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Analysis: The “S” in BDS: Lessons of the Elbit Systems Campaign (Part I)

Sept. 6, 2016 4:01 P.M. (Updated: Sept. 6, 2016 9:07 P.M.)
An Israeli F-16 I fighter jet takes off during a display for foreign media at the Ramon air force base in the Negev Desert, southern Israel, 2013 � AFP/File Jack Guez
By: Al-Shabaka

Al-Shabaka is an independent non-profit organization whose mission is to educate and foster public debate on Palestinian human rights and self-determination within the framework of international law.

In this Al-Shabaka policy brief, Maren Mantovani and Jamal Juma analyze some of the trends facing Israel’s military industrial complex with a particular focus on the campaign against Elbit Systems. The brief examines the tough times facing the industry, the myth of Israeli technological superiority, the industry’s local and global shifts, and the alliances emerging to reverse the militarization and securitization of societies. Based on this analysis, they draw valuable lessons and identify avenues for the global Palestine solidarity movement to pursue. The second part of this brief will be published on Wednesday, and the third and final part will be published on Thursday.

Israel’s biggest military companies last year rang alarm bells over a decline in international contracts, citing smaller budgets, more competition, and less desire for Israeli-made products as among the reasons. Is this an indicator that Israel’s arms industry might not be as invincible as it seems? What led arms deals with Israeli companies to fall through? What was the role of the Palestinian-led movement for Boycott, Divestment and Sanctions (BDS), which has called for military sanctions as part of its campaign to promote human rights?

An “Invincible” Industry Faces Tough Times

For years, Palestinians and their supporters -- global figures such as Desmond Tutu, Adolfo Peres Esquivel, Naomi Klein, and Noam Chomsky -- have called for an immediate and comprehensive military embargo against Israel to hold it accountable for its violations of Palestinian human rights. Tens of thousands of people have signed petitions and activists have demonstrated against companies tied to the Israeli military. For the last decade, activists have run a campaign against Elbit Systems, one of Israel’s largest military companies. The effort ranges from governmental lobbying to blockading Elbit subsidiaries in such countries as Australia, the United Kingdom (UK), and Brazil.

A dozen financial institutions, including almost all major Scandinavian pension funds, are no longer investing in Elbit Systems. In addition, and especially in the aftermath of major Israeli attacks, some European governments have taken restrictive measures including temporary freezes of arms deals and denials of arms export licenses. For example, the UK revoked five arms export licenses after the 2009-10 Gaza massacre, Spain froze arms sales over the 2014 Gaza massacre, and during the period of its center-left government (2005-13) Norway consistently refused arms export licenses to Israel and even stopped a German shipbuilder from testing Israel-bound submarines in its waters. South Africa has de facto ceased its military relations with Israel.

Yet until recently it seemed these actions would remain symbolic in their impact: The Israeli military industry appeared as invincible as the weapons it produced. This changed in October last year, when Israel’s biggest military companies called a meeting with the government to discuss how to tackle the decrease in military exports, which they expected at the time to fall from $7.5 billion in 2012 to around $4.5 billion in 2015. The companies pointed out that Israel's defense industry profit margin is about 4.5 percent - 5.5 percent, compared with 8 percent - 9 percent in the defense industry globally.They cited “smaller budgets, more competition, less desire for Israeli-made products, and the growing demands to transfer know-how and work abroad” as the reasons.

Global military expenditure stayed almost unchanged in recent years and indeed rose 1 percent in 2015. The revenue from one of Israel’s key military export products -- drones -- was even expected to nearly double from $6.4 billion to $11.5 billion between 2014 and 2024. While the reasons cited by the Israeli military industry seem to be an accurate description of trends in the global military trade, the drop in Israeli exports cannot be explained simply due to a lack of demand for weapons.

True, the Israeli military industry managed to ensure exports of over $5 billion in 2015 -- a slight recovery from the previous year -- and global political developments may bode well for the sector in the near future. Yet the military industrial complex is facing changes in the dynamics of its trade and propaganda. The erosion of the “Made in Israel” brand even in the defense and security sectors, to which the efforts of the BDS movement have contributed, is fertile ground in which human rights advocates can effect change.

When questioned recently about the impact of BDS on Elbit Systems’ operations, CEO Bezhalel Machlis admitted: “I’m not saying it’s not a threat, but I think that altogether we can handle it.” Human rights advocates now face the challenge of increasing the capacity of the BDS movement so that it pressures the Israeli war economy to the extent that it moves from being a threat to a definitive impediment.

How Elbit Systems and Brand Israel Are Losing Ground

Almost a decade into the campaign to stop investments, contracts, and other cooperation with Elbit Systems, some lessons can be drawn about the mixture of market forces, government structures, and activism that contributes to change. This section focuses on the latest losses Elbit suffered in France and in Brazil: Two governments that have had almost opposite perspectives on Palestine and the legitimacy of the BDS movement.

France’s decision against Elbit’s bid in its latest drone tender at the beginning of 2016 was an unexpected piece of bad news for the company. The now discarded Watchkeeper drone is based on Elbit’s Hermes 450 drone, which is being used in the massacres against Gaza. The Watchkeeper is being built in the UK by a joint venture between Elbit and a UK company. A sustained civil society campaign in France demanded the exclusion of the Watchkeeper from the tender on the grounds of Elbit’s involvement in Israeli war crimes, while in the UK activists have protested the Watchkeeper production site.

