President Ronald Reagan had just left Honduras, the last stop on his recent tour of Latin and Central America. Only two days later, on December 6, the red carpet was out again in Tegucigalpa, the Honduran capital. This time the guest of honor was Israeli Defense Minister Ariel Sharon. The official explanation for Sharon’s three-day visit was “exchanges of views.” The main topic was Honduran armed forces chief Gen. Gustavo Alvarez Martinez’s quest for new sophisticated warplanes. Washington and Paris, it seems, have felt politically constrained from selling Honduras new F-5 or Mirage jets to replace 12 French-made Super-Mystere fighters originally purchased from Israel some years back. 
Honduras — along with El Salvador, Chile, Argentina and Guatemala — accounts for an important piece of Israel’s annual billion-dollar plus arms market. On another continent, Israeli Foreign Minister Yitzhak Shamir had just led a large delegation of Israeli officials and businessmen to Zaire. Several weeks earlier, an Israeli Defense Ministry delegation in Kinshasa, including Sharon’s adviser on national security affairs and the head of the Israel Defense Forces Planning Branch, “agreed to supply weapons systems and identified issues of organization and training in which Israel will help Zaire.”  Sharon himself led a military delegation on a five-day visit to Zaire in mid-January. Israel will replace Belgium in training the Zairian army division deployed in mineral-rich Shaba province, and will establish and train a special guard force for President Mobutu Sese Seko.
The negotiations with Honduras and Zaire highlight the extent to which the export of military goods and services has become an important feature of Israel’s economic role in the world market, and its political role as a prime supplier in the global arms bazaar. This role, which has developed over the last decade, involves a somewhat specialized clientele: right-wing regimes, chiefly in Central and Latin America and in Africa, whose massive violations of human and political rights forecloses a politically reliable military supply relationship with the United States or other major arms exporters like France or the Soviet Union.
A Hothouse Economy
Israel’s emergence as an arms merchant has its beginning in the period since the 1967 war. After that event, Israel adopted a distinctly more aggressive and ambitious foreign and military policy, not only with regard to its Palestinian and Arab neighbors but on a global scale. Today, these policies are supported by a concentrated effort to manufacture in Israel as great a proportion as possible of the arms requirements of the Israeli army. This military production program is heavily committed, for both economic and political reasons, to the export of military hardware.
The structure of Israel’s military-industrial complex, and its relationship with the American arms industry and the US government, has its origin in the specific character of Israel’s political economy. The economic editor of the Jerusalem Post once commented that, “The system that emerged [in Israel]…has never been anything but a capitalist system.”  It was, however, a very weak and structurally flawed capitalist system. From 1948 to 1965, the rate of domestic saving in Israel was approximately zero. All of Israel’s economic growth during this period was financed by capital imports totaling $6 billion. Of this amount, $4 billion consisted of unilateral capital transfers requiring no return on investment.  The main sources were contributions collected by the United Jewish Appeal and other Zionist fundraising efforts, West German government reparations for Nazi war crimes and US government aid.
Among the most prominent manifestations of the historic weakness of the Israeli economy are: a constant decline in the rate of exchange of the Israeli pound (and now the Israeli shekel) against the dollar; a steadily rising cost of living; a heavy tax burden, a negative balance of trade; a high rate of foreign debt; recurring deficits in the state budget; and, in recent years, an annual rate of inflation averaging well over 100 percent. All of these symptoms are rooted in the weakness of Israel’s industrial sector. The Israeli economy was able to survive and expand despite these weaknesses. As Avraham Shavit, president of the Israeli Manufacturers Association, remarked, it was “an economic hothouse,”  generously supported by external factors and living far above its real means.
The intensification of the Arab-Israeli conflict after the 1967 war placed a tremendous burden on Israel’s weak economy. From 1966-1967 to 1971-1972, military expenditures increased fivefold in absolute terms and two-and-a-half times as a percentage of the gross national product.  During the same period, military imports grew from $116 million to $800 million. This resulted in a reversal of the historic trend for imports to rise at a slower rate than exports. In 1970, commercial exports paid for only 52 percent of all Israeli imports. By 1973 Israel’s balance of trade was in a very precarious position. In that year, industrial exports amounted to $1.2 billion while military imports had reached $1.3 billion. 
The economic burden of the 1973 war exacerbated Israel’s deficit spending. The current account deficit increased from $1.1 billion in 1972 to $2.7 billion in 1973 and $3.4 billion in 1974.  The annual foreign trade deficit remained high throughout the 1970s and early 1980s. It was $1 billion in 1980 and $1.5 billion in 1981. As a result, by 1980, total external debt reached $18.48 billion. 
Israel’s economic weakness has always been offset by regular donations in the form of debt cancellations and other assistance from the US government. In fact, US aid, including grants and credits, exceeded the total cost of Israel’s direct military imports during the period 1976-1980 by $2.19 billion. Military imports as a percentage of the trade deficit actually declined, from 42.8 percent in 1968-1972 to 13.4 percent in 1976-1980. 
