A $500 million anti-tank missiles deal between India and Israel’s Rafael weapons manufacturer has been officially canceled, ahead of an official visit to New Delhi by by Prime Minister Benjamin Netanyahu. At the same time, Delhi said it would buy over 100 surface-to-air missiles.
On Tuesday, a spokesperson for Rafael Advanced Defense Systems confirmed an Israel Radio report that the company had received official notice from the Indian government that the deal for Spike missiles was nixed last week.
“Rafael was disappointed to receive the decision,” the company said in a statement.
“It should be stressed that the cancellation was done before the contract was signed, and despite the fact that the company fulfilled all its requirements,” Rafael said.
In November, Indian media reported that the cancellation of the deal for Spike missiles was forthcoming.
At the time, David Keynan, vice chairman of the Federation of Indo-Israeli Chambers of Commerce, warned that it could have negative repercussions not only on defense contracts between the two countries, but throughout the market.
“It is a very noteworthy deal. It will have an impact not only on defense trade, but on all trade,” Keynan said at the time, speaking over the phone from Bangalore, India.
The initial deal for the Spike anti-tank guided missile was signed in 2014. While the final agreement had yet to be approved by both parties, Rafael had started preparations for delivering the missile, opening a production facility in India in August with its local partner, the Indian industrial giant Kalyani Group.
The factory will not be sold or abandoned, but will be used by company for other projects in India.
Hours before the cancelation was confirmed, the Indian Defense Ministry said Tuesday it would buy 131 Barak surface-to-air missiles from Rafael for $70 million.
The Barak missiles are to be used for India’s first aircraft carrier, which is under construction.
Netanyahu will lead a business delegation to India on a five-day trip starting January 14. Israel has become a major defense supplier to India, selling an average of $1 billion of military equipment each year.
“[Rafael] will still take part in the delegation led by the prime minister,” the company said Tuesday.
Last April, the two countries signed a military deal worth nearly $2 billion which includes the supply over several years of medium-range surface-to-air missiles, launchers and communications technology.
It was unclear whether the deal announced Tuesday was part of that.
According to the Indian Express news outlet, the decision to cancel the Spike deal was made this week in order to protect Delhi’s own Defense Research and Development Organization, which is working on creating its own anti-tank guided missile.
Indian military sources told the website that DRDO had already produced a few varieties of anti-tank guided missiles and was “confident” that it could produce one on par with the Israeli Spike.
The Indian military, which currently uses an inferior anti-tank missile that does not work well at night, reportedly expressed concerns that the decision to scrap the Spike deal would negatively affect its preparedness, and that there was “operational urgency” for the Israeli missile.
India, which has longstanding territorial disputes with neighbors China and Pakistan, has signed several big-ticket defense deals since Prime Minister Narendra Modi came to power in 2014.
It has been moving away from relying on traditional ally Russia for military hardware, though it said Tuesday it had approved the purchase of 240 bombs from Russia’s JSC Rosonboron Exports for $188 million.
In recent years, India has deepened its ties to Israel, diplomatically and militarily.
Indian Prime Minister Narendra Modi visited Israel this summer, in the first official visit of an Indian premier in Israel.
In November, the Indian Air Force and special forces also took part in the Israeli Blue Flag air exercise, in what was seen as a sign of strengthening ties between New Delhi and Jerusalem. In June, a month before Modi’s visit, India helped sponsor the renowned Israeli Defense Expo in Tel Aviv.
And in May, three Indian Navy ships docked in Haifa for an official visit, marking 25 years of diplomatic relations between the two counties.
AFP contributed to this report.