In the shadow of fears of Chinese aggression: defense industries prepare for a wave of orders from Asia
Athens is expected to approve this week the purchase of three Israeli systems as part of the "Achilles Shield" program. Despite the reduction in the original amount, this is the second-largest deal for Israeli defense exports, and now eyes are on customers in the Asia-Pacific region in the shadow of the threat from China. Meanwhile, optimism is not reaching the stocks.
The Greek parliament is expected to approve this week the decision of the National Security Council (KYSEA) from about a month ago to purchase air defense systems from Israel, as part of the "Achilles Shield" program. Globes has learned that, contrary to earlier reports of 3.5 billion euros, the first deal is expected to be closed at about 2.9 billion euros (about 3.4 billion dollars) - and there may be follow-up deals.
The approval by the parliament in Athens is the final stage, and immediately afterwards the official announcement is expected to be released. Although the sale is lower than the amounts initially published, it is very significant. It is the second-largest ever after the sale of Arrow 3 to Germany, which included a first deal of 3.5 billion dollars, and last December, a follow-up deal of 3.1 billion dollars, for the benefit of significantly increasing the production rate of interceptors and launchers.
The deal with Germany included one system, but the one with Greece includes three different systems: David's Sling by Rafael in the upper layer, Barak MX produced by Israel Aerospace Industries in the middle layer, and Spyder by Rafael in the lower layer.
David's Sling has a range of up to 300 km and a speed of 2.55 km per second (7.5 Mach), and is relevant for intercepting cruise missiles, aircraft, and UAVs. The main deal to date was in August 2023 with Finland, for about 316 million euros. The Greeks need it and the two other systems due to the Turkish threat, which covers the entire country.
Barak MX system covers against fighter jets, helicopters, UAVs, cruise missiles, surface-to-air missiles, and surface-to-surface missiles. It is based on three different interceptors: Barak MRAD for short range (up to 35 km), Barak LRAD for medium range (up to 70 km), and the Barak ER interceptor for a range of 150 km. Barak MX was sold, for example, to Azerbaijan in November 2023, for 1.2 billion dollars.
Change in the mix of continents
The Arrow 3 deal influenced, temporarily, the mix of Israeli defense sales by continent. According to data from SIBAT, the International Defense Cooperation Directorate at the Ministry of Defense, it appears that in 2024 there was a jump in the rate of sales to Europe, from about 35% to 54% - under the influence of increasing defense budgets on the continent but especially this deal. In contrast, there was a significant decrease in Asia-Pacific, the big destination of 2023, from 48% to 23%. Last year, Asia-Pacific returned to grow to 32%, while Europe reached 36% of the all-time record export - 19.2 billion dollars.
The assessments in the Israeli defense establishment are that in the last quarter of the year sales will jump, this time to Asia-Pacific. The motive behind this is the assessment - in the West in general and in American intelligence in particular - that China is expected to invade Taiwan next year and shake up the space. Two countries that are expected to be significant export destinations in 2027 are the main customer of the Israeli defense industries, India, and one of the most prominent next target markets - Japan.
India remains first
India imports so much produce from Israel that the Arrow 3 deal to Germany did not change its position in first place. Data from the Stockholm International Peace Research Institute (SIPRI) show that about 29% of defense exports in 2021-2025 went to the Indians, while Germany reached about 21% in second place. A calculation of SIBAT's sales shows that the total Israeli defense export in those years amounted to about 71 billion dollars. That is, India imported from Israel defense goods totaling about 20.6 billion dollars in five years, while Germany settled for about 14.9 billion dollars.
The Indians are dealing with various border disputes with China, which controls about 38 thousand sq. km that New Delhi claims belong to it, in the Ladakh region. At the same time, there is the issue of shipping lanes. New Delhi controls far from mainland India the Andaman and Nicobar Islands, adjacent to the busy shipping lane of the Malacca Strait.
Japan and other markets
Japan, which is only about 300 km from China, may also become a large new purchaser of Israel in the coming years. In the shadow of the increasing Chinese aggression in recent years, Japan increased its defense budget in the years 2020-2026 by no less than 25%: from about 48 billion dollars to about 60 billion dollars. Tokyo, which since the end of World War II avoided military buildup, wants today to purchase almost everything: long-range missiles, air defense systems, satellites, and unmanned means.
Other potential growing customers are the other countries adjacent to China, such as Vietnam, Thailand, and the Philippines. Just last February it was reported on the Intelligence Online website, that the Ministry of Defense of Vietnam closed a contract with Rafael for a purchase of about 250 million dollars of "Firefly" (Maoz) - loitering munition that the IDF used in the war. As part of the agreement, the parties closed on the production of the munitions at a local factory. This is an international trend that will be reflected also in the deal with Greece, when in the case of Achilles Shield - about a quarter of the production is expected to be carried out in local companies.
Negative sentiment in stocks
Meanwhile, at least, in the capital market the optimism that characterized the stocks was replaced by a sharp negative sentiment. The TA-Defense index shows from the beginning of the month a decrease of about 10%, and completes a cumulative retreat of about 13.5% from the beginning of the year, and this in complete contrast to the strong business infrastructure of the companies in the industry.
The dissonance between the pessimism in the sector's stocks and the core activity and real demands stood out again last Friday. For example, Next Vision reported a new order in the amount of 5.6 million dollars, and the stock plunged by 5.5%. The current trend in the index illustrates that despite the rigid demands and new contracts, the market is now pricing the sector with caution and suspicion, apparently against the background of profit realizations after the peak levels that were recorded in the past.
