Log in
Israel is one of the most militarized countries in the world. The Israel Defense Forces (IDF) and, more broadly, the Israeli security forces form the core around which the country’s institutions, financial structures, and economy have developed since David Ben-Gurion ordered the creation of the IDF on May 26, 1948. In the decades since, the country’s political economy has developed around this central organizing principle of warfare, evolving as the nature of warfare has changed along with U.S. foreign policy in the Middle East.
In the 1940s, decentralized colonial militias coalesced to form a state-run enterprise for the production of military equipment. The Israeli state restricted exports from this industry, a trend that continued after independence, with state-owned arms manufacturers producing weapons for expansionist purposes. During the early Cold War and postcolonial periods, Israeli military strategy reflected this economic model. Rather than waging conventional warfare, colonization was fueled by small military units conducting ethnic cleansing campaigns with small arms. While Israel imported weapons, primarily from France, it equipped these militias primarily with domestically produced weapons.
It was following the 1973 Arab-Israeli War (Yom Kippur War), with the increase in military funding from the United States, that the Israeli military’s procurement practices changed. The new phase of the global Cold War marked the beginning of a period of sectoral change within the Israeli defense industry. The war exposed serious weaknesses in Israeli defense, which had struggled against the armies of Arab countries equipped by the Soviet Union. Israel’s response was a rapid and sharp increase in imports of US weapons systems. But this decision required a structural adjustment: to strengthen its ties with the American defense industry, Israel privatized and liberalized its national military apparatus. In the last decades of the 20th century, the Israel Defense Forces (IDF) transformed itself into a high-tech colonial police force, managing the Palestinian populations of Gaza and the West Bank through surveillance and control. As arms imports from the United States continued apace, Israel shifted its own production toward new, specialized surveillance and incarceration technologies. A new global division of labor in the production of military equipment emerged, shaped by the War on Terror and the US-led global defense industry through 2023.
Israel’s genocidal campaign in the Gaza Strip marks a break with the decades-old status quo. Since October 7, the Israeli military industry has increasingly sought to offset its overwhelming dependence on military imports with its own domestic production, thus returning to its origins as a militia nation mobilized for constant hostilities. This change is both qualitative and quantitative. By producing for domestic consumption, the Israeli military-industrial complex has begun to reshape its production profile around low-tech weapons designed for mass destruction and displacement—thus, products and practices closer to its founding strategy.
A Colonialist State
The roots of the Israeli arms industry predate the founding of the state itself. Israel Military Industries, the company behind the Desert Eagle (semi-automatic pistol) and the Uzi (submachine gun), was established in 1933 as a manufacturer of small arms to supply the early Zionist militias. Its weapons were produced in secret [this was the era of the British Mandate, spanning from 1922 to 1947, following the 1917 decision], smuggled in, and stockpiled illegally for use by these Zionist armed groups. The militias that later formed the Israeli army were primarily armed with Sten guns [of British origin], mortars, and light armored vehicles—weapons well-suited to intimidating civilians and ultimately effective in the ethnic cleansing of Palestine. These weapons favored small-unit tactics and irregular warfare in rugged terrain, aligning with Israel’s early doctrine of high mobility and decentralized command, and exemplifying what Israeli generals often described as the ideal of a "small, smart army."
The settlers’ collectivist mentality played a key role in the Zionist movement’s militarism, its weapons strategies, and its relationship with the indigenous Palestinian population. Under former Israeli Prime Minister David Ben-Gurion, head of the Labor Party and the trade unions (he was also a leader of the Haganah armed group), the state monopolized Israeli weapons manufacturing. This monopoly on weapons production fostered the development of the country’s public sector, with revenues being reinvested in research and development. [1] This type of warfare also influenced military recruitment policy. In order to maintain unit cohesion and loyalty, Israel exempted a large portion of the population from conscription: Palestinians, ultra-Orthodox Jews, and, later, a growing number of secular Jews. This strategy proved effective in 1948, 1956, and 1967, when light, agile units were able to overpower less organized Arab forces. However, with the outbreak of war in 1973, the limitations of this strategy were quickly exposed.
