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Introduction Political Conditions I sr a e l a n d t h e W a r s Hamas Foreign Policy Geo-Political affairs Macro Economic Condition I sr a e l ' s D e f e n c e India and Israel I sr a e l ' s I n i t i a t i v e Summary Recommendation Annexure Bibliography

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The State of Israel (Hebrew: ‫ ,מדינת ישראל‬Medinat Yisrael) was established on May 14, 1948 after nearly two thousand years of Jewish dispersal. The 60 years since Israeli independence have been marked by conflict with neighboring Arab states and the PalestinianArabs. There have also been many negotiations, and peace has been achieved with Egypt and Jordan. Israel's democracy has survived under difficult circumstances and the country has prospered despite war, ethno-religious conflict, boycotts, and mass immigration and terror attacks. It is bounded to the north by Lebanon, the northeast by Syria, the east by Jordan and the West Bank, the southwest by Egypt with this border also being the border between Asia and Africa. To the west of Israel is the Mediterranean Sea and the Gaza strip.

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But the good news was accompanied by bad news. In particular, since 1993 Israel experienced a sharp deterioration in the balance on current account of the balance of payments, which worsened in 1994, and even more so in 1995. The balance on current acco unt is defined as exports of goods and services, plus unilateral transfers from abroad (US grants, contributions from world Jewry, German restitution,


immigrant and other private transfers) minus imports of goods and services. In 1990-92, as a whole, the balance on current account was positive at $154 million. In the following three years, 1993-95, there was a sharp deterioration with a total deficit of $7.8 billion, of which $4.1 billion was incurred in 1995 alone. [All data regarding the Israeli economy are from the Bank of Israel Annual Report (Israel: Government of Israel, March 1996).] This deficit was not the result of arms imports, which actually declined. Estimates for the first quarter of 1996 show a continued deterioration with the deficit in the balance on current account 25% higher than in the same period a year earlier. [Data for the early months of 1996 are from Economic Developments in Israel and the World (Israel: Bank Leumi, July 1996).] These deficits were covered, for the most part , by loans and a growing external debt. If the budget submitted to parliament by the new government in mid-1996, which focuses on cutbacks in government expenditures, is implemented, it should reverse the adverse trends in the balance of payments and reverse the recent up-trend in inflation. The data do not suggest that the Oslo agreements had any perceptible effect on the Israeli economy. Nor can one "blame" the Oslo accords for the problems


which arose since 1993/1994. Israel's recent economic woes are attributable mainly to unwise govern ment economic policies. One example is the unusually large wage increases granted by the government to public sector employees in 1993-96 (soon emulated by other sectors) that stimulated very large increases in private consumption, imports and inflation. A second example is the provision by the government of unusually large subventions to politically-favored groups, aggravating the budgetary deficit and indirectly the deficit in the balance of payments. What all this tells us is that Israel's economic problems can be addressed only by the adoption and implementation of appropriate economic policies. Israel adopted some important new economic policies in the mid-1980s which fostered efficiency, productiv ity, and profitability, and the favorable results became very visible in the early 1990s. Wise economic policies underlay Israel's prosperity, and poor economic policies explain the problems that arose in more recent years. As the rest of this discussion will demonstrate, the same is true of the Arab states where the problems are far more deep-rooted. Wise domestic policies hold out the promise of prosperity. Only basic,


fundamental economic changes can significantly impro ve the performance of the Middle Eastern economies, and provide jobs and decent incomes for the vast army of unemployed and underemployed, the poor and downtrodden—not interstate politics.

PEACE THROUGH GLOBALIZATION Most political commentators are puzzled by the fact that Sharon, who has brought Israeli society to its lowest point ever in every respect, is so immensely popular among the voters. The most common explanation for Sharon's high standing is that, in its deep despair over the security and economic situations, the Israeli public is clinging to the grandfatherly figure that the Likudnik prime minister has cut for himself. Sharon, it is true, has always been a brilliant tactician, but his popularity has deeper roots than this grandfatherly image. Its roots lie in the total collapse of the policy of peace through globalization, and vice versa, pursued by Labor between 1993 and 2000. Historically, the power of the Labor party rested on a highly mobilized economy, controlled in almost


