German Submarine Sales to Israel

Introduction

Like most submarine sales in recent years, the planned sale by German shipbuilders ThyssenKrupp of three Dolphin-2 submarines to Israel, possibly intended to carry nuclear weapons, appears to have involved substantial bribes. In this case, the suspected recipients are close associates of Israeli Prime Minister Binyamin Netanyahu. The sale was provisionally agreed late in 2016, against the wishes of senior military commanders and without a competition. Suspicions of corruption emerged almost immediately, and an Israeli police investigation has led to numerous arrests, with at least one key suspect becoming a state witness. The planned contract has been halted by Germany as the investigation proceeds.

Key Facts

Buyer: Israel

Seller: ThyssenKrupp (Germany)

Year of deal: Preliminary agreement in 2016. Contract intended to be signed 2017, but delayed due to corruption investigation.

Equipment: 3 Dolphin-2 diesel-electric submarines

Value of deal: EUR 1.2 billion

Sum involved in corruption allegations: Not known. Probably in the tens of millions of dollars, at least.

Dramatis Personae

Binyamin Netanyahu – Israeli Prime Minister who negotiated the deal.

Michael Ganor – Israeli businessman, main agent for ThyssenKrupp in Israel.

David Shimron – Binyamin Netanyahu’s personal lawyer, represented ThyssenKrupp in submarine deal.

Moshe Ya’alon – former Israeli Defence Minister (2013-16); opponent of the deal.

Vice Admiral Eliezer Marom – Israeli Navy commander 2007-2011; arrested in submarine case.

Rear Adm. (retd.) Avriel Bar-Yosef – former Israeli Deputy National Security Council Chief; arrested in submarine case.

The Arms Deal

Israel already has five German Dolphin and Dolphin-2 submarines in their fleet, purchased during the 1990s and 2000s, and is due to receive a sixth in 2019, the last of a 2012 order. The Israeli cabinet approved a framework agreement to buy three further Dolphin-2 submarines from German submarine-maker ThyssenKrupp in October 2016, for a price of EUR 1.2 billion. It is likely that the submarines will be armed with nuclear weapons.

The deal was controversial and opposed by sections of the military, as Israel’s current submarines will not start approaching obsolescence until 2025, and as no attempt seems to have been made to explore alternative suppliers (e.g. France’s DCNS). Former Defence Minister Moshe Yaalon, who resigned in May 2016, criticized the deal and claimed that he had vigorously opposed it prior to his resignation. The deal was pushed through by Prime Minister Binyamin Netanyahu.

As yet no contract has been signed, and a planned Memorandum of Understanding (MoU) between Israel and Germany, due to have been signed in July 2017, was halted by the German government due to the ongoing investigations, even though the German Cabinet had approved the sale as recently as the end of June 2017.

Update (July 2018): The MoU was eventually signed in October 2017. According to media reports, the final version of the MoU has a clause which allows Germany to cancel the deal if criminal acts are established. As of spring 2018, the Israeli navy foresees signing a procurement contract for the submarines in 2020.

The Corruption Allegations

Investigators suspect that ThyssenKrupps’ principle agent in Israel, Michael Ganor, promised fees worth millions of dollars to key procurement decision-makers in Israel. David Shimron, Netanyahu’s personal lawyer and Ganor’s own legal counsel, was also involved. Ganor is said to have told police that Shimron was promised fees of ‘tens of millions’ of Israeli shekels (10 million shekels is about USD 2.8 million), and that this was 20% of the fee that Ganor himself was to receive from Thyssen Krupp. This would put Ganor’s fee into the tens of millions of dollars.

Investigations and Outcomes

Israeli police started an investigation into the deal within a month of it being announced, in November 2016, following revelations that Netanyahu’s personal lawyer, David Shimron, had acted as a representative for ThyssenKrupp in relation to the deal. The investigation was ordered by Attorney General Avichai Mandelblit.

A criminal probe was opened in February 2017, and in July seven people were arrested, with some detained or placed under house arrest. Those arrested included Shimron; businessman Michael Ganor, ThyssenKrupps’ principle agent in Israel, who had been involved in a number of arms deals since 2012; Vice Admiral (retd.), Eliezer Marom, former Israeli Navy Commander, who is alleged to have insisted upon Ganor’s appointment as an agent in 2009; and Rear Adm. (retd.) Avriel Bar-Yosef, former Israeli Deputy National Security Council Chief, who had been one of the main supporters of the deal. They were suspected of crimes including bribery, tax fraud, and money laundering, in relation to the submarine deal and another to buy corvettes from ThyssenKrupp.

At the end of July 2017, it was reported that Ganor had agreed to become a state witness, and had accepted a sentence involving a fine of USD 2.8 million and one year’s imprisonment.

Police have stressed that Netanyahu himself is not at present a suspect in the case, although Moshe Ya’alon insists that Netanyahu must have known about the corrupt dealings. Indeed, the newspaper Yedioth Ahronoth reported in March 2018 that investigators weighed the risks of Germany canceling the deal before deciding to question the prime minister. Netanyahu is currently under investigation by Israeli police over three other corruption cases.

Update (July 16, 2018): Prime Minister Netanyahu was interviewed by police for several hours in relation to the Dolphin case on June 12, 2018, and continues to be treated as a witness, not a suspect.

Sources

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