The Infrastructure of Domination
If Israel’s military successes against Egypt, Syria, and Jordan in the 1967 Six-Day War engendered overconfidence among Israeli military elites, the 1973 Yom Kippur War shattered this notion of self-sufficiency, including in weapons manufacturing. The massive purchases of Russian military equipment by the Iraqi and Syrian governments, along with soaring Arab oil revenues and the influx of weapons purchased with these revenues, marked the beginning of a regional arms race along many axes of conflict. When war broke out in October 1967, small Israeli units and even air superiority failed to halt the advance of Syrian and Egyptian divisions. In the midst of the war, Israel turned to imports of American-made weapons, which required new tactics and, ultimately, a new strategy.
Dependence on US military funding began in the midst of the Yom Kippur War and quickly became a defining characteristic of the Israeli arms industry. Israel’s inherent hostility toward Soviet-funded Arab socialist governments made it a natural ally of US interests during the Cold War. By saving Israel from destruction, the United States gained a new tool for projecting power in the Middle East and a ready-made opportunity to restructure the Israeli military industry according to its own economic and geostrategic priorities.
In the years that followed, the United States used military funding to exert pressure on the type of technologies and equipment Israel could produce at home. The Pentagon identified Israeli military research projects that could compete with US defense companies and negotiated their permanent termination. These included work on an anti-tank missile intended to compete with the US-made LAU missile, as well as Israel’s flagship weapons project, the Lavi fighter jet, developed in the 1980s and designed to outperform Lockheed Martin’s F-16 fighter jet. [2] The Pentagon also monitored Israeli arms exports containing US technology, prohibiting their sale to countries such as Russia and China.
Since 1973, Israel has become the largest recipient of US foreign military aid in the world and, since the Iranian Revolution of 1979, by far the largest purchaser of US military equipment in the region. Since the beginning of the Yom Kippur War, the United States has provided Israel with total military aid of over $171 billion, unadjusted for inflation and interest-free. [3] This shift in the basis of Israeli military procurement has profoundly reoriented the role of local arms manufacturers. While the United States is by far the world’s largest arms exporter, Israel has become a major arms exporter, with the world’s highest per capita arms export rate. However, while US arms exports favor members of the North Atlantic Treaty Organization (NATO), most Israeli arms exports are to non-NATO countries.
The marriage of US and Israeli military interests would have two consequences. First, under US influence, private arms companies overtook state-owned enterprises in Israeli military procurement, as the country underwent a period of intense privatization. Pressures for privatization increased due to the painful adjustments imposed by the United States on arms production and cuts in military spending reflecting the end of the Cold War. In 1993, a government committee chaired by Professor Israel Sadan convened to study the future of Israeli military procurement and recommended the privatization of "peripheral" functions, from storage and distribution to logistical acquisitions and even the security of the bases themselves. Competition among privatized suppliers was presented as a cost-saving measure that, according to assurances given to the Israelis, would not compromise security. Efficiency was the watchword of the day, a principle echoed by then-Israeli army chief Ehud Barak [IDF chief of staff from 1991 to 1995, then foreign minister, and prime minister from 1999 to 2001], who declared: "Anything that does not fire or directly assist in firing will be eliminated."[4]
Privatization was not limited to the arms industry. With the 1985 Structural Stabilization Plan, Israel embarked on a large-scale privatization of its telecommunications infrastructure and services, its national airline, the banking sector, as well as partial privatization of the water, health, and ports sectors. [5] In addition to meeting US preferences, privatization offered members of Israel’s security elite lucrative opportunities in running private arms companies.
Second, these private companies would become increasingly involved in the US-led global war on terror. Privatization went hand in hand with specialization in technologies used in cyberwarfare, attack drones, and advanced electronic systems for military vehicles [6]. Following the Second Intifada [2000-2005] and the September 11, 2001, attacks [on the World Trade Center], Israel and the United States shared a common interest in developing high-tech systems for surveillance, regulation, and control.