Although US aid more than covered increased Israeli military expenditures after 1967, Israeli military and political planners did not consider this an entirely satisfactory situation. The 1973 war had shown that Israel could not fight a prolonged engagement in which its army did not determine the timing and pace of fighting without depending on resupply from the United States. This dependency sharply reduced Israel’s political options, and enabled Henry Kissinger to extract concessions from the Israelis during the disengagement of forces negotiations with Egypt and Syria after the 1973 war. These agreements were sweetened by sharp increases in US military aid to Israel, but this included an even greater degree of dependency and loss of initiative for Israel. Moreover, Egypt also became the recipient of substantial US military and economic aid. Israel perceived as a serious threat the possibility that the US would acquire a strong Arab ally in the Middle East, which might produce a shift in US policy in the region.
Militarization of the Economy
In response to the economic burden of military expenditures and the possibility of foreign political limitations being placed on Israeli military options, the Israeli government had already adopted an economic strategy which appeared at once to resolve the structural weaknesses of the Israeli economy and also to reduce the extent of military dependence on the US. Militarization of the Israeli economy proceeded at a rapid pace throughout the early and mid-1970s, until the economic crisis in Israel forced the government after 1977 to reduce somewhat its expenditures on arms. Commitment to this militarization strategy, has, however, not diminished. The slowdown is only the result of a lack of funds rather than any change of strategy. Following the Israeli invasion of Lebanon, it is reasonable to expect an escalation of military expenditures regardless of the domestic economic consequences.
The result of this policy is that the military sector is today the largest factor in the country’s economic life. During the 1970s, it absorbed an average of nearly 37 percent of the government budget and 16 percent of the country’s total economic resources. This was four and five times the rate of military expenditures in the NATO and Warsaw Pact countries respectively. 
The demand and supply of military needs have an inordinate influence over all governmental decision making. Many sectors of Israeli society are linked either formally or informally to the military. Several of the directors in the electronics and computers industries in Israel are former senior air force and army commanders.  The engineering labs of Haifa’s world famous Technion are devoted to flight control, rocket and engine combustion, and aircraft production. The Israeli defense establishment funds 45 percent of the research in its engineering department.  That department even performs contract research for the US Navy and Air Force. Army officers make up 30 percent of Technion’s engineering researchers, and 80 percent of its research is “applied.”
Currently an estimated 300,000 persons, or 25 percent of Israel’s work force, are engaged in military-related production. The nationalized Israel Aircraft Industries (IAI) is Israel’s largest industrial enterprise and employs 22,500 workers. A glance through the IAI catalog underlines the variety and multi-purpose functions as well as the sophistication of its products. The Westwind jet, sold as an executive business aircraft, can be converted into a fighter plane. About seven aircraft a month are currently being sold to private buyers in the US. IAI manufactures the Kfir jet fighter, based on designs lifted from the French Mirage through industrial espionage. The MBT division of IAI manufactures a series of highly sophisticated weapons delivery systems for the Hawk and Gabriel missiles; bomb release systems; and perimeter security systems. The Bedek aviation division of IAI brings in large revenues through overhaul, maintenance, and training. Bedek operates nine international airlines and trains local personnel for many national aviation companies. 
In 1966, Israeli military production totaled $80 million. The French arms embargo on Israel following the 1967 war was the immediate stimulus for the decision to expand this program. By 1973, military production exceeded $500 million.  As military production has increased, so have exports of military products. Israel’s general trade grew from $778.7 million in 1970 to $5.54 billion in 1980.  Arms exports have grown at twice that rate, from $100 million to $1.25 billion.  The most dramatic increase in arms sales occurred between 1978 and 1980, when military exports increased 341 percent from a base of $425 million.  In 1980, arms were roughly 40 percent of total exports.  This increase in the volume of military exports occurred shortly after the first Likud government came to power. The rate of military exports has continued to climb as Israel’s non-military industrial sector shows continuing weakness. In 1981, exports of polished diamonds, traditionally Israel’s largest industrial export, fell by 24.5 percent; and that industry’s labor force has diminished by one third since 1980.  Chemical and plastics exports have declined 4.9 percent and textiles by 17 percent.  Citrus exports, formerly a large foreign exchange earner, have been a weak performer in recent years. By contrast, “electronics, machinery and metal products” exports grew by 25.7 percent. 
The Stockholm International Peace Research Institute (SIPRI) and the journal Defense Attache rank Israel as the seventh largest arms exporter in the world — the largest outside the NATO and Warsaw Pact countries. In 1980 Israel sold 38 percent of all the arms exported by SIPRI’s category of Third World arms manufacturers. 
