Rafael won the prime contract. Yet IAI did not disappear from the winning architecture: its ELTA division supplies the sensors<\/a>. The case is instructive precisely because rivalry and workshare proved compatible.\n<\/p>\n The public record does not show how much the direct contest affected pricing. What it does show is the structural problem: a foreign government reached the final stage with two alternatives supplied by companies owned by the same foreign state and could compare one Israeli state asset directly against another.\n<\/p>\n Slovakia provides a second illustration. Its assessment considered Rafael\u2019s SPYDER alongside IAI\u2019s BARAK MX among the medium range options<\/a>. The process ultimately selected BARAK MX, and in 2024 Israel and Slovakia concluded a Government to Government agreement worth approximately \u20ac560 million<\/a> for IAI\u2019s system. The first battery was delivered in 2026.\n<\/p>\n There is nothing improper in either buyer\u2019s conduct. They behaved exactly as rational customers should.\n<\/p>\n The buyers are doing their job. Israel is not doing its job as owner.\n<\/p>\n It still has no permanent rule for deciding when competition between two assets it owns serves the state and when it merely subsidises the customer.\n<\/p>\n Israel has recognised the problem for years. In 2009, the Ministry of Defense established the Harari Committee to examine competition in defence exports<\/a>. In 2016, Ministry Director General Udi Adam warned against what he called \u201cdestructive competition\u201d, saying it was also hurting industry profitability. In July 2026, Ministry Director General Amir Baram circulated a voluntary ethical code. The Ministry has since publicly invoked its code of ethics<\/a>. Such a code can, at most, curb misconduct; it cannot prevent competition itself from destroying value.\n<\/p>\n The failure already exists. The IPO does not create it; it closes the window for correction. What the state can settle now as sole owner will, after listing, collide with minority rights, cost more money and leave less freedom of action.\n<\/p>\n Israel is advancing partial privatisations of both companies while retaining state control<\/a>, with IAI expected to move first and Rafael preparing for a later listing.\n<\/p>\n Once IAI is listed, and even more once Rafael follows, ownership no longer overlaps. An investor who buys IAI shares does not thereby acquire Rafael shares. If the state then tells IAI not to pursue a contract because the national portfolio is better served by Rafael leading it, that investor can fairly ask why an opportunity was removed from the company he owns to benefit another company.\n<\/p>\n The same tension reaches the boardroom. IAI\u2019s board owes its duties to IAI; Rafael\u2019s board owes its duties to Rafael. Only the state sees the combined value. After separate listings, what is now a failure by one owner becomes a rational incentive for two corporations, each judged on its own revenue, order backlog, profitability and valuation rather than the state\u2019s aggregate outcome.\n<\/p>\n Israel therefore needs a narrow Export Collision mechanism, triggered when IAI and Rafael approach the same foreign customer, for the same operational requirement, with materially substitutable solutions.\n<\/p>\n Competition remains the default. Intervention begins only when the value created by two Israeli bids falls below the value their rivalry transfers to the customer.\n<\/p>\n The Government Companies Authority (GCA)<\/a>, acting for the state as shareholder, together with the Ministry of Defense, Ministry of Finance and the Israel Competition Authority (ICA)<\/a>, within the Ministry of Economy and Industry, should weigh the value created by two bids against the value their rivalry transfers to the buyer. The ICA\u2019s involvement is also the institutional safeguard against coordination hardening into permanent market allocation.\n<\/p>\n If a joint Israeli offer preserves more value, one company can lead and the other supply. Workshare can remain in both through subsystems, integration, maintenance, licensing, support or other participation.\n<\/p>\n Only near complete overlap combined with clear value destruction should justify a single Israeli bid.\n<\/p>\n The mechanism does not allocate markets, prohibit parallel development or coordinate prices.\n<\/p>\n Competition remains. Cannibalisation is managed.\n<\/p>\n Italy shows that the choice is not simply merger or uncontrolled rivalry.\n<\/p>\n Fincantieri and Leonardo are separate publicly traded industrial groups under significant Italian state influence. In the naval sector they created Orizzonte Sistemi Navali, owned 51 per cent by Fincantieri and 49 per cent by Leonardo<\/a>. Fincantieri serves as prime contractor and the single customer interface; Leonardo leads the combat systems side. The framework was explicitly designed to strengthen Italian competitiveness abroad, maximise Italian industrial content and preserve returns for the national industrial base.\n<\/p>\n The model preserves corporate independence while managing the point at which separate capabilities meet the customer.\n<\/p>\n IAI and Rafael overlap more deeply and sometimes offer genuinely substitutable products, so Israel needs a more flexible mechanism. The principle holds: a state does not need to merge companies to prevent them from cannibalising one another in export markets.\n<\/p>\n France provides a warning from the opposite direction. Airbus Defence & Space and Thales Alenia Space had jointly supplied Morocco\u2019s Mohammed VI reconnaissance satellites<\/a>. A decade later, Airbus and Thales competed separately for their successor and both lost to an Israeli bid<\/a>. IAI subsequently emerged as the supplier in a deal reported at approximately $1 billion to replace the two Airbus and Thales satellites<\/a>.\n<\/p>\n The deterioration in French Moroccan relations weighed heavily, so the loss cannot be reduced to industrial rivalry alone. But the structure matters: two strategic French holdings approached the same foreign requirement separately while their Israeli competitor arrived as one bidder.