German submarine manufacturer ThyssenKrupp recently raised the price of three new submarines ordered by Israel’s defense ministry by a whopping €1.2 billion ($1.37 billion). The increase was brought up for discussion by a ministerial committee on Sunday and was reportedly approved. This is the first time the Israeli public is being informed of this alarming price hike.
On Sunday, the Bennett government ordered the establishment of a state commission of inquiry to investigate Case 3000, which involved the dispute between the security apparatus and former-Prime Minister Benjamin Netanyahu over the purchase of a ThyssenKrupp and Netanyahu’s consenting to ThyssenKrupp’s selling advanced submarines to Egypt (Bennett Cabinet to Approve Inquiry into Submarines Affair that May Impact Netanyahu). Now it appears that the relationship between the IDF and ThyssenKrupp just continues to spread joy everywhere.
The three submarines whose price has been doubled will join three submarines ThyssenKrupp has already sold to the IDF and which are at the center of Case 3000. ThyssenKrupp was clearly taking advantage of the fact that the IDF Navy’s underwater future was tied to the German vessels, and so, a few months ago, as negotiations with ThyssenKrupp were progressing toward signing a detailed MOU, the defense ministry announced behind closed doors that the Germans had jumped their financial demand to €3 billion ($3.42 billion). Presumably, the cost of turning to a different manufacturer at this stage of the game would be considerable, and delivery dates would be pushed off from around 2030 to who knows when.
But wait, there’s more. The German government originally sweetened the deal for Israel by agreeing to pay a third of the cost, €600 million ($684 million). That hasn’t changed: the Germans will subsidize the sale by €600 million – but with the price now at €3 billion, Israel’s share will rise from €1.2 billion to €2.4 billion ($2.74 billion).
It appears that when the purchasing geniuses at the defense ministry closed the first deal with the Germans, they neglected to nail down the key details of the deal for the next three subs. This could have to do with the quality of communication between the prime minister at the time and his defense apparatus.
Besides the simple opportunity to take advantage of the IDF’s weak position at this point, being stuck with the ThyssenKrupp vessels and unable to shift gears, there may be three additional reasons for the price increase: the delay of the IDF’s decision on the purchase—due to those internal disputes with the PM—simply pushed the costs from their 2016 economic environment to the one we’re having these days; the Navy has raised additional equipment requirements; and there may have been some inaccuracies in the pricing the defense ministry and the IDF gave the Netanyahu government.
Where will the money come from? Obviously, from the defense budget. The payments to ThyssenKrupp will be spread over 15 years, so the damage would not cripple any vital IDF task. As the commission of inquiry digs into the details of this saga, it may also make the connection between the internal fights over the submarines and the resulting outrageous costs to the Israeli taxpayers.