Germany’s Expanding Defense Partnership With Israel Hit Troubled Waters. It’s Too Valuable To Sink.

As America’s NATO allies boost their defense spending and capabilities to counter Russian aggression, Germany is turning to Israel. After fielding its first Israeli-made Arrow 3 ballistic missile defense system in December, Berlin announced plans last week to expand deployment of the system to a second site in southern Germany.

Additionally, a German automaker has been in talks to sell a factory to an Israeli company for the manufacture of Iron Dome components. However, Qatari investors are reportedly interfering with this budding defense partnership, hurting both Germany and Israel.

The United States also stood to benefit from the factory deal. The German-Israeli defense partnership can help secure American interests in Europe while shoring up a key partner in the Middle East. Neither Berlin nor Washington should have patience for any outside efforts to throw sand in the gears.

Arrow 3 Comes to Germany

The deployment of an additional Arrow 3 battery cannot come quickly enough for a Europe hoping to boost its air and missile defense (AMD) deficiencies as Russian incursions into NATO airspace continue and as the Trump administration emphasizes the need for Europe to take “primary responsibility for its own defense.”

Arrow is a U.S. and Israeli codeveloped ground-based ballistic missile defense system that constitutes the “upper tier” of Israel’s interceptors. Arrow 3 is designed to protect against long-range ballistic missile threats.

German Air Force Chief Lt. Gen. Holger Neumann said the decision to expand Arrow 3 to a second site was “a decision of great strategic importance,” and Berlin has certainly put its money where its mouth is: $3.6 billion in 2023 to acquire the Arrow 3 system and $3.1 billion in 2025 for additional interceptors and launchers.

Germany’s decision to procure an additional Arrow 3 battery highlights the importance of increasing its ballistic missile defense capability and capacity in response to Russia’s prolific use of various missiles against Ukraine and reflects how effective Israeli AMD platforms have repeatedly proven against Iranian ballistic attacks.

Germany Could Support Iron Dome Manufacturing

The Iron Dome system was designed to intercept rockets, artillery, mortars, and eventually evolved to defend against some drones. By 2020, it proved able to intercept cruise missiles and has showed limited capability against ballistic missiles. The “SkyHunter” variant of Israel’s Tamir interceptor is also used by the United States Marine Corps Medium-Range Intercept Capability (MRIC) missile defense system.

Though Berlin has not sought to procure an Iron Dome battery for itself, Volkswagen (VW) is looking to sell an aging factory in western Germany to Israel’s Rafael Advanced Defense Systems, which would use the facility to manufacture Iron Dome components including Tamir interceptors.

Rafael signed a letter of intent in April to purchase Volkswagen’s Osnabruck factory, which will phase out automobile production in 2027. More than 2,000 jobs are reportedly at stake and selling the facility to Rafael would provide a boost to the German economy at a time when Berlin is racing to strengthen its defense industrial base (DIB). However, Qatar is Volkswagen’s third-largest investor and reportedly threw a wrench into the deal.

Qatar is nominally a European partner but also plays host to the leadership of Hamas and promotes an anti-Western agenda on its state-controlled Al Jazeera network to an audience of tens of millions worldwide. Qatar’s anti-Israel positions are, by now, well-known and may well have led Doha to stonewall a deal of which Israel is not the only beneficiary.

Though there is some Iron Dome-related manufacturing in the United States, an additional manufacturing facility in Germany would increase production rates for critical components and provide redundancy should a plant in Israel sustain damage during war. In April, an Iranian strike reportedly destroyed an Israeli defense manufacturing facility.

During Operation Roaring Lion, Israel increasingly used Iron Dome to intercept ballistic missiles from Iran, underscoring Israel’s need for additional production. Rafael has a partnership with the American firm RTX to manufacture interceptors in Arkansas, but the addition of a Germany-based facility could multiply output substantially.

Israel also reportedly deployed multiple Iron Dome batteries to the United Arab Emirates to help defend against Iranian attacks, further showcasing the need for as many Tamir interceptors as can be made.

Operation Epic Fury likewise demonstrated the need for the United States to field greater air defense capabilities and capacity. Iranian drone and missile strikes reportedly damaged, destroyed, or otherwise degraded over 200 U.S. military structures. The U.S. Marines may already be using their interceptors with the MRIC system that deployed on Guam last month for testing. Meaning, if there ever was a conflict that required the MRIC, the RTX facility in Arkansas alone might not be able to keep up with demand. The benefits of increasing the overall production capacity of Tamir interceptors through a factory in Germany therefore could also extend to the United States.

Qatar’s ability to interfere and delay critical AMD deals risks battlefield needs not being met and sets a dangerous precedent for future coordination. 

A Warning for the U.S.

Qatar’s reported efforts to scuttle the Volkswagen-Rafael agreement ought to be a cautionary tale for the United States, which has absorbed more than $400 billion from Qatar, including investments in leading artificial intelligence firms like xAI and Anthropic and space technology companies looking to secure federal contracts.

While complete information about the scope of Qatar’s investments in U.S. companies is not always public, a board seat is not necessarily required to influence corporate behavior. Companies that accept large investments from Qatar may resist ventures that could create friction with Doha. Locking horns with deep-pocketed investors is a headache that executives simply do not need. 

Today, this challenge is surfacing in the VW boardroom and torpedoing a project that would benefit Germany, Israel, and the United States. The lesson is that investments from sovereign investors can come with hidden strings, and those strings can be damaging when they are attached to governments whose positions often run counter to Western interests. Expanding cooperation between Germany and Israel is worth preserving, and Washington should take note of Qatar’s ability to interfere before it has its own Osnabruck moment.

Natalie Ecanow is a senior research analyst at the Foundation for Defense of Democracies (FDD) focusing on the Middle East and the Gulf. Justin Leopold-Cohen is a senior research analyst at the Center on Military and Political Power (CMPP) at FDD. For more analysis from the authors and FDD, please subscribe HERE. Follow FDD on X @FDD and @FDD_CMPP. FDD is a Washington, DC-based, nonpartisan research institute focusing on national security and foreign policy.