Foreign Investment in the Military Sector
Attracting increased foreign investment in the Israeli economy has been an important corollary to Israel’s efforts to expand exports using military products as the leading factor. Israel’s initial industrial growth depended heavily on American private sector capital.  Today’s aviation and computer industries continue to rely on participation by a large number of US and European multinationals. To offset the inflation and instability that plague the Israeli economy, the government offers large benefits to new investors, particularly in export-oriented industries: up to 70 percent of initial capital (30 percent grant and 40 percent at 8 percent interest), and up to 50 percent of research and development costs. It allocates subsidies for training and plant and premises rental costs. Duty exemptions are available on imported raw material destined for reexport and only a 15 percent duty is imposed on imported machinery and equipment. Israel boasts a flat corporate tax of 33 percent, which is suspended for the first five years. 
Wages are also substantially lower in Israel. According to the US Department of Commerce, Israeli industrial workers in 1976 “produced less than half as much as the US worker,” but their wages (including benefits) “were less than one third that of the US,” making Israel’s wage cost per unit of output “lower than in most industrial countries.”  Israel Investment Authority Director Rafael Benvenisti estimates that Israeli engineering graduates’ salaries are about 40 percent of US levels. The combination of lower salaries and government subsidies, says Leon Riebman, president and chief executive officer of AEL Industries, means “it is costing us 30 percent of what it would cost to do the same type of research in the US.”  Western companies have been quick to take advantage of these benefits. McDonnell Douglas, General Dynamics, General Electric, Pratt and Whitney, and Garrett Air Research all have licensing agreements for engine and other aviation components. McDonnell Douglas and Boeing presently have subcontracting agreements valued at $60 million. The MK2 hydrofoil boat is being produced under license from Grumman, and digital computer equipment is manufactured under license from Litton Industries.  Israeli Military Industries holds production licenses from Fabrique Nationale Herstal of Belgium and NWM Kruithorn of the Netherlands for the production of Uzi submachine guns and Galil automatic rifles. These weapons were developed in Israel to meet Israeli specifications. The patents were then sold to European manufacturers, who in turn granted production licenses to Israel. The Finnish firm Tampella has been instrumental in the financing of Soltam which, along with Tadiran, produces electronics under Tampella license. Elron, a computer industry group, was founded in 1962 with the financial assistance of Rockefeller Brothers and Associates.  Kial, a large industrial conglomerate with subsidiaries engaged in weapons-related production, was also founded with private foreign funding.
A very large number of small computer and metal firms depend on sales to the Israeli arms industry. More than 100 companies are suppliers of IAI alone. It is difficult to establish precisely the participation of various firms in armaments production. Controls on information about the military sector of the economy are strict. Many of the firms involved in this sector are private companies and do not issue annual reports. Often the total foreign sales of a corporation are reported without a regional breakdown. Some firms are discreet about their dealings with Israel in order to avoid penalties imposed by the Arab boycott. Despite all these limitations, it is clear there is very extensive involvement of foreign capital in the Israeli armaments industry.
Military Self-Sufficiency and US Policy
In the aftermath of the bombing of the Iraqi nuclear reactor in June 1981 and the annexation of the Golan Heights in December 1981, Israel has spoken more openly of attaining complete military self-sufficiency by 1990. This goal can be related to Washington’s short-term suspension of the delivery of F-15 and F-16 fighters to Israel following these actions.  The Begin government is determined that economic and political isolation will not hinder Israel’s foreign and military strategy.
Israeli self-sufficiency is largely dependent on its continued willingness to serve as an instrument of US foreign policy. Israel is linked to the United States through Foreign Military Sales assistance (FMS), regular concessions on transfers of technology, re-export and co-production agreements, preferential opening of markets in the US and Europe for Israeli goods, and private American financing and investment aided by US government tax concessions.
The militarization of the Israeli economy has been substantially aided by American FMS financing. Israel has received over half of all the FMS-financed exports to the entire world — $13.5 billion of the total of $24.85 billion — between 1950 and 1981. Debt repayment concessions amounting to $4.95 billion — 50 percent of the world total — have been extended to Israel.  By law, FMS loans and grants must be spent on the purchase of military equipment from the US. American arms manufacturers thereby also benefit handsomely from the generosity of the US government. It is worth noting, though, that of the total $3.4 billion worth of exemptions to this requirement granted by the Pentagon, $3.35 billion was spent by Israel. 
Israel enjoys extensive tariff concessions from the US, and 25 percent of all its commercial exports are sold in this country. According to Defense Minister Ariel Sharon, Israel has offset agreements valued at $850 million in military and military-related goods and services, a substantial contribution towards the repayment of its FMS debt to the US.  Israeli officials argue that US military aid to Israel is reciprocated by that country’s service as a kind of “combat laboratory.” One IAI official noted that “we have people here all the time from US companies and the US military studying our experience.” Israel’s ambassador to the US, Moshe Arens, who worked as an American aeronautical engineer at Curtiss-Wright Corporation before emigrating to Israel, puts it bluntly: “The US has been getting a fair return.” 
