India’s reported plans to scrap a half-billion-dollar deal with Israel for anti-tank missiles will have negative repercussions not only on defense contracts between the two countries, but throughout the market, according to an Indian-Israeli commerce organization.
The large sale has been lauded by Israeli officials as a major milestone in trade and military relations with India, giving its reported cancellation extra significance, said David Keynan, vice chairman of the Federation of Indo-Israeli Chambers of Commerce.
“It is a very noteworthy deal. It will have an impact not only on defense trade, but on all trade,” Keynan told The Times of Israel Tuesday, speaking over the phone from Bangalor, India.
He noted that defense exports often act as a “catalyst” for further trade.
On Monday, Indian media outlets reported that the country’s defense ministry had decided to scrap a $500 million deal to buy Spike anti-tank guided missiles from Israel’s Rafael Advanced Defense Systems in favor of developing such missiles domestically.
The cancellation of the agreement has yet to be officially confirmed. A Rafael spokesperson said the company was continuing in its efforts as normal, until it is notified of a change.
The Spike deal was not just words on paper, but had already reached more advanced stages of implementation. Rafael had begun preparations for delivering the missile, opening a production facility in India in August with its local partner, the Indian industrial giant Kalyani Group.
The opening of the missile production facility this summer came weeks after a visit to Israel by Indian Prime Minister Narendra Modi — the first official visit to Israel by a sitting Indian prime minister.
In a speech at its inauguration, Rafael CEO Maj. Gen. (res.) Yoav Har Even said the factory “is another expression of the strong cooperation between Israel and India in general and of Rafael as a strategic ally of India in particular.”
According to Keynan, whose organization facilitates trade between India and Israel, the reports that the massive deal will be called off sparked concern among businesspeople from both countries.
“I have already received dozens of calls about it,” he said.
Israelis expressed concern that the deal might indicate that agreements with Indian companies are not as solid as they seem. And Indians were worried that in the fallout, Israelis might indeed have those fears and be less interested in making deals in India.
Keynan, who has lived in India since 2003, noted that his commerce group is not government-affiliated and was not involved in the Spike agreement or any other defense deals.
While exports to India have increased over the years — New Delhi is currently Israel’s 10th-largest trade partner — they haven’t been doing so at the same rate as Israel’s exports in general, according to Keynan.
From 2015 to 2016 bilateral trade grew by 0.85 percent, according to the Indian Embassy in Israel.
“It’s slower than we’d like to see,” he said.
The exact value of Israeli exports to India is difficult to calculate as not all the figures are publicly available, notably defense exports, which make up a significant percentage of the total. However, Keynan estimated that in the past year Israel exported approximately $5 billion to India in goods and services, some $1.5 billion of that in defense trade.
According to Israel’s Central Bureau of Statistics, Israel also ships approximately $1 billion worth of diamonds to India each year, along with approximately $1 billion in chemicals. The rest comes in the form of agriculture products, non-military technology, industrial products and other assorted goods and services.
According to the Indian Express news outlet, the cancellation of the Spike deal was done in order to protect the government’s 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 that was “confident” it could produce one on par with the Israeli Spike.
The Indian army, 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.
A spokesperson for Rafael noted the “Spike missile, which is in use in 26 countries, was chosen by India after a lengthy process, in which the system was inspected and successfully performed in a wide variety of scenarios.”
This year was a major one for defense cooperation between Israel and India. In May and April, Israel Aerospace Industries (IAI) announced two deals with New Delhi for missile defense systems, which were together worth over $2.5 billion.
Earlier this month, 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.