The United States approved a $3.5 billion sale of Israel's Arrow-3 missile defence system to Germany on Thursday, clearing the way for delivery in 2025 and full operational deployment by 2030, Israeli officials said.
The U.S. is a partner in the Arrow project, which was developed jointly by the Israel Missile Defence Organisation and the United States Missile Defense Agency.
The Germany deal, which would be Israel's biggest ever defence sale, follows a European arms build-up in response to Russia's war in Ukraine.
Israel and Germany will sign a Letter of Commitment, with a $600 million initial payment, to commence work on the project, a statement by Israel's Defence Ministry said, adding that the full contract will be ready to sign by the end of 2023.
Using a detachable warhead that collides with the target, it is designed to intercept ballistic missiles outside the earth's atmosphere, an altitude allowing for the safe dispersal of any non-conventional warheads.
Germany has said it expects its air force to take delivery of Arrow-3 by the fourth quarter of 2025.
Moshe Patel, head of the Israeli Missile Defence Organisation, told reporters that would be the first "milestone" with another coming when the German Arrow-3 achieves "full capability, around 2030".
Additional German spending on Arrow-3 could raise the deal's value to $4 billion, Patel said, adding that other countries - which he declined to name - have voiced interest in the system.
Asked if the Arrow-3 procured by Germany is intended to protect its east - an allusion to Russia - Patel said: "They are buying a full architecture that can protect each part of Germany."
Boaz Levy, CEO of main contractor Israel Aerospace Industries [RIC:RIC:ISRAI.UL], added: "The system is a mobile system and you can shift it according to threats."
The Ukraine war has laid bare a shortage of ground-based air defence systems such as Raytheon's (RTX.N) Patriot units or the more recently developed IRIS-T in many Western nations.
While Patriot and IRIS-T cover the medium layer of air defence, Arrow-3 - in whose production Boeing Co (BA.N) is also involved - offers protection for the higher layer.
Israel's Army Radio said the signing ceremony with Germany on the Arrow-3 sale was expected to take place in November.