The Memorandum of Understanding on “strategic cooperation” signed by Secretary of Defense Weinberger and Minister of Defense Sharon on November 30, 1980, offered Israel further concessions for debt repayment and for development of its own military production. The US agreed to purchase up to $200 million worth of Israeli-manufactured military hardware; Israel could use up to $100 million of its FMS assistance to purchase Israeli-made military equipment; and the US would grant third countries permission to spend part of their US military credits in Israel.  Although these provisions did not “satisfy Israel’s requests during the negotiations for the memorandum,” the Jerusalem Post claimed that it nevertheless “laid the groundwork for using Israel’s defense needs and the American aid that nourishes them, to create a broader base for Israel’s industrial development.” 
The origins of US military technological cooperation with Israel for the development of Israel’s domestic arms industry are found in a 1971 agreement to provide technical information and assistance for arms production. During the negotiations for the 1975 Sinai agreement, Israel demanded computer and aviation technology along with $3.5 billion in aid. Israeli representatives from the armaments and aviation industries negotiated co-production agreements with leading US manufacturers in anticipation of the Sinai agreement on these terms.  Defense Secretary James Schlesinger vetoed Israel’s request for co-production of 40 percent of the F-16 warplane to be transferred under the agreement, but compensated Israel with Pentagon overhaul agreements involving technology packages for the McDonnell Douglas F-4 fighter and the A-4 attack aircraft.  In addition to the F-16s provided for in a secret addendum to the Sinai agreement, Kissinger promised deliveries of Pershing missiles (with conventional warheads) and gave assurances of future production cooperation projects. 
Between 1975 and 1977, 100 complete technical data packages from the US were put at Israel’s disposal.  In October 1977, Israel made extensive new requests for access to both technology and weapons. Carter administration officials were aware that Israel’s demands might be the price for concessions in the Geneva negotiations scheduled for 1978.  They resisted, in public at least, Israel’s requests, which included co-production of armor, XM-1 tanks, torpedoes, Maverick and Hellfire air-to-ground missiles, and sophisticated radar and electronics equipment, in addition to $1.5 billion for research and development.
The Lavie (“Young Lion”) jet aircraft project, to be undertaken by Bet Shemesh engine manufacturers, epitomizes the grand plans for the self-reliant future of Israel’s military industry, and incorporates many of the weaknesses and dependencies of the Israeli arms industry. The Lavie is intended to be a $9 million Israeli version of the F-16 or F-18 aircraft, which sell for around $16 million each. Although the project was designed to free Israel from possible limitations put on it by the US, it requires a degree of US cooperation at least as high as in any other previous military venture. The project is based on tentative calculations and anticipated support. Its purpose seems to be more political than military. The Begin government first raised it when the Carter administration blocked Israel’s proposed sale of the Kfir jet to Ecuador, and again when the Reagan administration temporarily suspended delivery of warplanes in 1981.
The Lavie will not be exempt from the US government’s authority to veto re-export of American-made components. Like the Kfir, the Lavie will be powered by a US jet engine from Pratt and Whitney. Israel does not have itself the necessary $1.1 billion to start the project. It has not succeeded, despite drawn-out negotiations with US aviation contractors, in securing any of the necessary investment, co-production or licensing agreements. The engine agreement with Pratt and Whitney is firm, but neither McDonnell Douglas, Northrup, General Dynamics, LTV nor Grumman have come into the Lavie deal. Israel is unable to build the graphite and bromide wing and fin sections of the plane, which are like those in the F-18 and the US version of the Harrier. 
New Directions Under the Reagan Administration
The Carter administration’s policy in this domain was riddled with loopholes and exceptions. Israel regularly received compensation for denial of co-production agreements. For example, in 1977 Israel was refused co-production rights for the McDonnell Douglas F-15. But by 1979, at least $20 million worth of F-15 parts was being manufactured in Israel.  Certain parts for the F-15 are now manufactured solely in Israel, such as gun access panel doors. Israel’s largest privately owned aircraft parts manufacturer, Cyclone Aviation Products, produced F-15 parts despite the fact that the planes for which they were destined were being delivered to Saudi Arabia.  Another case of Carter administration “flexibility” in dealing with Israel was its compensation to Israel for refusing to enter into a co-production agreement for the Israeli designed Merkava tank: Washington permitted Israel to use $107 million in FMS credits to finance the construction of a third production line for this tank. 
The US government has itself extended a substantial number of contracts to Israeli arms manufacturers. This has been a source of friction between the Pentagon and Department of Defense and US manufacturers. Lower labor costs, offset agreements to meet its debts, and Israel’s unmatched expertise in certain electronics and aviation engineering give it a competitive advantage. E-Systems, a leading military contractor in the US, recently protested the Pentagon’s contract award to the Israeli company, Tadiran, for army radio equipment worth $39 million. The General Accounting Office cold-shouldered the protest by quoting the ingeniously worded Buy American Act which allows “preference for suppliers of domestic end products, but does not require that bidders offering foreign end products be rejected.”  Defense Department contracts for aviation and computer goods make up an increasing percentage of Israel’s exports to the US — 26.5 percent in 1978 and as much as 37 percent by 1980. 