equal measures by the state and by the Histadrut. The Histadrut was an umbrella political-economic labor organization on the Western European model (albeit an extreme variety of that model), not a labor union federation like the AFL-CIO. While the Israeli economy was at no time a socialist economy, for many years profit was not the only consideration determining economic policy. National considerations, primarily the need to maintain full employment among Jewish workers, operated to curb the profit motive. With the rapid economic growth that began after 1967, political pressure was mounting to "rationalize," or liberalize, the economy. This neoliberal impetus found its political expression in the Democratic Movement for Change, a oneissue, one-election political party that won 15 Knesset seats in the 1977 parliamentary contest, bringing Labor down and allowing Likud to take power for the first time. After it won the elections, Likud launched two drastic policy initiatives: economic liberalization and peace with Egypt. While the former was in line with its political principles, the latter came as a total surprise. Not long before that Begin had vowed to retire, when his time came, to Yamit, the town built by Israel in northern Sinai. The explanation for this contradiction lies in the conjunction of the two policies: economic


liberalization required, as a precondition, a reduction in state expenditures and therefore in the volume of the Arab-Israeli conflict. Likud's peace policy turned out to be much more successful than its economic one. The Histadrut, which Likud failed to capture when it captured the state, opposed liberalization every inch of the way, and the only tangible result of the liberalization efforts was an inflation rate that reached 450 percent a year by 1985. At that point, Labor came to the rescue, and the national unity government headed by Shimon Peres and Yitzhak Shamir adopted a new economic policy of harsh anti-inflationary measures and drastic liberalization. Parallel to that, the national unity government also extricated Israel from most of Lebanon, where it had been mired, thanks to Sharon, since 1982. THE DISAPPEARING "PEACE DIVIDEND" The Oslo accords of 1993 were to be the capstone of this combined process of peace and economic liberalization. Initially, the accords paid off handsomely in economic terms, allowing Israeli capital to make important strides in its effort to integrate into the global economy, and attracting unprecedented foreign investment to Israel. As a result, per


capita GDP rose almost three times between 1980 and 1998, from $5,600 to $15,100. But this "peace dividend" did not benefit the entire society. During the rapid economic development that took place in the 1990s, Israel moved from being the least unequal advanced capitalist society to being second only to the US in economic inequality. Income and wealth gaps were mitigated somewhat by taxes and transfer payments, but, as could be expected, political pressures have been mounting to cut taxes and reduce transfer payments. Since 1985, all Israeli governments have pursued aggressive neoliberal economic policies of privatization, deregulation, tax cuts and contraction of social services. But of the two major political parties it was Labor which was perceived as the true champion of these policies, because it combined neoliberal economics with the peace process and with many other measures of social, political and cultural liberalization. Likud (and Shas), on the other hand, while no less liberal in economic terms, have been anti-liberal in political and cultural terms, and were thus able to capitalize not only on the opposition to the peace process per se, but also on the economic and cultural frustrations generated by


the broader process of liberalization. When the Oslo process collapsed in 2000, Likud, whose number of Knesset seats had shrunk to only 19 in 1999, was there to pick up the pieces. With Netanyahu getting cold feet at the last moment, Sharon became leader of Likud and viciously attacked Barak for his handling of the second intifada. Barak, in turn, was blaming Arafat for rejecting the "generous offer" supposedly made to him at Camp David and choosing an armed struggle instead. But Arafat was not running in those elections, and faced with the political bankruptcy of Labor and rapidly deteriorating personal security, the Jewish electorate opted for Sharon's promise to "let the IDF win." Sharon's decisive victory was guaranteed by the Palestinian boycott. SHARON'S CALCULUS With his election as prime minister in February 2001, Sharon's tactical brilliance came fully into play. Capitalizing on the opportunism of a number of key Labor politicians,


first and foremost the Nobel Peace Laureate, Shimon Peres, he proceeded to form a government of national unity, thus ensuring that there would be no effective opposition to his policies in the Knesset. With liberal public opinion shattered by the myth of the "generous offer" and by the suicide bombing attacks, Sharon had the field to himself. As luck would have it, after September 11, 2001 the US was transformed from a restraining influence upon Sharon to a cheerleader for the execution of his old plan -- the reoccupation of the West Bank and Gaza, the destruction of the Palestinian Authority and the annihilation of the Oslo process. By summer 2002, Sharon had largely accomplished these goals, and the government of national unity became a burden upon him, as he began thinking about bolstering his support on the right in the approaching Likud primaries. Ben-Eliezer was consumed with a similar calculus regarding the Labor primaries, and the issue of the 2003 state budget, the most draconian anti-social budget ever proposed in Israel, was a convenient occasion for both of them to go their separate ways. Typically, it was Sharon's calculation that paid off and Ben-Eliezer's that backfired. Following the breakup of the national