\n<\/p>\n The lesson is not that every overlap demands consolidation. It is that every overlap deserves an ownership test before the customer performs one on the seller\u2019s behalf.<\/p>\n \t That boundary needs explicit authority.\n<\/p>\n Israel\u2019s Defense Export Control Law gives the Ministry of Defense broad powers over defence marketing and export licensing<\/a>. The law regulates whether and how defence marketing and exports may proceed. It does not create a mechanism for resolving an economic collision between two state owned exporters.\n<\/p>\n Neither an expansive interpretation of the existing powers of the Defense Export Controls Agency (DECA) nor ad hoc intervention is enough. The mechanism should be anchored in the privatisation resolutions, corporate articles and prospectuses, alongside a narrow statutory amendment allowing the state, for as long as it controls both companies, to manage an Export Collision without managing the companies themselves.\n<\/p>\n The ICA belongs inside the mechanism to keep intervention narrow, reviewable and incapable of hardening into market allocation.\n<\/p>\n The rule must also be built into the offering and disclosed before the first share is sold, so the market prices the state\u2019s retained authority. But that authority cannot be exercised at minority shareholders\u2019 expense.\n<\/p>\n If the state prevents one company from pursuing a contract to preserve value in the other, it cannot finance its portfolio policy from the pockets of the minority shareholders in the company that stands down.\n<\/p>\n The first remedy is to retain value in that company through workshare, subsystems, maintenance, integration, intellectual property licensing or another form of participation. Where that is impossible, a pre agreed economic balancing mechanism should apply.\n<\/p>\n The state may manage its assets. It may not transfer value from the minority shareholders of one asset to the minority shareholders of another.\n<\/p>\n IAI should list first; Rafael should follow. They require the same ownership rules, not the same offering template. The precise stake, timing and structure can differ because the companies are different; state control, Export Collision rules and minority protection cannot.\n<\/p>\n For now, the parent companies belong in Tel Aviv. A domestic listing does not eliminate the minority shareholder problem, but it keeps the new ownership regime inside one Israeli legal and regulatory system.\n<\/p>\n Nasdaq adds another layer of securities law and disclosure<\/a>, corporate governance<\/a> and litigation risk. A state majority does not remove it. A decision to withdraw IAI or Rafael from a bid, redirect workshare or require a joint offer could itself acquire consequences for disclosure, directors and investors in the United States.\n<\/p>\n Israel would retain the authority to act. It would simply make every use of that authority legally and financially more expensive.\n<\/p>\n For now, Nasdaq should remain available to US subsidiaries, civilian businesses and units separated from the sovereign core.\n<\/p>\n The IPO is the deadline. The cannibalisation problem requires treatment even without it.\n<\/p>\n Rivalry should remain where it creates capability and stop where it exports value.\n<\/p>\n The state does not need to decide which company wins. It needs to stop being the loser.\n<\/p>\n \u2014\n<\/p>\n Related by the same author:<\/p>\n \u201cThe \u2018Bayraktar Trap\u2019: Cheap Airpower Or Costly Dependence,\u201d EurAsian Times, September 20, 2025.<\/a>![\"\"](\"https:\/\/www.europesays.com\/iran\/wp-content\/uploads\/2026\/08\/c54eafbb-10ad-4264-9490-abd8f1e15a2a-640x400.jpeg\")
\n\t\tShay Gal beside a Leopard 2A8 fitted with EuroTrophy at Eurosatory in Paris. One of Europe\u2019s most advanced main battle tanks integrates Rafael\u2019s TROPHY active protection system and IAI-ELTA\u2019s WindGuard radar. A European platform, two Israeli state-owned companies, one protection architecture: competition, workshare and value preserved in the same system. (Photo: Courtesy of Shay Gal)<\/p>\n
\n\u201cThe KAAN \u2018Trap\u2019: Permission, Not Power,\u201d EurAsian Times, November 24, 2025.<\/a>
\n\u201cWhat Washington Gives \u2014 and What It Takes in Return,\u201d Israel Defense, February 1, 2026.<\/a>
\n\u201cHow China Became the Real End-User of U.S. F-16 Tech \u2014 Not by Theft, But Institutionalized Access,\u201d EurAsian Times, June 6, 2026.<\/a>
\n\u201cNasdaq Can Value IAI and Rafael. It Must Not Price Israel\u2019s Freedom of Action,\u201d The Times of Israel, July 20, 2026.<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"Israel built the rivalry between Israel Aerospace Industries (IAI) and Rafael Advanced Defense Systems to produce superiority. It…\n","protected":false},"author":2,"featured_media":245909,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","_share_on_mastodon":"0"},"categories":[33],"tags":[11616,382,37,10269,7376,6414],"class_list":["post-245908","post","type-post","status-publish","format-standard","has-post-thumbnail","category-israel","tag-finland","tag-france","tag-israel","tag-israeli-economy","tag-israeli-foreign-policy","tag-morocco"],"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@iran\/117081657120805590","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/iran\/wp-json\/wp\/v2\/posts\/245908","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/iran\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/iran\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/iran\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/iran\/wp-json\/wp\/v2\/comments?post=245908"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/iran\/wp-json\/wp\/v2\/posts\/245908\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/iran\/wp-json\/wp\/v2\/media\/245909"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/iran\/wp-json\/wp\/v2\/media?parent=245908"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/iran\/wp-json\/wp\/v2\/categories?post=245908"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/iran\/wp-json\/wp\/v2\/tags?post=245908"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}