Opposition to aiding the development of foreign arms industries has emerged from Congress, due to concern about the prospect of financing competitors to American arms producers rather than scruples about feeding regional arms races. In response, Les Brown of the State Department Bureau of Politico-Military Affairs has voiced apprehension about “new competitors and embarrassments over controversial sales of co-produced military equipment.”  Other administration spokesmen show no regard at all for Congressional perceptions. Undersecretary of State James Buckley argues that the US should actively foster the growth of indigenous arms industries as part of regional defense planning and as a way to further the sophistication and specialization of the US military-industrial base. 
The Reagan administration has completely abandoned the Carter administration’s feeble reluctance to introduce new technology and to promote export-oriented arms development programs in countries which receive US aid. In November 1981 the Reagan administration reversed the ban on Israel’s proposed sale of Kfir fighters to Ecuador.  Israel also secured reversal of a decision related to production of the MK2 hydrofoil patrol boat under license from Grumman.  Although the US refused Israel’s request for co-production rights to the General Dynamics F-16 jet, partly because of stiff resistance by General Dynamics, it is probable that Israel is manufacturing parts for its own fighters. Certainly it is arming them itself. Continuing negotiations around the Lavie aircraft project and the strategic cooperation memorandum suggest that Israel still plans to acquire the co-production rights for the F-16 in an offset agreement. 
Military Collaboration with South Africa
“We consider that, on the road to our economic independence, we can increase in the next four years the weaponry exports by an additional $2 billion,” Yaacov Meridor declared in August 1981. Speaking to a gathering of Israel Bond officials in Jerusalem, Begin’s special assistant for economic coordination outlined how Israel hoped to achieve this:
We’re going to ask you, the US government, not to compete with us in arms. We are very strong in arms production, not like the United States, but for the Third World and even for Europe we are starting to be strong. We are going to say to them, the Americans, don’t compete with us in Taiwan, don’t compete with us in South Africa, don’t compete with us in the Caribbean or in any other countries where you couldn’t directly do it…. Let us do it. I even use the expression, ‘You sell the ammunition and equipment by proxy, your proxy.’ And this would be worked out with a certain agreement with the US where we will have certain markets…which will be left for us. 
The Reagan administration shows no signs of reserving particular arms markets for Israel or anyone else. In Central and South America, the US has quadrupled its average yearly sales.  Nevertheless, Meridor’s prescription for Israeli arms exports does fit a pattern of moving into a special market — what amounts to a network of “pariah states” whose extensive racism and blatant repression have placed political restraints on Washington’s open embrace.
In the case of South Africa, military sales are part of a larger web of political and economic collaboration which includes the exchange of Israeli technology and scientific expertise for South African raw materials, including coal, steel and uranium. A number of joint ventures have been established on this basis. Israel’s Tadiran (a subsidiary of Koor Industries) and South Africa’s Consolidated Power, formed a large electronics combine specializing in military electronics and computers. The Israeli and South African subsidiaries of Motorola operate joint ventures. Conlog is a joint venture of the Israeli Elron group and the Durban-based subsidiary of Control Logic, itself a subsidiary of Anglo-American. Iskor represents an amalgam of Koor Industries (51 percent), owned by the Histadrut and the South African government steel corporation Iscor (49 percent). Iscor manufactures 50 percent of Israel’s steel.
Until 1967, Israel had maintained a firm public posture of opposition to the apartheid regime of South Africa. The major link between the two countries was the supply of South African diamonds to the Israeli diamond-cutting industry. Commercial and political relations expanded after 1967, and reports of military collaboration and trade began in 1970, when Tadiran negotiated a licensing arrangement with Fuchs, Ltd. for the production of certain highly sophisticated electronic equipment developed by the Israeli firm. In May 1971, Israel offered to replace three South African warplanes that had crashed. Exchange visits of high officials — the chief of South Africa’s notorious Bureau of State Security visited Israel in 1973, for instance  — culminated in the April 1976 visit of South African Prime Minister John Vorster to Israel. At this time the two governments set up a formal Ministerial Joint Committee which included the defense ministers of both countries. According to the pattern defined by the 1976 agreement, the exchange of Israeli arms and advice for South African strategic materials expressed itself in three major areas: conventional arms trade, nuclear collaboration and counterinsurgency.
Israeli-supplied conventional arms sales and licensing agreements with South Africa include the following: Reshef-class gunboats armed with Gabriel missiles; Dabur coastal patrol boats; hardened steel for South Africa’s armored corps; self-propelled 105mm howitzers; air-to-air rockets; anti-tank missiles; assault rifles; radar bases; and surveillance equipment. South Africa was late in establishing its own shipbuilding capabilities and has depended on Israeli engineering and design in this field. Under the Simonstown Agreement of 1955, Britain had supplied South Africa with the equipment to patrol its sea routes. Since the cancellation of the agreement in 1975, Israel has taken on the role of building up the South African navy.  According to SIPRI (1981), 45 percent of Israeli arms exports between 1970 and 1979 were naval ships. South Africa purchased 35 percent of the ships exported.