unity government, Sharon called for almost immediate elections, depriving both Ben-Eliezer and Netanyahu of the opportunity to prepare themselves for their respective primaries. TERRITORY VS. PEACE Curiously, the upcoming general elections will be the first in Israel's history clearly to be fought over the issue of territory versus peace. Mitzna's candidacy is promoted by big Israeli capital, which has been sustaining serious losses due to the economic devastation caused by the combination of a global crisis and the flight of every form of foreign (and some domestic) capital, including tourism, because of the renewed conflict. Mitzna won the Labor primaries by going against the conventional wisdom and clearly articulating his dovish positions, and he seems determined to stay this course for the duration of the electoral campaign. Sharon is hiding behind his faint support for a "Palestinian state" and his willingness to make "painful concessions" for peace, but everybody realizes that reelecting Sharon promises only more of the same. Paradoxically, Sharon's utter failure to enhance the security of Israel, and of individual Israelis at home and abroad, may actually help his electoral effort.



Optimistic commentators have pointed to the fact that in both major parties, and even in the ultra-nationalist National Religious Party, the more moderate candidates, or at least those professing to be such, won the internal contests. This, they say, indicates that public opinion is gradually moving to the left. This observation may be correct in a very general sense, as desperation is spreading throughout Israeli society. But in the very short time between now and January 28 this shift of sentiment is not likely to make a difference. The only question now is whether Mitzna will have the staying power to remain in the Knesset as head of the opposition, so that at least Sharon will have to face a loud, coherent, critical voice as he goes on with his plans to completely subdue the Palestinians.

JERUSALEM, Aug 3 (Reuters) - Israel's central bank, under pressure to keep the shekel from strengthening further and hurting an already battered export sector, said on Monday it would expand its intervention in the foreign exchange market. 'From now on, the Bank of Israel will act in the foreign exchange market in the event of unusual movements in the exchange rate which are inconsistent with underlying economic conditions, or when conditions in the foreign exchange market are disorderly,' it said in a brief statement. The Bank of Israel added it would continue to buy $100 million a day of foreign currency , a programme it began 16 months ago when the dollar was in freefall versus the shekel. The shekel weakened sharply on the news to 3.825 per dollar from its official rate of 3.743, set about an hour before the announcement. The official rate was the strongest level since Dec. 19, 2008. The Israeli currency, which gained 1.2 percent on Monday, had


appreciated by about 12 percent since reaching a low of 4.25 per dollar in late April. As the shekel continued to rise, exporters have appealed to politicians and Bank of Israel Governor Stanley Fischer to act to stem its advance. Exports, which account for nearly half of Israel's economic activity, slumped an annualised 29 percent in the first quarter under pressure from the global economic crisis. The economy contracted by an annualised 3.7 percent the first three months of the year. The Bank of Israel predicts a moderation in the second half of 2009. (Reporting by Steven Scheer; Editing by Ruth Pitchford) Keywords: ISRAEL FOREX/CENBANK (; +972 2 632 2210; Reuters Messaging:
COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.

Israeli analysts believe Iranian prime minister, Ahmadinejad has worked to undermine the peace process with arms supplies and aid to Hezbollah in South Lebanon and Hamas in Gaza and is developing nuclear weapons, possibly for use against Israel. Iran also encourages Holocaust denial. The Israeli army proved unable to prevent Hezbollah from shelling the north of Israel in 2006. The collapse of an unofficial cease-fire between Israel and Gaza and resumption of shelling of southern Israeli towns from Gaza, Israeli forces mounted a three-week campaign in Gaza leading to widespread international protests



In the 2009 legislative election the right-wing camp won a majority of seats and President Shimon Peres called on Netanyahu to form the government. There is a broad international consensus that the actions of the nations involved in the Arab-Israeli conflict violate prohibitions contained in international law. However, this legality is disputed by some of the nations involved. Both the basis for international law and disagreement over its applicability in the case of the Arab-Israeli Conflict is discussed below. The United Nations General Assembly has voted on a resolution pertaining to issues of international law as applied to the conflict every year since 1974.The most recent vote was held on January 22, 2009. The

resolution entitled "Peaceful settlement of the question of Palestine" was adopted by a recorded vote of 164 in favor to 7 against with 3 abstentions.




Israel has had wars with few countries in the past. Like the Arabs and few neighbouring countries. Few of them are explained in detail below.



Israel's Lebanon War (REFER ANNEX III)

The 2006 Lebanon War was a 34-day military conflict in Lebanon and northern Israel. The principal parties were Hezbollah paramilitary forces and the Israeli military. The conflict was precipitated by a cross-border raid by Hezbollah during which they kidnapped and killed Israeli soldiers. In a speech in July 2008, Hezbollah leader Hassan Nasrallah acknowledged that he had ordered the kidnapping of Israeli soldiers in order to free prisoners held in Israeli jails. The conflict began on July 12, 2006 when Hezbollah militants fired rockets at Israeli border towns as a diversion for an anti-tank missile attack on two armored Humvees patrolling the Israeli side of the border fence, killing three, injuring two, and seizing two Israeli soldiers.


ISRAEL • Hezbollah makes it tough for Israel Confronting one of the world's strongest armies, Hezbollah fighters are still battling Israel's tanks and raining rockets over the border, denying Israeli hope of a swift victory. Israel, wary of getting sucked into a new occupation of south Lebanon only six years after pulling out under Hezbollah fire, has decided against a full-scale invasion. Its reluctance to sweep into Lebanon is a back-handed compliment to the prowess of the Shiite fighters backed by Iran and Syria. Israel, wary of getting sucked into a new occupation of south Lebanon only six years after pulling out under Hezbollah fire, has decided against a full-scale invasion. Its reluctance to sweep into Lebanon is a back-handed compliment to the prowess of the Shiite fighters backed by Iran and Syria.

Hamas Dominates Parliamentary Elections Israeli-Palestinian relations were thrown into further turmoil when the militant Hamas Party won an unexpected landslide victory in the January Palestinian parliamentary elections. Although Hamas had been in a cease-fire with Israel for more than a year the party continued to call for Israel's destruction and refused to renounce violence. In April 2006, Hamas fired rockets into Israeli territory, effectively ending the cease-fire between them. Israel launched air strikes and sent ground troops into Gaza, destroying its only power plant and three bridges. Fighting continued over the summer, with Hamas firing rockets into Israel, and Israeli troops reoccupying Gaza.


ISRAEL • Violence Flares in Gaza

The Israel-Palestine conflict has been an ongoing one. Though the state of Israel was formed in 1948 there was a dispute between the Zionist pioneers and the Arab population living in Palestine. After years of almost daily exchanges of rocket fire between Israelis and Palestinians in the Gaza Strip, Israel and Hamas, the militant group that controls Gaza, signed an Egyptian-brokered cease-fire. While Palestinian and Israeli officials continued their dialogue throughout 2008, a final peace deal remained out of reach amid the growing rift between Fatah, which controls the West Bank and Hamas. Days after the cease-fire between Israel and Hamas expired, Hamas began launching rocket attacks into Israel, which retaliated with airstrikes that killed about 300 people. Israel targeted Hamas bases, training camps, and missile storage facilities. Egypt sealed its border with Gaza, angering Palestinians who were attempting to flee the attacks and seeking medical attention. After over a week of intense airstrikes, Israeli troops crossed the border into Gaza, launching a ground war against Hamas. Israeli aircraft continued to attack suspected Hamas fighters, weapons stockpiles, rocket-firing positions, and smuggling tunnels.



The desire of a dispersed people for a homeland cannot help but enlist the sympathy even of those with no Jewish roots, nor can any sensitive man or woman fail to be moved by the countless tales of valor and self-sacrifice in the years both preceding and following the creation of Israel. Many of American citizens have donated their personal savings on a scale of generosity without precedent in history. The question is no longer whether the United States should contribute to assuring Israel's survival and prosperity. To suggest that America should take a stronger and more assertive line in the search for Middle East peace is to risk being attacked as a servant either of Arab interests or of the oil companies, or being denounced as anti-Israel, or, by a careless confusion of language, even condemned as anti-Semitic.



In January, 2006, Hamas - an Islamist party with a military wing branded as a terrorist group by the West and won one of the freest and fairest elections ever conducted in the Middle East. Hamas became the legally and duly chosen representative of the Palestinian people, an inescapable player in the Israeli-Palestinian conflict. Despite similar previous pronouncements; the United States and Israel have avoided formulating a realistic policy towards Hamas, based primarily on three non-negotiable demands: that Hamas recognize Israel, renounce violence, and accept previous agreements between Israel and the Palestinian Authority. The United States hasinsisted that it will not deal with Hamas until all three are fully accepted. Hamas cannot be understood without understanding the sharia background of many of its policies. Israel's establishment is illegitimate and unjust, and its recognition by Muslims is forbidden. Hamas maintains that accepting Israel's legitimacy necessarily renounces the Palestinian narrative. Hamas has repeatedly offered to end its violent resistance against Israel by means of various shariabased mechanisms, such as a hudna (time-limited truce) or a tahadiyya (cease-fire). It has also advocated the principle of "Palestinian legitimacy," whereby it would accept as binding the decision of the Palestinian people to accept peace with Israel - even if Hamas, as a Muslim religious organization, could not reconcile that outcome with sharia and preserve its Muslim beliefs.



The Jewish state turned 50 amid a midlife crisis. With the epic drama of Israel's founding behind them, Israelis confront dispiriting existential questions. Israeli politics, always ferocious, are reeling from the assassination of Yitzhak Rabin. The peace process, though flagging, is still pushing Israelis closer to a reckoning with the Palestinians, their original rivals for the land. Americanization is giving a country built by austere pioneers an identity crisis. Tensions between religious and secular are increasingly bitter, and even the army no longer unites Israelis the way it used to. As the myths fade, Israel is deciding whether a Jewish state can ever truly be normal.



Given Israel's high reliance on economic and strategic military support from the United States (Israel is the number one recipient of U.S. foreign aid, and loans from the U.S. equal nearly half of the nation's external debt), Ariel Sharon cannot ignore the wishes of his country's chief Western ally in regard to the crisis with the Palestinians. And as the conflict continues, the perception of the rest of the world may well become less and less sympathetic if Sharon's solutions seem more and more militaristic. Since the alAqsa intifada broke out in September 2000, and Sharon came to power in March 2001, Israel's policy toward the Palestinians has become more restrictive. In spring 2002, Israel launched against the Palestinians its largest military offensive in 20 years, since the invasion of Lebanon. As suicide bombings against Israeli targets increased in 2002–03, Sharon presided over a state in which Israeli soldiers operated freely in the West Bank and Gaza, Israeli settlements increased, and Israeli blockades of Palestinian cities were tightened. Sharon has demanded Arafat be replaced, and the U.S. has indicated it would welcome a change in Palestinian leadership. The Bush Administration in 2002 put forward a plan for resolution of the Israeli-Palestinian crisis dubbed a "road map," that includes plans for a Palestinian state, a proposal to which Sharon has reluctantly agreed. The plan includes demands that Israel dismantle


ISRAEL settlements built since March 2001 and other concessions by Israel, to which Sharon has not agreed. The ruling coalition Sharon put together in February 2003 included two parties that oppose any Palestinian state and that staunchly support the settler movement. With the administration of US president George W. Bush focused on war with Iraq in March 2003, the "road map" has languished. The future of the Middle East may reach a deciding point, however, if war changes the political configuration of the region, and Sharon's leadership will be tested.





Will the happenings in The Middle Eastern regions lead to a World War III Scenario?
In 2006, when Israel attacked Lebanon, the war was presented to international public opinion as a conflict between Israel and Hezbollah. In essence the 2006 war was an Israeli attack on all of Lebanon. The Beirut government failed to take a stance, declared its “neutrality” and Lebanon’s military forces were instructed not to intervene against the Israeli invaders. The reason for this was that the political parties of the Hariri-led March 14 Alliance that dominated the Lebanese government were expecting the war to end quickly and for Hezbollah (their political rival) to be defeated, and eventually excluded from playing a meaningful role on the Lebanese domestic political scene. Exactly the opposite has occurred since 2006. Moreover, had the Lebanese government declared war on Israel, in response to Israeli aggression, Syria would have been obligated through a Lebanese-Syrian bilateral treaty, signed in 1991, to intervene in support of Lebanon. In the case of a future Israeli war against Lebanon, the structure of military alliances is crucial. Syria could indeed intervene on the side of Lebanon. If Syria enters into the conflict, Damascus could seek the support of Tehran in the context of a bilateral military cooperation agreement with Iran. If Iran were to enter on the side of Lebanon and Syria in a defensive war against Israel, the U.S. and NATO would also intervene leading us into a broader war.


ISRAEL Both Iran and Syria have military cooperation agreements with Russia. Iran also has bilateral military cooperation agreements with China. Iran is also an observer member of the Shanghai Cooperation Organization (SCO). Iran’s allies including Russia, China, the member states of the Collective Security Treaty Organization (CSTO), and the Shanghai Cooperation Organization (SCO) could all be drawn into the broader conflict.

(Refer to Annexure 2) A recent International Monetary Fund report stated that “macroeconomic conditions in the West Bank have improved” largely because “Israeli restrictions on internal trade and the passage of people have been relaxed significantly.” What’s more, says the IMF, “continuation of the relaxation of restrictions could result in real GDP growth of 7% for 2009 as a whole.” That’s a gross domestic product growth rate Americans would leap at, so what’s this dispute about? It is, once again, about the subordination of reality to pre-existing theories. In this case, the theory is that every problem in the Middle East is related to the Israeli-Palestinian dispute. The administration takes the view that “merely” improving life for Palestinians and doing the hard work needed to prepare them for eventual independence isn’t enough. Nor is it daunted by the minor detail that half of the eventual Palestine is controlled by the terrorist group Hamas.


ISRAEL Instead, in keeping with its “yes we can” approach and its boundless ambitions, it has decided to go not only for a final peace agreement between Israel and the Palestinians, but also for comprehensive peace in the region. Mr. Mitchell explained that this includes Israel and Palestine, Israel and Syria, Israel and Lebanon and normal relations with all countries in the region. The administration (pocketing the economic progress Israel is fostering in the West Bank) decided that Israel’s “step” would be to impose a complete settlement freeze, which would be proffered to the Arabs to elicit “steps” from them. But Israelis notice that already the Saudis have refused to take any “steps” toward Israel, and other Arab states are apparently offering weak tea: a quiet meeting here, over flight rights there, but nothing approaching normal relations. Mrs. Clinton recently decried “rigid ideologies and old formulas,” but the tension with Israel shows the administration is—up to now— following the old script that attributes every problem in the region to the Israeli-Palestinian conflict, while all who live there can see that developments in Iran are in fact the linchpin of the region’s future. The Obama administration’s “old formulas” have produced the current tensions with Israel. They will diminish only if the administration adopts a more realistic view of what progress is possible, and what dangers lurk, in the Middle East.





Israel produces a wide range of products from ammunition, small arms and artillery pieces to sophisticated electronic systems and the world's most advanced tank. Having to fight five major wars in its first four decades, Israel built a comprehensive standing army – the Israel Defense Forces (IDF) - and furnished it with an arsenal of highly advanced military hardware. The government, which owns three major defense firms, also encouraged the formation of private companies to equip the IDF. The development of a sophisticated defense industry inevitably led to exports, which today account for a majority of its revenues and allows the country's defense industry to compete against some of the largest companies in the world for foreign contracts, in addition to producing many of the arms needed for Israel's own defense. Many of the most innovative products developed by Israel's civilian high tech industry, especially in thefield of telecommunications, trace their origins to military technology. The more costly aircraft and other advanced weapons were procured from foreign suppliers, principally France. There are approximately 150 defense firms in Israel, with combined revenues of an estimated $3.5 billion. Israel's defense exports are coordinated and regulated through SIBAT - the Foreign Defense Assistance and Defense Export Organization - which is run by the Ministry of Defense. SIBAT's tasks include licensing all defense exports as well as marketing products developed for the IDF, from electronic components to missile boats and tanks. Each year, SIBAT publishes a defense sales directory, an authoritative guide to what the industry has to offer. Despite their far-reaching client base, even the biggest local firms are relatively small players in the global defense market.


ISRAEL With increasing competition from the major world aerospace players, Israeli companies tend to specialize in niche markets, or have sought to combine forces through mergers or joint marketing efforts. In addition, declining global defense spending has provided them with new opportunities as foreign governments seek to upgrade their existing arsenal rather than buy new equipment. In addition to Israel and the US, IMI has distributors in a number of countries, including Norway, Belgium, the Philippines and Greece. Some 60% of its revenues, worth approximately $550 million, come from exports. A complex of companies which specialize in development and coordination of defense business for Israeli firms abroad, and for international firms in Israel; RSL Electronics, which produces both airborne electronics systems for airplanes and helicopters and muzzle-velocity radar for field artillery.



• Israel now India's largest defence supplier

Despite the Left veto, which had stalled crucial policy-decisions in the country in the last four-and-a-half years before their relations with the Congress turned bitter, defence ties between India and Israel have grown significantly. So much so, that Tel Aviv has now overtaken Moscow as India’s largest defence supplier. A pointer to the strengthening bonds between the two sides, according to Israeli media reports, is their country’s decision to sign defence deals worth $9 billion with New Delhi during the past decade. There is close co-operation between the two sides and Indians respect Israeli systems and our experience in fighting terror. The increasing bonhomie between the sides has seen ties with India’s tradition, and reliable partner, Russia, taking a back-seat. Moscow had averaged sales of defence equipment worth $875 million annually to India for the past 40 years. The development is certain to be enhance Left’s discomfort with the Congress-led UPA government at the Centre, as the CPM and its alliance partners have traditionally viewed defence ties with Israel with suspicion. In the wake of recent Mumbai terror attacks, India also purchased from Israel the aerostat radar system to help defend the country’s coastline in a deal valued at $600 million, the daily said. The radars will be deployed in strategic points to provide advance warning against incoming enemy aircraft and missiles, the report said. The EL/M-2083 Aerostat radars are a


ISRAEL simpler version of the Green Pine radar, made by Israel Aerospace Industries, and used by the Arrow missile defence system. Israel and India have also agreed upon the joint development of medium-range surface-to-air missiles (MRSAM) for the Air Force. Significantly, India is also expected to receive the first of three new Phalcon Airborne Warning and Control Systems (AWACS), part of a $1.1 billion deal signed between the two countries, by March. The two sides are said to be in talks for the possible purchase of another three AWACS to boost aerial surveillance of India’s coastlines. The Indian defence ministry has reportedly also approved a $ 2.5 billion joint IAI-Rafael deal to develop a new and advanced version of the Spyder surface-to-air missile system.

India, Israel sign $1.4 bn deal on air defence system
India has signed its biggest defence deal with Israel for the purchase of a state-of-the-art air defence system at a whopping cost of $1.4 billion.Israel Aerospace Industries (IAI) has officially acknowledged that the defence deal between the two countries was inked under which Israel will develop and manufacture seaborne and shore-based systems against missile attack on India, business daily Globes reported. The signing of the deal comes as India is in advance stage of testing of its own anti-missile shield. The Defence Research and Development Organisation (DRDO) has already successfully test-fired its advanced air defence (AAD) missile. As per the agreement, IAI has also undertaken to procure military or aviation products and services from India. It will invest in defence companies in India up to an amount equal to 30% of the contract. India is currently Israel’s largest arms buyer.



India, Israel in talks on three new Phalcon aircraft
India and Israel are in advanced stage of talks over the supply of three new Phalcon aircraft in what could turn out to be the biggest defence contract in the history of the Jewish state. Indian defence officials are currently holding internal debates on the issue and if the deal comes through, New Delhi would be paying between USD 300-400 million per aircraft. India and Israel had in 2004 signed a USD 1.1 billion deal over the supply of three Phalcon Airborne Warning and Control Systems (AWACS), built on Russian Ilyushin76 airplanes. The first of the three planes, which is currently undergoing flight tests in Russia, is scheduled to be supplied by September 2009 and will be followed by the other two over a period of two years. The new deal would involve the same configuration as the earlier ones and include a radar and electronic intelligence system designed and manufactured by Israel Aerospace Industries' subsidiary, Elta Systems Group, installed in an Ilyushin-76 aircraft supplied by Russia. The Phalcons will give India a force multiplier by acquiring AWACS that can detect aerial threats and serve as a platform to direct combat jets to targets. It is an all-weather system capable of logging 60 targets simultaneously and has a range of up to 400 km. The Israeli defence ministry last year announced that New Delhi was its single largest importer of defence equipment, constituting about 50 per cent of Israel's defence exports and about 30 per cent of India's imports.