Since 2001, between 70 and 80 percent of Israeli-made weapons have been sold for export. Israeli arms companies have developed a reputation for selling weapons to marginal customers: countries under military embargoes, rebel groups, militias, states without diplomatic relations with other major arms producers, and even customers who subsequently used those weapons against Israel. [7] Israel built this reputation in the 1960s, at the height of the global Cold War, by exporting weapons to Uganda, Angola, Chile, South Africa, Singapore, Taiwan, Nicaragua, Guatemala, and pre-revolutionary Iran. Later, as the geography of hot wars shifted, its exports shifted to Rwanda, Yugoslavia, Turkey, Azerbaijan, and India. In recent decades, the Gulf states have begun to import increasing quantities of Israeli weapons [to supplement the US military]. Although Israel lags far behind major global arms exporters such as the US, Russia, the UK, France, and Germany, it reached the status of the world’s largest per capita arms exporter around 2009, after the 2008 invasion of the Gaza Strip killed approximately 1,400 Palestinians.[8]
In 2003, US President George Bush established the Department of Homeland Security (DHS) with a budget exceeding $59 billion. The DHS and the climate of the GWOT ( Global War on Terrorism ) provided Israeli military and security companies with the ideal opportunity to leverage their experience in the occupied territories. Israeli companies presented the occupied Palestinian territories as a testing ground for developing products suitable for an evolving US homeland security project, and Tel Aviv quickly became the global capital of the security sector of the arms industry. [9] The series of Israeli military operations in Gaza, Lebanon, and elsewhere was a boon for the country’s arms companies, allowing them to market their products as "battle-tested" at the various arms fairs that followed each operation. [10] Currently, these military products have become a very lucrative business and a key sector of the Israeli economy. In 2012, Israel earned $7.5 billion from military exports; that same year, former Israeli Defense Minister Ehud Barak said that 150,000 Israeli households depended on the arms industry for their income.
The special relationship between Israel and the United States is central to all of this. It is primarily a military relationship, with monetary flows and arms exports/imports playing a structuring role in the Israeli economy. While approximately 75% of the $3.1 billion in US military aid to Israel must be spent on American weapons, the remainder can be spent on locally produced weapons. This strengthening of diplomatic alignment has facilitated industrial integration, as when the American company Magnum Research transferred production of its Magnum and Desert Eagle pistols to Israel. Today, even when Israel buys US-made weapons, they are often built with Israeli components. Research funds allocated by the government and joint university research programs have lent scientific legitimacy to repression technologies.[11] In 2018, the wave of privatization and the new export demand culminated in the purchase of the state-owned Israel Military Industries by the privately owned Elbit Systems. This made the latter Israel’s largest arms company and the twenty-eighth largest arms firm in the world in 2019. It supplies the military not only directly, but also indirectly as a subcontractor to major companies such as General Dynamics and Airbus. [12] Elbit Systems clearly embodies the new face of the Israeli arms industry: technologies of oppression, product lines that complement rather than compete with US weapons, and global exports that capitalize on the value that governments around the world place on Israel’s experience with occupation.
In the five decades since the 1973 war, Israeli state-backed settler militias have transformed into a high-tech system designed to oppress Palestinians. In its now capital-intensive army, arms companies demonstrate their advanced technology through military assaults against Palestinians and the daily surveillance and control of the occupation.[13][14]
Specializing in surveillance systems, riot control equipment, and prison infrastructure, this “laboratory” produced tools ideal for maintaining the occupation, but ill-suited to conventional warfare. No longer a fighting force, the Israeli military transformed itself into a colonial police force, prioritizing deterrence, humiliation, and repression of Palestinian resistance over battlefield supremacy. Tens of thousands of private security personnel were trained to develop and maintain these technologies.
The Strategy of Annihilation, Ethnic Cleansing
Israel’s decades-long reliance on this high-tech model of surveillance of enclaved Palestinian populations was called into question by the October 7 attacks. Internal investigations leaked in March 2025 revealed that officers had dismissed the possibility of a Palestinian attack, believing their deterrence regime to be infallible. When Hamas shattered this illusion, Israel’s far-right government reverted to what until then seemed an outdated form of warfare: heavy weapons supplied by the United States (artillery, tanks, armed drones, naval bombardments, and fighter jets) to carry out a prolonged siege of an entire population.