The French company Segem, which eventually won the contract, downplayed the fact that its drones also include Elbit technology. Instead, it celebrated its “national” technology and production. Only a few years ago, the “Made in Israel” tag would have counted as a plus for a drone. Today, the rising trend to ensure the growth of national military industries and a maximum of technology transfer has been a central element in eroding the appeal of Israeli military technology across the globe. This also ultimately contributes to one of the objectives of Palestine human rights campaigners – reducing the profits Israel gains from its war machine – and enables their advocacy to achieve results.

It is unclear to what extent pressure from the Palestine solidarity movement influenced the decision of the French government, which has been developing laws against BDS even more draconian than those in Israel. However, in April Israel reported that in 2015 the French government rejected another deal, in this case for surveillance technology. Fox News quoted a “well-placed Israeli counter-terror specialist:” “French authorities liked it, but the official came back and said there was a higher-level instruction not to buy Israeli technology.” If the report is not propaganda aiming to push forward other contracts, it indicates an unexpected reluctance within French government circles to enter into deals with Israel.

In Brazil, Elbit’s local subsidiary AEL Sistemas has seen an end to a decade during which its revenues grew exponentially, with a share in every major Brazilian defense project. The country was one of the fifth biggest importers of Israeli weapons between 2009 and 2014 and one of the most important clients for Elbit drones. However, in December 2014 the company lost its first strategic project: The government of Rio Grande do Sul, in the south of Brazil, annulled a Memorandum of Understanding with AEL Sistemas for the development of a technological park for the construction of military satellites. The deal was opposed by a sustained civil society campaign for a military embargo. That campaign was based on solidarity with the Palestinian people and the need to end Israeli impunity, but it also went further: It unmasked AEL Sistemas’ attempt to pass as a Brazilian company and exposed it as an Israeli subsidiary, underlining the fact that Brazilian tax money would be channeled to Israel. Further, it proved that technology transfer would effectively flow from Brazil’s universities to an Israeli company. Ultimately, the government cited budget constraints and its commitment to cooperation with the Palestinian community and movements as reasons to end the project. This was a clear win for the BDS movement.

In January 2016, Elbit Systems had to abandon its drone research and development (R&D) project in Brazil, which had launched in 2011 with great fanfare. The Ministry of Defense, headed by a member of the pro-Palestinian Communist Party of Brazil until the coup against the government in May of this year, refused funds to implement it. The ministry’s reticence was undoubtedly influenced by the political positioning of the Brazilian government. A high ranking Brazilian defense official had sparked an argument in the media when he warned that the diplomatic rift provoked by Brazil’s refusal to accept a settler leader as Israel’s ambassador could delay the execution of military contracts between the two countries. This concern was picked up by other figures such as the former defense minister, Celso Amorim, who argued that now is the "time to diversify our suppliers" and reduce excessive dependency on Israeli technology.

It is worth noting that Palestinian organizations such as Stop the Wall and the Palestine solidarity movement had provided evidence showing that Israeli software, monitoring, and surveillance technology were at that time an integral part of virtually all strategic industrial development projects of the Brazilian defense ministry.

Avionics technology in most airplanes, Brazil’s drones arsenal, surveillance technology in the border control systems, technology in Brazil’s tanks, and the communication system of the Brazilian sea forces are all provided either by Elbit Systems or by Israeli Aerospace Industries and their subsidiaries. This effectively results in a loss of national sovereignty and independence, the core principles to which defense establishments are committed. A 2015 report from The Marker, Israel’s most important financial newspaper, rightly highlighted that “political reasons” have led to a de facto freeze of military transactions with Brazil -- a development that is particularly painful for Elbit Systems.

Without a doubt, the hard times Elbit Systems has been facing in Brazil are to a large extent due to the souring of relations between Brazil and Israel during the last years of the government led by the Workers’ Party, which ruled the country from 2003 until May 2016. This in turn is partly the result of the growing influence of the BDS movement in the country and acceptance of its arguments within parts of the Workers’ Party. The awareness raising campaigns that seek to dismantle “Brand Israel” emphasize that Israeli weapons are “field tested” on Palestinians and alert the public to the fact that tax money is spent to sustain Israeli military companies. These strategies have penetrated even into the defense establishment. However, Palestinian human rights advocates will now need to identify new strategies given the coup against the elected government.

The failure of the Watchkeeper to win the French drones contract shows that even in contexts quite hostile to the demands for a military embargo, the enchantment with Israeli military technology can fade and other interests can prevail. It is crucial to understand what in a government apparently antagonistic to pro-Palestine attitudes is creating rifts between the Israeli and French military sectors and how to best capitalize on it. The current tender for another drones deal, in which Elbit Systems is again among the bidders, makes this effort urgent.

What these case studies show is that investing time and energy into understanding the dynamics within the defense and homeland security sectors is fundamental for developing effective BDS activism. At this stage, as the benefit of military cooperation with Israel becomes more and more questionable, Palestine solidarity activists can use this gained knowledge to deliver, or find allies who can deliver, arguments that target the interests of national decision makers. The net result could shrink markets for the Israeli military industry.

Originally published in full on Al-Shabaka's website on August 24, 2016.

The views expressed in this article are the authors’ and do not necessarily reflect Ma'an News Agency's editorial policy.
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