Germany approves $3.1 billion expansion of Arrow 3 missile defense deal with Israel

Europe, Middle East, News December 18, 2025 , by IRIA Comments Off

6 minute read

Germany’s Bundestag has approved a $3.1 billion expansion of its Arrow 3 air and missile defense contract with Israel, significantly increasing the scope of what is already the largest defense export deal in Israeli history.

The approval complements an initial agreement signed roughly two years ago, valued at about $3.5–$3.6 billion, bringing the combined value of the two deals to more than $6.7 billion, or over 20 billion shekels.

The expanded agreement is expected to substantially strengthen Germany’s air and missile defense capabilities while accelerating production of Arrow 3 interceptors and launchers for delivery to the Bundeswehr.

With a combined value exceeding $6.7 billion, the Arrow 3 agreement stands as the largest defense export deal in Israel’s history. Israeli officials see the Bundestag’s approval as reinforcing Israel’s status as a leading supplier of advanced missile defence systems at a time of rising global demand.

Expanded Contract and Signing Details

The contract expansion is scheduled to be formally signed on Thursday in Germany. The signing will be led by Moshe Patel, Director of the Israel Missile Defense Organization, and Annette Lehnigk-Emden, Director General of the German Federal Office of Bundeswehr Equipment, Information Technology and In-Service Support.

Representatives from the Israeli Ministry of Defense, the German Federal Ministry of Defense, and Israel Aerospace Industries are expected to attend.

According to the Israeli Ministry of Defense, the agreement includes a significant increase in the production rate of Arrow 3 interceptors and launchers. These systems will be supplied to Germany as part of a broader effort to improve its long-range air and missile defense architecture.

The expansion completes the sales framework agreed upon by Israel and Germany approximately two years ago, when the two defense ministries signed the original Arrow 3 procurement deal.

Israel's Arrow 3 missile defense system — *^{A model of the Israeli Arrow 3 missile on display at Hatzor Airbase, in Israel, on March 3, 2018. (Image Credit: Ben Hartman/IAI)}*

Strengthening German Air and Missile Defense

Arrow 3 is designed to intercept long-range ballistic missiles outside the atmosphere. The system is a core element of Israel’s multi-layered air defense network and is now set to play a central role in Germany’s future missile defense posture.

German officials have presented the Arrow 3 acquisition as a key pillar of Berlin’s efforts to enhance national and allied air defense amid a deteriorating security environment in Europe. The increased procurement of interceptors and launchers under the expanded contract is intended to ensure sufficient operational depth and long-term sustainability of the system.

The deal also reflects Germany’s growing emphasis on high-altitude, long-range missile defence capabilities as part of broader NATO and European security planning.

Operational Track Record and Development Background

Arrow 3 has demonstrated operational performance during the current war, with dozens of successful interceptions reported. Israeli officials have highlighted this combat record as a key factor underpinning international confidence in the system.

The Arrow 3 system was jointly developed by the Israeli Ministry of Defense’s Directorate of Defense Research and Development, known as MAFAT, and the U.S. Missile Defense Agency, with Israel Aerospace Industries serving as the prime contractor. The program represents one of the closest areas of technological cooperation between Israel and the United States in missile defense.

Israel Aerospace Industries is responsible for the system’s overall integration, while multiple Israeli defense firms contribute subsystems and components.

^{The flags of Israel and Germany fly in front of the Arrow 3 missile defense system and a radar dome during an event of the German Air Force at the Holzdorf Air Base, eastern Germany, on December 3, 2025. (Image Credit: Ralf Hirschberger/AFP/via X)}

Israeli Government Sees Strategic and Economic Gains

Israeli officials have framed the Bundestag’s approval as both a strategic milestone and a major boost for Israel’s defense industry and broader economy.

Defense Minister Israel Katz said, “The Bundestag’s approval of the Arrow 3 deal expansion is a clear expression of the deep trust that Germany places in the State of Israel, in its technological capabilities and in our shared commitment to defending our citizens in the face of escalating threats.”

“This is a first-class strategic partnership, based on a long-term security strategy. The revenues from the deal will help continue advanced strategic developments, strengthen the IDF’s military capabilities, and ensure Israel’s qualitative edge for years to come against our enemies, while deepening security cooperation with our partners in Europe and around the world,” Katz added.

The Israeli Ministry of Defense said the export aligns with a defense export strategy led by Katz and Director-General Maj. Gen. (Res.) Amir Baram aimed at supporting the Israel Defense Forces’ force build-up while reinforcing Israel’s defense industry.

Deepening Strategic Ties with Germany

Maj. Gen. (Res.) Amir Baram described the deal as a landmark in bilateral relations. “The Arrow deal expansion is another significant milestone in the deepening strategic relations between Israel and Germany, our central partner in Europe,” he said.

“The massive deal, valued at over $3 billion, embodies, in practical terms, the Defense Ministry’s strategy to increase defense exports. The deal will strengthen Israel’s position in the world as a defense superpower, will expand and accelerate Arrow production for the IDF as well, and will channel billions into strengthening the defense industries and developing the next generations of defense systems,” Baram added.

Israeli officials have emphasized that the increased production capacity driven by the German order will also benefit Israel’s own missile defense needs by accelerating manufacturing timelines and sustaining industrial readiness.

*^{The process of loading an Arrow 3 anti-aircraft missile into a transport and launch container. (Image Credit: IAI)}*

Role of MAFAT and Industry

Brig. Gen. (Res.) Dr. Danny Gold, head of MAFAT, highlighted the symbolic and operational significance of the deal. “I congratulate the signing of the deal with Germany to expand procurement of Arrow 3 interceptors. This represents a significant expression of trust in the Defense Ministry, the Israeli defense industry, and relations between the countries,” he said.

“The Arrow system, a significant part of the multi-layered air defense array that protected the citizens of the State of Israel during the war, now protects Germany’s skies. We will continue to fulfill our mission as required,” Gold added.

Israel Aerospace Industries, as the prime contractor, is expected to play a central role in executing the expanded contract. IAI CEO Boaz Levy pointed to the pace of delivery under the original agreement as a key factor in Germany’s decision.

“IAI’s centrality in Germany’s air defense array and the trust built with the German government were expressed in the delivery of the Arrow 3 system within just two years from the signing date to supply,” Levy said.

“The mutual trust, advanced technological development capabilities, as proven in the campaign and meeting the schedules, all these led to the German government’s decision to approve the follow-on deal for procurement of the Arrow air defense system,” he added.