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Israel seeks discount on two German warships
November 25, 2009 / 11:57 AM / 8 years ago

Israel seeks discount on two German warships

* German Meko preferred over U.S. rival vessel

* Israel looks for discounted deal by end of year

* Netanyahu, Barak due in Berlin next week

By Dan Williams

TEL AVIV, Nov 25 (Reuters) - Israel plans to buy two warships from Germany rather than rival U.S.-made vessels and is negotiating with Berlin in the hope of clinching a discounted deal by year’s end, Israeli officials said on Wednesday.

They said the Meko corvettes’ purchase would be pursued by Israeli Prime Minister Benjamin Netanyahu and Defence Minister Ehud Barak when they visit the German capital on Nov. 30.

Built at ThyssenKrupp’s (TKAG.DE) Blohm+Voss shipyards in Hamburg, the Meko costs around $300 million but Israel wants the German government to underwrite the sale. An official involved in the talks said Israel sought a discount of 20 to 30 percent. That would help the Meko outprice the Littoral Combat Ship (LCS), which is made by American firms General Dynamics Corp (GD.N) and Lockheed Martin Corp (LMT.N) and which the Pentagon has been lobbying the Israelis to buy.

An Israeli official said despite the fact that U.S. defence grants would significantly defray the estimated $460 to $600 million cost of the LCS, the Meko topped the wish list.

“We want to close a deal by the end of the year. Now it comes down to financing issues with the Germans,” he said.

A ThyssenKrupp official was in Tel Aviv this month to confer with the navy about fitting the Mekos with Israeli technologies to improve performance and reduce costs, the official said.

German Foreign Minister Guido Westerwelle, who visited Israel this week, declined to comment on the Meko negotiations.

Keen to atone for its Holocaust history, Germany has in the past partially financed major Israeli military acquisitions.

In 2006, it agreed to cover up to a third of the cost of an Israeli contract for two German-built Dolphin-class submarines. Israel already has three Dolphins, acquired at deep discounts.

If the Mekos are bought, Israel would plan to add as many as eight more of the ships to its fleet in the future. An Israeli official suggested that his country’s battle-hardened reputation would serve as a useful endorsement for the German-made ship.

“The Germans have a domestic-industrial interest in helping us with this deal. There’s also the prestige element, which would enhance the interest of other foreign customers.”

Editing by Mark Trevelyan dan.williams@thomsonreuters.com, +20 2 2578 3290, Reuters Messaging: dan.williams.reuters.com@reuters.net

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