purchase three Dolphin class submarines for Euro 1.3B and the four corvettes for Euro 430M from the German conglomerate.

Finns to Market Elbit GPS System

DA-Group, a Finnish electronics firm, will manufacture and market iSNS, the secure GPS antenna system of Elbit Systems, as part of a partnership agreement between the two firms. iSNS, which can be installed as an add-on kit, is said to be compatible with airborne, land and sea applications.

New Zealand Sale

Ground robotics system developer Roboteam, based in Tel Aviv, has won a tender to supply New Zealand’s military with dozens of robotic remote-controlled systems in a deal worth tens of millions of dollars. Under terms of the contract, Roboteam will supply three separate systems to the New Zealand Army – the TIGR transportable interoperative ground robot, the MTGR micro tactical ground robot, the IRIS individual robotic system.

Fighting Forest Fires

Elbit Systems recently completed development of a new system that will enable aircraft fitted with it to take part in fighting forest fires. Based on a system called HyDrop, Elbit’s development enables aircraft to fly over large fires at night. According to a report in Globes, existing airborne fire-fighting systems cannot operate at great altitudes due to the “aerosol effect,” in which water or fire retardants launched from the plane is ineffective because it is diffused by the time it reaches the ground.

Launch Postponed

Satellite operator Space Communication (Spacecom) has postponed the launch of communication satellite AMOS-17 until July. The launch had been expected in the first quarter. Spacecom recently reported that it had shown a profit in 2018, the first for the company since the accidental explosion of its AMOS-6 satellite on a launch pad in 2016.

Polish Tank Tender

IAI and Elbit are one of 13 participants in a Polish Defense Ministry tender for the upgrade of armored vehicles, according to a report on the Israel Defense website. Among the other participants: Lockheed Martin of the U.S., Germany’s Rheinmetal, BAE MDBK of the U.K., and Systems, Sweden. The tender includes heavy tanks equipped with hard kill and soft kill technologies.

B.S. Engines Gets Boost

Completion of its acquisition of Carmel Forge in January had a positive impact on Beit Shemesh Engines sales, according to a report in Globes. The aircraft engine manufacturer reported first quarter sales of $39M, up 57.1% from the preceding year.

Caution over Merger’s Effect

Senior Israeli defense industry officials have expressed concern over effect of the RaytheonUnited Technologies merger on Israeli defense-related companies. They anticipate that the creation of one giant corporation will increase already intense competition on defense markets in general and make their own firms’ entry onto U.S. defense markets increasingly difficult.

One special area of concern is the effect on Israeli suppliers of Raytheon. These include Elbit Systems, which sells dichromatic lasers that Raytheon uses to manage special payloads installed on unmanned aerial vehicles. It is also unclear the merger will affect Rafael’s long-standing cooperation with Raytheon on air defense systems, including David’s Sling and Iron Dome.

Turkey’s Choice

Turkey will have to decide between U.S. F-35 advanced warplanes and Ankara’s plan to purchase Russian S-400 anti-aircraft systems, after U.S. acting defense secretary Patrick Shanahan’s warning letter to his Turkish counterpart in early June. Turkish President Recep Tayyep Erdogan has said that backing out of the Russian deal is “out of the question,” while the Americans say that S-400s in Turkey would pose a threat to American F-35s operating in the area, and that Turkey cannot have both the U.S. planes and the Russian anti-aircraft missile system.

Lockheed Gets Training Contract

U.S. defense contractor Lockheed Martin has been awarded an NIS 150M Israel Defense Ministry contract to operate a F-35 training center for the Israel Air Force for the coming decade. The center will be located at the Nevatim air base in southern Israel.

Rail Safety

IAI has unveiled See Far, a system for early detection of potential obstacles on railroad tracks. The system, developed by IAI’s Elta Systems subsidiary, combines advanced radar and an array of spectral electro-optical sensors, providing early warning about the presence of vehicles, humans and animals at about 1 km away, in all weather.

Defense Prize to MK

Knesset Member Ofer Shelah, a member of the Yesh Atid party (currently part of Blue White), has been awarded the Yitzhak Sade Prize for Military Literature for his 2015 book “The Courage to Win”. Shelah was a member of the Knesset’s Foreign Affairs and Defense Committee; his award-winning book deals with shortcomings in the management of Operation Protective Edge, the 2014 campaign targeting terror tunnels dug by Hamas and other terror groups under the border between Israel and the Gaza Strip.

Mack Backs out of Truck Deal

Truck manufacturer Mack has decided to back out of a tender it won to supply trucks to the Israel Defense Forces. According to various Israeli press reports, Israeli officials suspect that the reason was related to Mack’s parent corporation, Volvo of Sweden.

