BMI's Executive Summary

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Israel's international relations are at an all-time low, except, of course, with a few key influential allies. The intensification of the conflict with the Palestinians, and perhaps most significantly the devastating and arguably inappropriate invasion of Lebanon, have all undone months of diplomacy with the Arab World and the international community at large. Vast parts of the international community condemned Israel's actions in Lebanon, actions which arguably failed to achieve Israel's objectives. Given this failure, the government, and Prime Minister Ehud Olmert, have been widely criticised by Israel's parliament, media and population. The withdrawal from Lebanon has been seen as a climb-down by the right wing in Israel, having failed to either deal a decisive blow to Hizbullah, the Iran- and Syria-backed militant Shi'a group that instigated the conflict or secure the release of the two captured Israeli soldiers.

Although domestic and international relations are in trouble, BMI does not see a significant change to the level of threat to Israel's security for the foreseeable future. Israel will continue to exist within a highly volatile region and be at risk of attacks from both internal and external parties. This is not new to Israel. It has existed under these conditions, and far worse, since its creation and has built up sophisticated and well-tuned mechanisms for combating such threats. Whilst not numerically great, its armed forces are well-trained, well-armed and highly experienced. Perhaps more importantly, Israel is supported by the world's only superpower, the US, which donates enormous quantities of military aid and equipment to the Israeli Defence Force (IDF).

Israel's armed forces are also supported by one of the world's most advanced defence industries, which benefits from large amounts of support from the government in the form of contracts. Israeli arms exports are currently flourishing, with lucrative relationships created with major weapons purchasers such as India and Turkey. In 2006, transfers totalled some US$4.5bn, ranking Israel in the top five exporters in the world. Arms imports are also likely to be sustained at a significant level by several long-running procurement programmes and an increase in foreign military financing (FMF) from the US.

BMI's newly-released Israel Defence & Security Report concludes that the Israeli defence industry is set to thrive regardless of the immediate political or security environment in which it operates.

Contents

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Chapter 1 - Executive Summary

SWOT Analysis

Israel Political SWOT

Israel Security SWOT

Israel Defence Industry SWOT

Israel Economic SWOT

Israel Business Environment SWOT

Chapter 2 - Political Overview

Domestic Political Outlook

High Political Turmoil, Low Market Impact

Recriminations Over Military Strategy

The Blame Game

Will Olmert Survive?

A New Leader?

A New Palestinian Government

A Way Out?

Another Scenario: Withdrawals On Hold, And The PA Dissolved

Diplomatic Losses

A Shared Interest

An EU Role

Unilateralism Is Dead

Anti-Western Sentiment Rises

Chapter 3 - External Political Outlook

Hizbollah Claims Victory

Chapter 4 - Security Risk Analysis

BMI’s Security Ratings

Risk Ratings

Table: Yemen Regional Security Ratings

Table: State Terrorism Vulnerability Index

Regional Security: The Middle East and North Africa

Inter-State Conflicts

Internal Conflicts

Israel Security Risk Ratings

Israel Conflict Risk

Israel Terrorism Risk

Israel Physical Safety Risk

Chapter 5 - Security Risk Overview

Internal Security Situation

Palestine

The Cycle Continues

Hamas Breaks Truce

Chapter 6 - External Security Situation

Return To Lebanon

Hizbollah Claims Victory: Security Implications

Hizbollah Is Still Strong

Return To Deterrence For Now

But Still A Long-Term Threat

Anti-Israel Hawks Emboldened Elsewhere

Golan Heights

Iran

Iraq

Libya

Chapter 7 - Military Structure & Defence Industry

Armed Forces

Table: Regional Armed Forces (including conscripted) 2006

Current Strength

Historical Strength

International Deployments

Weapons of Mass Destruction

Table: Israeli Nuclear-Capable Delivery Vehicles

Chapter 8 - Market Overview

Arms Trade Overview

Imports

Exports

Industry Trends & Developments

Table: Key Players – Israel Defence Sector

Procurement Trends & Developments

Chapter 9 - Industry Forecast Scenario

Table: Israel Defence Sector – Historical Data & Forecasts

Table: Israel Defence Sector – Government Expenditure

Arms Trade

Key Risks To BMI’s Forecast Scenario

Chapter 10 - Macroeconomic Forecast

Table: Israel – Economic Activity

Chapter 11 - Company Profiles

General Dynamics

Rafael Armament Development Authority

Israel Military Industries

Israel Aircraft Industries

Elbit Systems

Elisra Group

Chapter 12 - BMI Forecast Modelling

How We Generate Our Industry Forecasts

Defence Industry

Sources

Chapter 13 - Appendix A: Risk Ratings Methodology

Conflict Risk Methodology

Terrorism Risk Methodology

Physical Safety Risk Methodology

Overall Risk Rating

State Vulnerability Index

Competitive Landscape for MEA Defence & Security: Sample of  
Companies Ranked

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Rankings and Competitive Landscapes by production and sales; market share and change on previous year; number of employees, ownership structure and year established. Also includes analysis of company expansion, export and investment strategies.

Network of Defence & Security Sources

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BMI's Middle East & Africa Defence & Security Reports are based on an extensive network of multilateral organisations, government departments, automotive industry associations, chambers of commerce and company reports. Information sources include: