“Israel is in a sort of isolation… We will increasingly need to adapt to an economy with autarkic characteristics [without foreign trade], the word I most hate. I am a supporter of the free market, but we may find ourselves in a situation where our arms industries are blocked. We will need to develop arms industries here—not only research and development, but also the ability to produce what we need.”
—Israeli Prime Minister Benjamin Netanyahu, speaking at a conference of the Finance Ministry’s accountant general, as reported by the Times of Israel
With the war against Hamas closing in on the end of its second year, Israel’s geopolitical standing has taken a beating, with governments around the world expressing negative feelings about it—and often taking action. In a recent speech, Israeli Prime Minister Netanyahu admitted—a surprising admission—that Israel was being isolated, which might create economic isolation in regard to Israeli arms industries. Israel, he said, would have to become a “super-Sparta,” apparently meaning strong in isolation.
Netanyahu tried to reverse his admission just hours later, saying that the Israeli economy is still as strong as ever, with foreign R&D money coming in at levels second only to the US. But his initial candid admission lent credence to a specter that Israel’s supporters have been worrying about for a while, an increasing isolation of the country in a way that will harm it.
The admission led to a pointing of fingers by Netanyahu’s political opponents. Yair Lapid responded: “Netanyahu’s statement that Israel is entering isolation and needs to adapt to an isolation economy is a crazy statement. Isolation is not a decree of fate, it is the product of a wrong and failed policy of Netanyahu and his government. They are turning Israel into a third-world country and are not even trying to change the situation.”
Israeli industry groups also decried Netanyahu’s statement.
Whatever level of blame Netanyahu’s policies deserve or what he exactly meant, there is a different question that is worthwhile to examine: How isolated is Israel already, how isolated might it become, and what dangers does that pose?
Arms Industry Isolation
Netanyahu’s references to the arms industry seems to be acknowledging that while Israel’s defense industry is very strong, it is also one of the industries that tends to draw the most protest by anti-Israel activists and therefore leads to some governments becoming uncomfortable about it. Conversely, it also becomes controversial for countries to sell arms to Israel.
Israel’s total arms sales to other countries in 2024 was $14.8 billion. That puts it just behind the UK in total arms sales, the Economist reported. Because of the way contracts for these kinds of systems work, they often involve multi-year relationships that aren’t easy to suddenly end. When you buy a complex missile defense system to protect against a Russian attack, as Germany recently did from Israel, you can’t suddenly decide that you’re not going to keep up the relationship. You need to have a connection with your supplier.
But there still have been a number of countries that have broken off some level of purchases from Israel. Spain indirectly targeted Israeli companies just this month by cancelling contracts with Spanish companies that would have paid royalties to Israeli companies whose designs the Spanish products were based on.
That included a cancellation of a purchase of about $825 million worth of the SILAM missile launcher, based on a design by Elbit Systems. Elbit would have reportedly made about $176.3 million off the deal. Another canceled deal was for $337.5 million worth of anti-tank missiles, again not directly from an Israeli company but a deal in which an Israeli company would be paid for a license.
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