Israel also provided training for South African marine engineers. Production was under license from Ramta, a subsidiary of IAI. These craft operate with Israeli EL/M 2207 radar systems also produced by an IAI subsidiary, Elta.  SIPRI has documented several major shipments of missiles to South African order of 108 Gabriel I and II missiles in 1977 and 72 in 1979. There are reports that Israel has also supplied South Africa with Kfirs and rebuilt Mirage fighters.
The evidence for Israeli-South African nuclear collaboration is circumstantial but significant. The Vorster visit of 1976 generated a flow of South African capital to Israeli military industries, and also a reported exchange of South African enriched uranium and Israeli nuclear technolgy.  The most ominous indication of this nuclear collaboration was the mysterious explosion over the south Atlantic in September 1979, monitored by a US nuclear detection satellite. A task force of South African warships was observed conducting maneuvers in the area. Despite earlier CIA and Pentagon reports that the blast was nuclear, the US government, at the highest level, officially declared the origins of the satellite signals to be unknown. An investigation by a British television documentary team concluded that it was caused by an Israeli-South African nuclear warhead fired from a howitzer manufactured by South Africa from US and Belgian components. Other accounts of the incident assert that Taiwan also collaborated on the project, and that cruise missile technology was also involved. 
Much of the military equipment sales and joint ventures have provided South Africa with a range of counterinsurgency weapons and devices. Israel has helped provide South Africa with “anti-guerrilla” electronic fences and surveillance equipment produced by Tadiran, Elvit and IAI. The Economist reported in 1977 that, in response to Congressional restrictions, then-Secretary of State Henry Kissinger had “asked the Israeli government in early 1975 to send troops to Angola in order to cooperate with the South African army” in fighting the MPLA.  Israel did apparently respond with advisers, and the Rand Daily Mail reported in June 1981 that Israelis were training anti-government forces of Jonas Savimbi’s UNITA in Walvis Bay, Namibia.  Israel has repeatedly denied reports of Israeli soldiers participating with South African army units as advisers or combatants. A New York Times story in 1978 noted that some 5,000 Israelis had emigrated to South Africa in recent years and “presumably that number contained some skilled people with technological insight into items of Israeli manufacture.”  High-level Israeli counterinsurgency collaboration with South Africa continues. Defense Minister Sharon spent ten days in South Africa in December 1981, and visited “operational areas” in Namibia at the time of large-scale South African attacks across the border into Angola.  On Angola’s northern border, Zaire is negotiating with Israel a five-year plan for reorganizing the Zaire army, including training and the supply of “large quantities of Soviet weapons and American and other Western military equipment already used by the Israeli army.” 
Israel’s role as a conduit for arms to embargoed states is by now well known. In 1979, for instance, 11 US HU-205 Huey helicopters, classified by Israel as obsolete, “went astray,” supposedly en route from the Israeli inventory to Singapore. The same helicopters were soon after found employed in the white-ruled Rhodesian army.  In 1978 South Africa received US-made artillery shells, which were supposedly destined for Israel. 
South Africa’s Israeli connection may now become a two-way street. South Africa itself is now producing arms for export. Piet Marais, chairman of the Armaments Corporation of South Africa, recently confirmed a Financial Mail report that South Africa seeks to market its military hardware through Israel and Taiwan to those states which cannot openly purchase arms from Pretoria. 
In the Horn of Africa, Israel may be restoring military ties with Ethiopia. Israel had extensive military links with that country under the reign of Haile Selassie, some of which were maintained secretly for a while by the Berg. Now, after several years of complete estrangement, the London-based Foreign Report writes that Israelis are replacing East Germans as military intelligence advisers. The Israeli government flatly denies the report, but according to the Jerusalem correspondent of the Jewish Telegraphic Agency, “Some observers here found them credible in view of the fact that Israelis have been permitted to visit Ethiopia recently after being barred from that country for years. Another indication of substance is the sudden, marked change in public statements here on the condition of the Falashas (Ethiopian Jews).” 
Military Sales in Central and Latin America
The only major country in Latin or Central America which is not a customer for Israeli arms is Brazil — it has an extensive arms industry of its own and is itself a growing arms exporter. Argentina ranks second only to South Africa as a market for Israeli weapons, thanks to its purchase of some 50 supersonic jet fighters prior to 1982. At the height of the Malvinas/Falklands War, an Israeli cargo of bombs and munitions apparently destined for Argentina was intercepted at New York’s Kennedy Airport.  Since the war, Israel sold the junta 24 US-made A-4 Skyhawks, and is shipping an additional 22 Israeli-built Kfir fighters.  Although Israel is not Argentina’s main supplier, the lack of political constraints on shipments — most recently despite the British and US arms embargo — has fostered a close relationship between the two countries. The silence of the Begin government in the face of the junta’s anti-Semitic outrages testifies to the importance of the Argentine market for Israel. The Israeli military attache in Buenos Aires maintains a sizable staff and complement of salesmen to coordinate sales to the rest of the region. 
