The US State Department has given approval for Israel’s sale of the Arrow 3 ballistic missile defence (BMD) system to Germany, in what would be the largest ever defence deal for Jerusalem, valued at $3.5bn (NIS13.2bn).

In June, it was reported that the German Ministry of Defence and the Bundestag’s Budget and Defence Committees had begun to approve the acquisition of the Arrow 3 system. The system is part of Israel’s multi-layer defence array and offers protection against longer-range aerial threats.

In a statement released to Israeli media, Israel’s Ministry of Defence (IMOD) revealed that senior officials were notified on 17 August that the US Government had approved Israel’s request for Germany to procure the Arrow 3 capability.

According to IMOD the Arrow 3 missile defence system is designed to intercept exo-atmospheric ballistic missiles, employing a hit-to-kill approach for intercepting incoming threats.

The Arrow 3 system has been co-developed and co-produced by the Israel Missile Defense Organization (IMDO) and the US Missile Defense Agency (MDA), with the industrial team led by Israel Aerospace Industries (IAI).

IMOD further stated that after receiving approval from the US Government, senior officials from Israel and Germany will participate in a ceremony to sign a Letter of Commitment (LOC) that marks the commencement of the agreement. The allocated commitment of $600m will facilitate the immediate initiation of work on the project.

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Once the LOC is signed, both countries, together with IAI, will finalise the agreement’s details, after which approval will be sought from both countries’ parliaments ahead of a full contract signing by the end of 2023. Israeli defence industry participation will include IAI, Government-owned Tomer, Rafael, and Elbit Systems.

Israel Defense Minister Yoav Gallant described the approval decision as “significant” which would contribute to Israel’s force buildup and economy.  

“It is also particularly meaningful to every Jewish person, that Germany is acquiring Israeli defense capabilities,” Gallant said.

Missile defence market growth

According to GlobalData, the global missiles and missile defence systems (MMDS) market is forecast to witness moderate growth between 2023 and 2033. The MMDS sector is valued at $45.2bn in 2023 and will grow at a compound annual growth rate (CAGR) of 4.2% to reach a value of $67.9bn by 2033.

The cumulative market for global MMDS is anticipated to be valued at $657.4bn over the forecast period.

GlobalData analysis states that demand for MMDS is anticipated to be driven by air defence modernisation and advanced precision strike missile procurement programmes by key defence spending countries, such as the US, Russia, China, India, Poland, and the UK, among others.