The trucks would have been used to transport tanks and other heavy equipment. Mack, which makes its trucks in the U.S., won the tender several months ago over several competitors, but has not signed the contract, said to be worth about $50M. The IDF has had a shortage of transport vehicles for several years and decided on a single large purchase as an economy measure.

Finance & Investment

Entrepreneurship Fund

The government’s Innovation Authority has launched a NIS 180M fund to encourage local entrepreneurship in outlying areas over the next five years. The project’s goal is a regional ecosystem to connect research and development companies with regional assets. Currently 77% of start-up companies are based in central Israel.

Bank Profits Soar

Bank Hapoalim and Bank Leumi, Israel’s two largest financial institutions, reported strong profits for the first quarter of 2019. Bank Leumi’s profit amounted to NIS 1.09B, 50% higher than the parallel quarter in 2018. A substantial part of the bank’s increased income was attributed to the sale of its Leumi Card business to Warburg Pincus of the U.S. for NIS 200M. For the parallel period, Bank Hapoalim reported a 31% rise in net profit, to NIS 821M.

Mergers & Acquisitions

Palo Alto’s Two Israeli Buys

Palo Alto Networks, the California-based cyber and information security firm, purchased two Israeli start-ups in late May – Herzliya-based Twistlock, a developer of security solutions for virtual containers, for $410M in cash, and Tel Aviv-based PureSec, which makes security products in a serverless architectural environment, for an undisclosed sum estimated to be in the $60-70M range.

Proofpoint-Meta Networks

Proofpoint, a California-based cybersecurity specialist, has purchased Israel’s Meta Networks for $120M. Founded in 2016 and based in Tel Aviv, Meta Networks develops cloud-native security tools for enterprise networks.

SolaWinds-Samanage

U.S. software developer SolarWinds has acquired Samanage, a developer of cloud management of information systems, for $350M in cash. Samanage, founded by Israeli Doron Gordon in 2007, has offices in North America, Europe and Australia and an R&D center in Israel.

Vimeo-Magisto

Vimeo, a U.S. video platform with headquarters in New York City, has purchased Israel’s Magisto for an estimated $200M. Magisto, of Nes Tziona southeast of Tel Aviv and California, has developed technology enabling short-term video creation for any medium. It claims more than 100 million users.

Salesforce-Bonobo.ai

Salesforce, the international software company, has purchased Bonobo.ai, the Tel Aviv-based developer of a conversational intelligence platform. Bonobo, whose technology helps companies analyze consumer responses and interactions, was founded in 2017; its technical team consists mainly of artificial intelligence specialists who did their military service with Israel Defense Forces intelligence units. Purchase price was not announced.

Salesforce has also announced that its VC arm, Salesforce Ventures, is establishing a $125M fund for continued investment in cloud technology.

NetApp-Cognigo

NetApp, the California-based hybrid cloud services provider, acquired Israeli data security specialist in April for a sum estimated at about $70M. Cognigo, which has offices in Jaffa, utilizes machine learning technology to help organizations manage and protect critical data records and comply with privacy regulations.

Perrigo-Ranir

Perrigo has acquired dental care specialist Ranir Global Holdings of Grand Rapids, Michigan, for $750M as part of an extensive reorganization of the Irish-based pharmaceutical firm whose shares are dully listed on the New York and Tel Aviv stock exchanges. Perrigo has operated in Israel since 2005, when it acquired Agis, an Israeli pharma, for more than $800M.

Solabia-Algatechnologies

Solabia, the French biotech group, has acquired an 80% stake in Algatechnologies, an Israeli microalgae company based in Kibbutz Ketura in the Arava desert north of Eilat. Algatechnologies develops, cultivates and markets ingredients produced from microalgae. No financial details were disclosed, but market sources suggest that the deal was based on an $80-$100M company valuation.

Zebra-Profitecht

Zebra Technologies, a data-capture specialist based in Lincolnshire, Illinois, has acquired Israel’s Profitecht. No purchase price was announced for Profitecht, an Israeli developer of fraud-and-loss-protection technology for retail marketers.

Shiji Group-Mycheck

The Shiji Group, a provider of software for the hospitality, retail and entertainment industries, has purchased MyCheck of Tel Aviv. Purchase price for the Israeli firm, which has developed a mobile app focusing on the hospitality industry, was not announced. It is the first Israeli acquisition for Shiji, which employs around 4,000 people, with over more than 70 subsidiaries and brands, with over 60,000 customers in the hospitality industry, over 200,000 in the restaurant industry and over 400,000 retailers.

Delta-Bogart

Delta Galil Industries, the Tel Aviv-based producer of underwear and other garments, has signed an agreement to purchase The Bogart Group of Hong Kong. Bogart designs develops and manufactures fashion bras and other lingerie, sport and swimwear. The company is a strategic partner for leading brands including Victoria’s Secret, PVH, Jockey, Adore Me, Vanity Fair and Hanes. Price was not announced.