Israel’s genocide in Gaza, along with its invasion of Lebanon and airstrikes in Syria, Yemen, and Iran, have one important thing in common: they are carried out primarily with imported weapons. The majority of these are subsidized by American taxpayers, although Israel pays a higher price for weapons from Germany, Serbia, and increasingly, “countries with which we do not have diplomatic relations, including Muslim states on every continent,” an Israeli defense official told Yediot Aharonot in November 2024. As the Israeli military has depleted its ammunition and weaponry in its post-October 7 campaign, Israeli arms dealers have become scavengers in a global arms trade whose prices are inflated by demand in Ukraine, trading high-tech weapons systems such as drones and computer equipment for basic materials like shells, gunpowder, and other explosives.[15] According to the Wall Street Journal, as of December 2023, the United States had delivered to Israel more than 5,000 Mk82 unguided bombs, 5,400 1,814 kg Mk84 unguided bombs, 1,000 907 kg GBU-39 bombs, and approximately 3,000 Joint Direct Attack Munition (JDAM) kits. Since October 7, the United States has supplied Israel with approximately $17.9 billion worth of weapons and ammunition, in addition to annual external military financing of $3.8 billion and paid imports of $8.2 billion from U.S. arms companies.[16]
The shift to a strategy aimed at maximizing destruction has also led to a renewed interest in domestic weapons manufacturing. At Elbit Systems’ 2025 shareholders’ conference, the trend was clear: Israel remains dependent on arms imports but is trying to source as much as possible from domestic companies to avoid the impact of the growing military embargo. Elbit Systems’ export share fell from 79% in the first quarter of 2023 to 58% in the fourth quarter of 2024. But this shift in demand toward the company’s founding domestic customer has not reduced sales. Elbit Systems’ latest financial reports reveal that the company’s revenue and operating profit increased not due to exports, but rather due to "a significant increase in demand for its products and solutions from the Israeli Ministry of Defense (IMOD) compared to pre-war demand levels." For the year ending December 2024, the company earned $1.6 billion in profits on $6.8 billion in revenue, compared to $1.5 billion in profits on $6 billion in revenue in 2023. Its order book grew from $17.8 billion to $23.8 billion. Overall, Israeli arms companies have seen an influx of orders from the national army.[17] In May 2025, Elbit issued $588 million in new shares, underwritten by Bank of America Securities, JP Morgan, Jefferies Group LLC, and Morgan Stanley.
As in previous periods, this economic shift has been accompanied by changes in military strategy. Elbit Systems’ new 155mm Sigma (Ro’em) cannon is a telling example. At first glance, its development seems paradoxical: Israel faces a critical shortage of 155mm shells, so why invest in a gun that doubles the rate of fire? The Sigma’s innovations reveal the IDF’s deep-seated priorities: its robotic autoloader reduces personnel requirements from seven soldiers to just two, allowing smaller units to operate with minimal coordination or discipline. With the continued influx of American bombs and US financial assistance for Israel’s worldwide purchase of munitions, this new equipment may facilitate a reorganization of the IDF’s strategy.
The Sigma is a weapon designed for vigilante-style bombing, maximizing destruction per soldier while institutionalizing the lack of discipline that characterized Israel’s campaign in Gaza. It embodies the transformation of the Israeli military: a technologically advanced army returning to artillery, where firepower replaces strategy and annihilation replaces occupation.
These tools are used with the mentality of settler militias. “Artillery and direct hits from tanks are more effective than expensive precision weapons,” an Israeli army officer said in November. “Killing a terrorist with a tank shell or a sniper, rather than a missile fired from a drone, is considered more professional.” [18] Tanks bombard refugee camps at close range; airstrikes level entire neighborhoods to kill a single militant. The American doctrine of combined arms and precision strikes is ignored, replaced by indiscriminate destruction. The arms industry created to control occupation zones in the Global South at the end of the Cold War has refocused inward, to complement a modern range of US equipment with maximum destructive capacity.
Notes
[1] Ya’akov Lifshitz, Security Economy, the General Theory and the Case of Israel, Jerusalem: Ministry of Defense Publishing and the Jerusalem Center for Israel Studies (2000).
[2] Sharon Sadeh, “Israel’s Beleaguered Defense Industry,” Middle East Review of International Affairs Journal , Vol. 5, No. 1, March 2001, pp. 64–77.
[3] Jeremy Sharp, “US Foreign Aid to Israel: Overview and Developments since October 7, 2023,”
https://www.congress.gov/crs-product/RL33222 , accessed August 2025.
[4] Nadir Tzur, “The Third Lebanese War,” Reshet Bet, July 17th, 2011
http://www.iba.org.il/bet/?entity=748995&type=297 , accessed December 2013.
[5] Yael Hason, Three Decades of Privatization [Shlosha Asorim Shel Hafrata], Tel-Aviv: Adva Center (November 2006).