ISRAEL I L S I – Biomed Israel 2009 Israel is now a fast growing field of innovation in biomedical, health care and life science industries. This attracted over 6000 local and international CEO’s, experts, academics, scientists, researchers, venture capitalists, and angel investors. Over 35 countries around the world participated in this meet. Biomed 2009 is an essential opportunity to learn from international experts the latest healthcare trends, regulatory and reimbursement issues, and therapies. A vast variety of Israeli BioPharma and Medical Device players will also receive exposure. Biomed 2009 highlights: Plenary sessions and presentations by industry leaders and academia worldwide The 3rd International Stem Cell Meeting Unique opportunities for networking and learning Satellite events focusing on clinical studies, aesthetic medicine, orthopedic One-on-one partnering meetings Exhibition of the latest medical innovations Prime location – Tel Aviv, a commercial capital and tourist delight.



ISRAEL Palestinians in the West Bank and Gaza Strip live in an odd and oppressive limbo. They have no nation, no citizenship, and no ultimate power over their own lives. Since 1967, when Israel conquered these areas (the final 22 percent of mandatory Palestine), Palestinians have been living under Israeli military occupation. While in some parts Israel has allowed a Palestinian “autonomous” entity to take on such municipal functions as education, health care, infrastructure and policing, Israel retains overall power. According to international law, an occupying force is responsible for the protection of the civilian population living under its control. Israel, however, ignores this requirement, routinely committing violations of the Geneva Conventions, a set of principles instituted after World War II to ensure that civilians would “never again” suffer as they had under Nazi occupation. Israel is one of the leading violators of these conventions today. Hamas has repeatedly offered to end its violent resistance against Israel. It has also advocated the principle of "Palestinian legitimacy," and A flurry of upcoming meetings between senior U.S. and Israeli officials suggests that Washington is determined to try to overcome the current impasse. The aspect to ponder is that how Americans, in approaching the problems of the Middle East, can best fulfill their responsibilities not only to Israel and to themselves but also to peoples all over the world whose well-being could be seriously endangered by further conflict.


ISRAEL Israelis have learned the hard way that reality cannot be ignored and that ideology offers no protection from danger It is now clear that the middle east crisis will be deep and prolonged and that it will have far-reaching geopolitical consequences. The long movement toward peace has stopped, and a new period of state intervention, reregulation, and creeping protectionism has begun. Such lack of strength and unity in the West is untimely, because the crash will increase geopolitical instability. To suggest that America should take a stronger and more assertive line in the search for Middle East peace is to risk being attacked as a servant either of Arab interests or of the oil companies, or being denounced as anti-Israel, or, by a careless confusion of language, even condemned as anti-Semitic.




Sources : The Third Temple's Holy Of Holies: Israel's Nuclear Weapons Warner D. Farr, LTC, U.S. Army, September 1999

Criteria GDP (current prices, B$) 2005 131.2 2006 142 2007 161.8 2008 168


GDP Real Growth Rate (%) GDP per Capita (Current Prices, thousands of $) GDP per Capita (thousands of $, based on purchasing power parity) Exports of Goods & Services (B$) Imports of Goods & Services (B$) Unemployment Rate (%) Inflation Rate ( CPI, end of year) Inward FDI (current prices in B$) Current Account (% of GDP) 5.1 18.7 29,044 57.9 57.5 9.0 2.4 4.8 3.0 5.2 19.9 30,464 62.6 61.7 8.4 0 14.3 5.6 5.4 21 27,957 70.65 73.7 7.5 3.4 9.7 2.8 4.1 21.7 27,700 78 84 7.0 3.8 9.7 1.0

Sources: The Ministry of Finance (2008), International Monetary Fund (2007)








1. Israel now India's largest defense supplier - 16 Feb 2009, 0528 hrs IST, ET Bureau 2. India, Israel sign $1.4 bn deal on air defense system- 2 7 M a r 2 0 0 9 , 1 4 2 3 hrs IST, PTI, JERUSALEM 3. India, Israel in talks on 3 new Phalcon aircraft-1 6 A p r 2 0 0 8 , 1 5 3 8 Hrs, IST, PTI 4. US envoy warns against rearming Lebanon’s Hezbollah, Deutsche PresseAgentur/German Press Agency (DPA), December 17, 2008. 5. Iran, most powerful country, Islamic Republic News Agency (IRNA), October 21, 2008. 6. Preparing for a possible confrontation with Hizbullah, The Jerusalem Post, December 11, 2008 7. Hezbollah Terrorist Group; War with Israel Imminent”, Al-Manar, December 17, 2008 8. www. Foreign


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