Together-Cannabliss

Together Pharma, an Israeli specialist in cultivating and producing medical cannabis, has acquired Cannabliss in a $3.9M cash and share transaction. Canabliss, a Jerusalem-based medical cannabis pioneer, develops smoke-free therapeutic products including oils and cookies, and maintains R&D facilities and a distribution in conjunction with the city’s Hadassah Ein Karem Medical Center. Together raises cannabis plants at a farm near the southern city of Ashkelon.

FIMI Acquires Teva Plant

FIMI Opportunity Funds, headed by Ishay Davidi, has completed the acquisition of the Migada plant in Kiryat Shmona from Teva Pharmaceutical Industries for $47.5M. The plant, a business unit in Teva named Tevadaptor, produced a closed system for protecting medical teams against exposure to hazardous materials when preparing oncological drugs and treating oncology patients.

Imperva-Distil Networks

Imperva, a California-based cyber security firm whose founders include Shlomo Kramer, one of the founders of Israel’s network security pioneer Check Point Software, has acquired Distil Networks for an undisclosed sum. Distil, with operations in the U.S. and Western Europe, develops cloud-based security software to defend websites against malicious bots.

Kramer and Marius Gecht, another Check Point founder, and Nir Zuk of Palo Alto Networks, are among the investors in a $12M round of Fireblocks of Tel Aviv and New York, which is developing a secure platform for protecting blockchain assets at financial institutions.

LiveU Sold

Two U.S. private capital investment funds, Francisco Partners and IGP Capital, have purchased 90% of LiveU, an Israeli video transmission specialist, at a company valuation of $200M. Based in Kfar Saba northeast of Tel Aviv, LiveU has developed a device that uses cellular communications rather than satellite for live broadcasting. A device which comes as a backpack or pouch connects to a TV camera and sends the video to the company’s cloud from where it is relayed to its destination. LiveU’s system has been used to broadcast live news events by clients including BBC, Sky, Fox and the U.S. professional football NFL.

Sale Gets Court OK

A District Court has authorized the sale of Chim Nir to Elbit Systems and Goren Agriculture for NIS 8.5M. Chim Nir engages in crop-dusting and has been operating as Elbit‘s fire-fighting squadron since 2010.

Science & High Technology

Intel Backing

The venture arm of chipmaking giant Intel has led a $17M funding round for TriEye, a Tel Aviv-based semiconductor startup. Other investors include Israel-based Grove Ventures and Marius Nacht, co-founder of Check Point Software Technologies. TriEye develops shortwave infrared (SWIR) imaging technology designed to assist autonomous vehicles “see” better under limited visibility conditions such as darkness, fog, and dust. Its chairman, Dov Moran, is the co-founder and CEO of USB flash drive developer M-Systems Inc., bought by SanDisk for $1.6B in 2006.

Eyes on Israel

41 large European corporations currently operate innovation outposts in Israel, according to a report by Mind the Bridge, a Silicon Valley-based innovation advisory firm. In comparison, 60 large European corporations operate innovation hubs in California’s Silicon Valley. The Israeli hubs are tasked with identifying new technologies, research and development, and venture capital investment opportunities.

Insulin Substitute?

Betalin Therapeutics of Jerusalem recently raised $2.5M from venture funds and private investors for what it calls a revolutionary system aimed at replacing insulin therapy. Betalin has developed a one-time transplant of the proprietary Engineered Micro Pancreas (EMP), a biologically derived structure combined with insulin expressing cells which ensures continuous glucose-related insulin secretion. The technology is based on the work of Prof. Eduardo Mitrani of the Hebrew University of Jerusalem.

New Israeli Intel Chip

Intel launched Intel Core Mobile H series of processors, the international chipmaker’s most powerful generation of mobile processors, in late April. Designed to bring desktop-level performance to thinner systems for gamers and developers, the 9th Gen processor is a product of Intel’s development center in Haifa. A month later, Intel launched another developed-in-Israel chip – the Ice Lake, a 10th-generation high-performance processor.

Swedish Road

ElectReon Wireless, based in the Hadassah Neurim Youth Village north of Tel Aviv, has been awarded a contract to build a 1.6 km electrified road near the city of Visby on Gotland, a Swedish island. The road, based on ElectReon’s dynamic wireless loading technology, is designed to enable wireless charging of electric trucks and buses traveling on the road.

Technion Files IP Suit

The Haifa-based Technion Institute of Technology has sued Prof. Eli Ben-Sasson, alleging the Technion faculty member violated its intellectual property rules by allowing a private company to commercialize his academic research at the Technion. In a suit filed in mid-April, the Technion seeks 50% of Ben-Sasson’s equity in StarkWare Industries, founded in 2017 by the professor and his doctoral student, Michael Riabzev. StarkWare aims to develop hardware and software that improves scalability and privacy in the blockchain using a technology called STARK (scalable transparent argument of knowledge) and based on zero-knowledge proof, a mathematical tool developed in the 1980s. The suit alleges that the professor developed the now-commercialized technology with the help of grants for academic research from the Technion.

