On October 7, three years to the day after the Hamas attack, Israel missed a Pentagon deadline for 12 Boeing AH-64E Apache attack helicopters. The deal, worth about $1 billion, rested on a Dept of War production order. The Israel Air Force, the Defense Ministry and the National Security Council all backed it. The US granted three extensions over a year. Israel never placed the order.
The gap was $288 million, about a third of the price, payable over several years. The Defense and Finance Ministries could not agree on a funding source. A senior Israeli defense official told Calcalist the country was “delaying the U.S. military’s own procurement schedule.” The production slot is gone. A revived deal could cost more and arrive later, and a senior security official said the aircraft could be offered to others, potentially Saudi Arabia, Egypt or Jordan.
Five days after the missed deadline, Israel opened a national pavilion at AUSA, the US Army’s largest trade show. 19 companies exhibited. The Defense Ministry repeated its headline: exports passed $19.2 billion in 2025, a record for the fifth straight year.
But the picture inside Israel is opposite. A Government Companies Authority review found last week that billions of shekels in unpaid Ministry of Defense obligations forced state-owned defense contractors to shoulder over 500 million shekels in private financing costs. Approved-invoice liabilities owed by the MoD to Israeli defense companies reached 14.3 billion shekels at mid-year. The mounting arrears have triggered retaliatory withholding of state dividends, supply chain gridlock, and warnings of scaled-back research and development spending.
In about two months Israel must order two more KC-46 tankers (about $500 million), and a few weeks later its option on six CH-53K heavy-lift helicopters (about $1 billion) expires, with a senior officer saying there is “no budgetary source for them whatsoever.”
The contrast between defense export highs and local defense procurement lows couldn’t be starker. This kind of mismanagement of domestic defense-industrial resources directly risks state security.
This isn’t only Israel’s problem. Arms makers now have more orders than they can fill, so production slots go to the buyers who commit first, and a government that can’t approve its spending in time loses its place in line, however innovative its industry is or however “special” its relationships are.
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