Israel does not sell arms exclusively to right-wing military dictatorships, but the political isolation of these regimes has made the relationship especially lucrative for Israel and politically useful for the US. Israeli arms sales to Chile increased dramatically after 1976, when US military programs in that country were suspended. Sales to the Pinochet regime include patrol boats, missiles and radar equipment. Throughout the 1970s, Israel supplied virtually all of El Salvador’s military imports. Even after the US resumed its role as chief supplier toward the end of the Carter administration, the Israeli connection proved helpful. Late in 1981, according to the Israeli newspaper Davar, Israel agreed to “lend” to El Salvador $21 million from US funds appropriated for its use, to be repaid in the following fiscal year. 
Israeli arms sales are often accompanied by training missions, especially in countries actively engaged in counterinsurgency campaigns, including El Salvador, Guatemala and Honduras.  Israel had provided Nicaragua with most of its military supplies during the last years of the Somoza dictatorship.  According to Israeli sources, “the agent who struck the arms deal with Somoza, David Marcus Katz, was considered a friend of Nicaragua’s ruler and top figures in Israel.” Katz left Palestine even before the 1948 war and lives in Mexico City. There he serves “as the agent of about 17 Israeli enterprises, including suppliers of military equipment.” Katz frequently visits Israel, where he is known as a large financial contributor to Gush Emunim. 
Following the Carter administration’s embargo of military sales to Guatemala in 1977, Israel stepped in as the principal supplier. “We appreciate Israel,” said junta chief Garcia Lucas, whose presidential palace was named by Amnesty International as the headquarters of the right-wing death squads. “We see the Israeli soldier as the best soldier in the world today, and we look to him as a model and an example for us.”  These links have expanded under the new junta headed by Gen. Rios Montt, with some gratuitous prompting from Washington.  Israeli shipments to Guatemala include “transport” aircraft with manufacturer’s instructions for arming, and sophisticated computer equipment for monitoring guerrilla operations. An Israeli military training team is assigned to Guatemala, and military police there participated in a two-week counterinsurgency course taught by Israeli advisers. 
Israeli advisers are also serving in Honduras,  and are reported to be involved in US-sponsored covert operations aimed at overthrowing the Sandinista government in Nicaragua.  The latest addition to the list of Central American governments aided by Israel, Costa Rica, does not have an army. Here Israel will be supplying arms and advisers to the national police force. 
An Israeli specialty in Latin and Central America is programs directed by the Department for Cooperation and Foreign Liaison in the Israeli Ministry of Defense. With Israeli guidance, local military establishments initiate social services such as youth programs, construction and agricultural projects. These “Nahal-type military-agricultural projects” have been used in Bolivia, Ecuador, Peru, El Salvador, Panama and elsewhere with the objective of “building a positive and constructive image of the armed forces in their respective nations.” 
Israeli Sales and US Policy
The Israeli strategy to develop a large arms industry geared to export markets as well as IDF demands dates back to the years of Labor Party rule, and particularly to Shimon Peres’ time as defense minister. The dynamics of this process suggest that it will continue as long as Israel needs to build up its own arsenals for its ceaseless war with the Palestinians and with surrounding Arab states.
There is little or no significant opposition to this course within Israeli politics and society. On the contrary, “Many Israelis feel that their support for United States interests around the world should earn them special consideration from Washington and the American public.”  Indeed, it is a strategy which has been endorsed and funded by the last four US administrations. A high State Department official, asked recently whether the Reagan administration approved of growing Israeli arms sales and military missions in Central America, responded, “Absolutely. We’ve indicated we’re not unhappy they are helping out.” 
The absence of internal Israeli opposition to this role contrasts with public and Congressional criticism in this country. Begin and Sharon appear to be advertising Israel’s utility to the US at this global level, in order to overcome differences with the Reagan administration over Lebanon and the Occupied Territories. It is otherwise difficult to explain why Sharon himself felt the need to visit Honduras and Zaire himself, rather than leave such negotiations to upper-level subordinates in the Defense Ministry. The publicity surrounding these latest visits contrasts sharply with the great secrecy that surrounded previous Israeli ventures in arms diplomacy. Israel’s ties to South Africa, and Guatemala and other “pariah states” are now more firmly than ever a part of its political and economic role in the world.
 Washington Post, December 7, 1982.
 Davar, November 3, 1982; Foreign Broadcast Information Service, November 5, 1982.
 Jerusalem Post, October 31, 1977.
 Mordechai Ben-Tov, Kalkalat Yisrael al parashat ha-drachim (Tel Aviv, 1965).
 Journal of Commerce, November 8, 1977.
 Nadav Safran, Israel: The Embattled Ally (Cambridge, MA, 1978), p. 122.
 Ibid., p. 118.
 Ibid., p. 124.
 Al-Hamishmar, April 9, 1980.
 Ibid. For a fuller discussion and more detailed statistics, see Joel Beinin, “Challenge from Israel’s Military,” MERIP Reports 92 (November-December 1980).
 Haaretz, February 20, 1980.