Malware Protection

HP plans to install malware protection developed by Tel Aviv’s Deep Instinct in its new line of personal computers, the two companies announced in late May. Details of the deal were not announced, but Calcalist estimated its value at $150M.

Mitsubishi Outpost

Japan’s Mitsubishi Corporation recently opened an innovation center in Tel Aviv, tasked with scouting for Israeli companies and technologies in Mitsubishi’s core areas of interest, including automotive and smart mobility.

Teva Revenue Down

First-quarter revenues of Teva Pharmaceutical Industries, Israel’s international big pharm giant, amounted to just short of $5B, down 15% from the parallel quarter of 2018. Decline in sales of Copaxone, the financially troubled Israel firm’s multiple sclerosis treatment, was attributed to increased competition from generics. Despite the negatives, Teva CEO Kare Schultz said the figures indicated a “positive start” to Teva’s two-year restructuring plan.

Foodtech in North’s Future?

A consortium led by food company Tnuva has won a government tender to develop a high-tech incubator for food-tech startups at a cost of up to NIS 1B ($280M).

Brewer’s Security

Anheuser Busch, the world’s largest brewer, has opened a cybersecurity unit in Tel Aviv. The Belgium-based firm produces almost 500 beer brands around the world, including Budweiser, Becks, Stella Artois, Corona and Leffe. The brewer already has a Tel Aviv development center.

Mediwound to America

Mediwound‘s NexoBrid treatment for burn wounds, will be marketed in North America under terms of an agreement it signed with American company Vericel. Based in Yavne south of Tel Aviv, Mediwound retains marketing rights for NexoBrid, which is based on pineapple, in the rest of the world. The center is to be located in Kiryat Shmona, a small city not far from the Lebanese border. Other members of the consortium are Our Crowd, the Jerusalem-based crowdfunding specialist, the U.S. Finistere VC fund, and beer and soft drink bottler Tempo Beverages. The losing bidder in the government tender was Jerusalem Venture Partners, whose head, Erel Margalit, first proposed turning the northern city into a food-tech hub.

Mayo Joins Capsule Study

The Mayo Clinic is participating in an ongoing study of Check-Cap’s C-Scan colorectal cancer-detection system in the U.S., the Israeli company announced in mid-May. Located in the Arab village of Isfiya in northern Israel, Check-Cap describes C-Scan as a preparation-free swallowable capsule that detects pre-cancerous polyps in the lower digestive tract, using low-dose x-ray and wireless communication technology.

Extended Battery Life

Tubex NRG, based in Nes Tziona southeast of Tel Aviv, has developed BetteryX, an innovative miniature product built from bionanomaterials capable of extending the operational time of devices by up to 10 times. The system works in tandem with rechargeable batteries in electronic devices such as smartphones, drones, mobile medical equipment, and other devices.

Headset Technology

Augmented reality technology developed by Lumus Ltd. of Nes Ziona, is at the heart of Lenovo‘s new ThinkReality A6 headset. The headset weighs 380 grams and offers full HDresolution for each eye and a 40-degree field of vision. Lumus was founded by a former executive at Elop, a specialist in defense optics which merged with Elbit Systems in 2000.

New Ford Center

Ford executive chairman Bill Ford was present at the opening of the U.S. automaker’s new Tel Aviv research center in mid-June.

The new center will work to identify technologies and local startup companies in the fields of connectivity, sensors, automated systems research, in-vehicle monitoring, and cybersecurity, and will include a vehicle lab to support proof of concept efforts and artificial intelligence work.

Meanwhile, automakers Nissan and Renault have opened Alliance Innovation Lab in Tel Aviv, an innovation center designed to accelerate collaboration with Israeli start-ups and facilitate cooperation with the government’s Israel Innovation Authority.  The center will focus on vehicular sensors, cybersecurity and big data, in addition to enhancing existing cooperation with 10 Israeli start-ups.

Autonomous Test Centers

Israel is inviting property owners to submit offers for the creation of new testing sites. State-owned company Ayalon Highways, which is overseeing the tender, said the plan is to establish different sites throughout the country, not only near Tel Aviv.

Female Haredi Engineers

The second class of graduates of the Tmura program at Jerusalem’s Azrieli College, consisting of 37 haredi (ultra-Orthodox) women with computer engineering degrees, graduated in late May. According to a report in an ultra-Orthodox publication, the Tmura graduates have been employed in top Israeli technology firms, including Israel Aerospace Industries, Intel, Mobileye and others.

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