[6] Sadeh, 2001.
[7] Jonathan Cook, “Israel Maintains Robust Arms Trade with Rogue Regimes,” Al-Jazeera , October, 201
https://www.aljazeera.com/news/2017/10/23/israel-maintains-robust-arms-trade-with-rogue-regimes , accessed December 2024.
[8] United Nations, “5. Estimates of Mid-Year Population: 2002–2011,” Demographic Yearbook, 2013
http://unstats.un.org/unsd/demographic/products/dyb/dyb2011.htm , accessed December 2024; Richard F. Grimmett and Paul K. Kerr, “Conventional Arms Transfers to Developing Nations, 2004–2011,” Congressional Research Service, 7–5700, August 24, 2012; Amnesty International, “Israel/Gaza: Operation ’Cast Lead’ – 22 Days of Death and Destruction, Facts and Figures,” July, 200 9
https://www.amnesty.org/en/wp-content/uploads/2021/07/mde150212009eng.pdf , accessed December 2024.
[9] Jonathan Cook, “Israel’s Booming Secretive Arms Trade,” Al-Jazeera, August, 2013
https://www.aljazeera.com/features/2013/8/16/israels-booming-secretive-arms-trade , accessed December 2024. Neve Gordon, “The Political Economy of Israel’s Homeland Security/Surveillance Industry,” The New Transparency , Working Paper (April 28, 2009).
[10] Sophia Goodfriend, “Gaza War Offers the Ultimate Marketing Tool for Israeli Arms Companies,” +972 Magazine, January, 2024
https://www.972mag.com/gaza-war-arms-companies/ , accessed December 2024.
[11] Maya Wind, Towers of Ivory and Steel: how Israeli Universities Deny Palestinian Freedom, Verso (2023).
[12] Stockholm International Peace Research Institute (SIPRI) “The SIPRI top 100 Arms-Producing and Military Service Companies, 2020,” SIPRI, December, 2020
https://www.sipri.org/sites/default/files/2021-12/fs_2112_top_100_2020.pdf, accessed December 2024.
[13] Yagil Levy, Israel’s Death Hierarchy: Casualty Aversion in a Militarized Democracy , New York: NYU Press (2012).
[14] This is widely referred to as the Palestinian “laboratory” — a term used in the critical literature as well as by Israeli arms companies themselves.
[15] Hussein, 2024. Yoav Zitun, “From deals in the Third World to dubious brokers: a glimpse into the IDF arms race,” Ynet , November 22nd, 2024,
https://www.ynetnews.com/article/h1tefly71g ;
See https://www.haaretz.com/israel-news/2024-09-27/ty-article-magazine/.highlight/retired-israeli-general-giora-eiland-called-for-starving-gaza-does-he-regret-it/00000192-33f5-dc91-a1df-bffff4930000 , accessed January 2025.
[16] Ellen Knickmeyer, “US spends a record $17.9 billion on military aid to Israel since last Oct. 7,” AP, October 9th, 2024,
https://www.ap.org/news-highlights/spotlights/2024/us-spends-a-record-17-9-billion-on-military-aid-to-israel-since-last-oct-7/ , accessed August 2025; Hagai Amit, “89 Billion NIS in two years: the numbers behind the buying binge of the IDF in the war,” The Marker, July 27, 2025.
https://www.themarker.com/allnews/2025-07-27/ty-article/.highlight/00000198-4735-deec-ab9e-e73f8bc40000 , accessed August 2025.
[17] Yuval Azulay, “Israel’s Arms Industry Profits Soar as Wars Fuel Billion-Dollar Contracts,” Calcalist , August, 2024
https://www.calcalistech.com/ctechnews/article/hkuwdfkic , accessed December 2024.
[18] Zitun, “From deals in the Third World to dubious brokers: a glimpse into the IDF arms race,” Ynet , November 22nd, 2024,
https://www.ynetnews.com/article/h1tefly71g (Back)
Shir Hever , economist. He is the director of the Alliance for Justice between Israelis and Palestinians. His research focuses, among other things, on the economic dimensions of the policy of occupation and colonization of the Palestinian territories. He published The Political Economy of Israel’s Occupation: Repression Beyond Exploitation , Pluto Press 2010, and The Privatization of Israeli Security, Pluto Press 2017.