 Israel Business and Investors’ Report, January 1981.
 Jerusalem Post, May 10, 1982.
 Israel Business and Investors’ Report, January 1981.
 Safran, p. 117.
 Statistical Abstract of Israel, 1981.
 Stockholm International Peace Research Institute (SIPRI) Yearbook, 1981.
 Yediot Aharonot, January 4, 1980.
 Maariv, April 4, 1981; SIPRI, 1981.
 Jerusalem Post, March 24 and April 21, 1982.
 Journal of Commerce, December 11, 1981.
 SIPRI, 1981.
 For an indication of the favorable climate for private US capital in Israel during its early years, see “US Capital in Socialist Israel,” Fortune (June 1950).
 Aviation Week and Space Technology, March 31, 1975; Investing in Israel (Israel Investment Authority, NY).
 “Marketing in Israel,” US Department of Commerce Overseas Business Reports, July 1980.
 Business Week, April 20, 1981.
 Steven Lydenberg, “The US Corporate Role in International Arms Transfers,” Weapons for the World (New York: Council on Economic Priorities, 1977).
 I. Klich, “The New Arms Carve-Up,” South (April 1982).
 As of January 1983, the Reagan administration had not released for delivery 75 F-16 warplanes embargoed after the invasion of Lebanon.
 Foreign Military Sales and Military Assistance Facts (Washington, DC: Government Publishing Office, 1982).
 According to an unofficial summary of a General Accounting Office report, US Security and Military Assistance: Programs and Related Activities, commissioned by Sen. William Proxmire (R-WI).
 Jerusalem Post, February 4, 1982.
 Wall Street Journal, September 17, 1981.
 Joe Stork, “Israel as a Strategic Asset,” MERIP Reports 105 (May 1982), p. 12.
 Mideast Commentary 7 (January 1982).
 Aviation Week and Space Technology, February 16, 1976. On the 1971 agreement, see Stork, p. 4.
 Aviation Week and Space Technology, February 16, 1976.
 Safran, p. 558; Edward Sheehan, The Arabs, Israelis and Kissinger (New York: Readers’ Digest Press, 1976), p. 253.
 Armed Forces Journal, December 1977, p. 14.
 Jerusalem Post, February 4, 1982.
 Israel Business and Investor’s Report, June 1979.
 Jerusalem Post, April 12, 1982.
 Max Holland, “The Myth of Arms Restraint,” International Policy Report 5/1 (May 1979).
 New York Times, June 7, 1982.
 Israel Business and Investors’ Report, August 1981.
 Changing Perspectives on US Arms Transfer Policy, House Subcommittee on Foreign Affairs (Washington DC, 1981), p. 50.
 Ibid., p. 52.
 Aerospace Daily, March 16, 1982.
 Lyndenberg, op cit.
 Jerusalem Post, February 4, 1982.
 Los Angeles Times, August 18, 1981; Financial Times, August 18, 1981.
 Baltimore Sun, December 2, 1982.
 Yediot Aharonot, August 16, 1973.
 The Activities of Transnational Corporations in the Industrial, Mining and Military Sectors of Southern Africa (United Nations, 1980), p. 62; UN Committee Against Apartheid, Recent Developments Concerning Relations between Israel and South Africa, September 1981.
 Economist, December 20, 1980.
 Rosalynde Ainslee, “Israel and South Africa: An Unlikely Alliance?” (UN Special Committee Against Apartheid, July 1981), p. 15.
 Economist, November 5, 1977.
 Rand Daily Mail, June 23, 1981.
 New York Times, February 10, 1978.
 New York Times, December 14, 1981; The Star (Johannesburg), December 15, 1981.
 Jewish Telegraphic Agency, December 1, 1982.
 Christian Science Monitor, December 26, 1978.
 Jerusalem Post, October 21, 1980.
 New York Times, December 5, 1982.
 Jewish Telegraphic Agency, January 25, 1983.
 New York Times, May 27, 1982.
 Washington Post, December 7 and 16, 1982.
 National Catholic Reporter, December 25, 1981.
 Davar, January 3, 1982; translated in Israel Shahak, Israel’s Global Role (Belmont, MA, 1982).
 New York Times, December 17, 1982.
 National Catholic Reporter, December 25, 1981.
 Davar, November 13 and 14, 1979; translated in Shahak, p. 17.
 Maariv, November 22, 1981; translated in Shahak, p. 48.
 New York Times, December 17, 1982.
 NACLA Report on the Americas (February 1982), p. 52.
 Washington Post, December 7, 1982.
 George Crile, New York Times, December 4, 1982.
 Washington Post, December 7, 1982.
 Edy Kaufman, Yoram Shapira and Joel Barromi, Israeli-Latin American Relations (New Brunswick, NJ, 1979), pp. 104-105. This book includes a glowing account of Israeli-Latin American military relations as they developed in the 1960s and early 1970s.
 Benjamin Beit Hallahmi, New York Times, January 6, 1982.
 New York Times, December 17, 1981.