The Israeli Ministry of Defence (IMoD) is helping Israeli defence companies to enhance their cooperation with German defence companies. According to Israeli sources, the existing cooperation will expand to new fields like space.
The structural drivers, such as German rearmament funds, Israeli combat-proven equipment, and the JV-with-local-production model that meets European sovereignty requirements, demonstrate deepening cooperation. Currently, all of the major Israeli prime companies (IAI, Elbit, Rafael) and German prime companies (Diehl, TKMS, Rheinmetall, KNDS, MBDA Deutschland, Reflex) have formal industrial collaborations. The Arrow 3 programme alone is worth around US$6.5 billion and is still expanding.
One of the strongest bilateral defence-industrial ties in Europe, collaboration between German and Israeli defence businesses is not only continuing but also rapidly expanding. Clearly, the trend indicates that collaboration is increasing rather than decreasing. Europe now accounts for 36% of Israel’s defence exports, which reached a record $19.2 billion in 2025 – a 30% increase. Israel is now Germany’s third-largest arms export market from 2021 to 2025, with Germany alone accounting for around half of Israeli defence exports in 2025. A security agreement that “anchors Germany’s deep commitment to the security of the State of Israel,” including cyber defence and counterterrorism, was signed by the two governments in January 2026, formalising their strategic partnership.
The flagship is the US$ 3.5 billion contract for the Arrow 3 signed in 2023, plus a US$3.1billion follow-on in December 2025 for more Arrow 3 interceptors and launchers. The first battery went operational at Holzdorf in December 2025; a second site in Kaufbeuren, Bavaria was announced in June 2026. Berlin is now in talks for an additional purchase (cited in Army Recognition + Jerusalem Post).
According to Israeli defence sources what is distinct now is the shift from government-to-government sales to joint ventures and local production in Germany — exactly the model Frost & Sullivan identifies as Europe’s new scaling engine: “Israeli battle-tested technology, German sovereign factory floors”. Elbit Systems + Diehl Defence: Jointly marketing the SkyStriker loitering munition to the Bundeswehr, with local manufacturing and assembly in Germany. Elbit + ThyssenKrupp Marine Systems (TKMS): MoU for joint naval defence development and integration into next-generation platforms, building on TKMS’s existing submarine ties with the Israeli Navy.
Elbit + KNDS Deutschland: PULS rocket artillery selected by Germany in February 2025 over the Rheinmetall/Lockheed GMARS — a notable upset where an Israeli system beat a German-American prime on a German contract. Rafael + Reflex Aerospace: Joint ultra-high-resolution satellite programme. Rafael + Rheinmetall: Cooperation on missiles, anti-tank tech, and a 155 mm artillery system. Rheinmetall + UVision: Co-producing the HERO loitering munition family for Europe. MBDA Deutschland + IAI: Co-marketing HAROP loitering munitions. IAI + State of Berlin: MoU signed June 11, 2026 at ILA Berlin to build an aerospace/defence innovation centre with local production in Berlin-Adlershof, modelled on IAI’s US, India, and Israel accelerators. Rafael + Volkswagen (Osnabrück): Letter of intent to buy a VW factory to manufacture Iron Dome Tamir interceptor components — a major local-production play.
The Israeli sources point to the war in Ukraine as the main driver of this increased cooperation. Russia’s missile war in Ukraine made layered air defence and mass-produced munitions an existential German priority. Proven Israeli systems outperform multi-decade European roadmaps, and Arrow 3 is at the top of the European Sky Shield Initiative. According to the sources, “operationally proven” systems are now given priority in European procurement; Israeli air defence, EW, and loitering bombs are sought after due to their actual effectiveness against Iranian ballistic missile assaults. The sources pointed out that the JV model fulfils Berlin’s desire for production on German soil for supply security, employment, and NATO conformity.
Arie Egozi
