Israel: Below the Surface

Germany has been delivering submarines to Israel for decades. But how clean are these deals? And what role does Prime Minister Benjamin Netanyahu play? A deep dive into murky waters.

The submarines that surface in Jerusalem's city center on this late January morning are unarmed. They float above the gathered crowds in the form of black balloons. Or they're affixed to the roofs of cars, in the form of rusty, homemade models. One is hanging from a crane, erected specifically for that purpose. One man has brought along a rubber submarine, another is wearing a cardboard sub on his shoulders as a costume, with his head sticking out of the hatch. The demonstrators are intent on underlining the importance of the issue that is currently before the Supreme Court of Israel in Jerusalem: The Israeli government's purchase of submarines from the German defense company Thyssenkrupp.

The submarine has become a symbol of the security of this country, which lies on the eastern coast of the Mediterranean and extends south to the Red Sea. Should war break out, the submarines could be used to launch a counterattack against the aggressors, quite possibly with a nuclear weapon, the possession of which Israel has never officially confirmed. But the submarines carried by the demonstrators in front of the Supreme Court represent something quite different: They stand for the suspicions of corruption at the highest levels of government, of lies and bribes in the immediate orbit of Prime Minister Benjamin Netanyahu, the man who is up for re-election on Tuesday.

In the last 20 years, Israel has spent billions on submarines ordered from Germany, with a political agreement having been reached on three additional vessels. The big question, though, is: Why so many? Why does Israel want so many more submarines than are, according to experts, necessary for the defense of the country?

The Suspicion

The demonstrators refer to Israel's prime minister as the "crime minister," and for the last 39 weeks, there have been protests against him every Saturday across the country. Netanyahu is currently a defendant in three additional cases of corruption. But in the most sensitive case, the multi-year investigation into the submarine affair, he has thus far only been deposed as a witness. The Israeli high court could now change that.

The role played by the head of government and his closest advisers can be seen by taking a closer look at the documents, many of which have not yet been published. Netanyahu appears to have placed the orders for the submarines and other warships in contradiction to all logic - and in opposition to the advice given him by his own defense experts. The Süddeutsche Zeitung, together with the German public broadcasters NDR and WDR, has had the opportunity to examine the sworn testimony of high-ranking witnesses - from both political opponents and former political allies. They include former Prime Minister Ehud Barak, former Defense Minister Moshe Yaalon, former heads of the intelligence agency Mossad, generals and military chiefs of staff. Their testimony is deeply incriminating of Netanyahu or his immediate circle. Under the threat of prison sentences for perjury, they claim that all applicable rules were violated in the acquisition of the submarines and warships. An examination of the witness testimony hints strongly at corruption.

For months, members of the non-governmental organization Movement for Quality Government in Israel traveled throughout the country to urge politicians and members of the military to provide sworn testimony about their observations of questionable occurrences. The organization, which claims to have 300,000 supporters and almost 50,000 members in Israel, has spent the last 30 years fighting corruption and defending the rule of law. In this deeply divided country, many on the right side of the political spectrum suspect the organization of left-wing activism. But the group describes itself as an "independent, non-partisan, grassroots, non-profit organization" and has even received praise from Israeli President Reuven Rivlin, who is from the right-wing Likud party. The movement believes the submarine affair is the "biggest corruption scandal in Israeli history." The NGO is demanding that it be thoroughly investigated, including the role played by Netanyahu. It is a scandal that also involves massive amounts of German taxpayer money.

The War

The story has its roots in the Gulf War, when the Iraqi military invaded the neighboring country of Kuwait on August 2, 1990, and annexed the oil-rich country a short time after. Five months later, a military coalition under U.S. leadership launched an offensive to liberate Kuwait - and soon thereafter, the close American ally of Israel was likewise drawn into the crisis. Dozens of Iraqi Scud missiles were fired at Tel Aviv and Haifa, killing numerous people. Gasmasks were distributed to all households in the country, out of concern that Saddam Hussein could arm his missiles with chemical warheads.

In response to these events, the German government under Chancellor Helmut Kohl promised in early 1991 to deliver two submarines to its Israeli allies and pay for them. This pledge was born out of the feeling in Germany of responsibility for Israeli security, with arms deals seen as a way for Germany to at least partly make amends for the horrendous crimes perpetrated by Nazi Germany on the Jews during the Holocaust. But there was another aspect to that recompense in the Gulf War. The fact that the missiles fired at Israel by Iraqi dictator Saddam Hussein could even reach Israel and potentially be fitted with chemical warheads was thanks to German engineering expertise. In a dark chapter of recent German history, the government, state agencies and intelligence services all looked the other way as German companies earned handsome profits by doing business with despots like Hussein.

During this war, Israel recovered numerous electronic parts, tubes and screws from shell craters bearing the insignia "Made in Germany." Some of those parts made their way to the Chancellery in the German capital, then located in Bonn. "We were appalled," recalls an official who was present when the parts were spread out on a conference table. Protesters at the time gathered in front of the German Embassy in Tel Aviv and held up a sign reading: "Are we again to be exterminated by German gas?"

It was the beginning of a complicated three-way relationship between Israel, Germany and the defense company Thyssenkrupp.

The Company

Submarines made in Germany, along with Leopard tanks, are the drivers of German defense exports and are considered to be among the best in the world. The vessels are included in more than 17 naval fleets around the world, including NATO members like Norway, Italy, Greece, Portugal and Turkey. But Singapore, South Korea and many countries in South America also rely on the German technology. Since the 1960s, the German defense industry has sold more than 120 submarines around the world.

The first two vessels resulting from the promises made under Kohl were delivered to the Israeli navy in 1999, and the Dolphin and the Leviathan are still part of the Israeli fleet today. They were specifically developed for Israel by HDW in Kiel, which now operates under the name Thyssenkrupp Marine Systems. In the early 2000s, HDW outfitted its submarines with fuel cells that allowed the vessels to remain underwater for 18 days at a time. The Kiel-built ships are also considered to be the quietist non-nuclear-powered subs in the world. They are a deadly weapon. Longer, quieter, deeper: Those are the qualities that have produced the high global demand for the ships.

They are also attributes that Israel has valued for decades. Before long, an armaments link developed between Israel, a country under constant threat from its neighbors, and Germany - a bond that developed throughout the terms of several successive German chancellors and which continues to this day. The most recent German governments, first under the leadership of center-left Chancellor Gerhard Schröder and then with center-right Chancellor Angela Merkel at the helm, have also supported Israel's underwater defenses. During their tenures, Israel ordered additional submarines from Thyssenkrupp - first the Tekumah, and then the Tanin and Rahav, with the last two having a range of at least 15,000 nautical miles. For the Tanin and the Rahav, Germany took care of 333 million euros of the purchase price, slightly more than a third.

The Promise

Merkel explained why Germany does so in an attention-grabbing speech in March 2008 in front of the Israeli parliament, the Knesset. She was the first foreign head of government to ever be allowed to address the body. As the German chancellor, she said, Israel's security "will never be open to negotiation." She added that "we must do more than pay lip service to this commitment."

In the relationship between Germany and Israel, there is an unwritten rule, at least when it comes to armaments cooperation. Whatever Israel needs and requests, it gets. The broad extent of those deals is public, but the details remain a carefully guarded secret to this day. There is hardly any other aspect of recent German history that is as painstakingly and consistently shielded from prying eyes. Even procedures that lie decades in the past continue to be strictly classified by the German government.

Merkel's words from her Knesset speech have turned out to be anything but lip service. When Benjamin Netanyahu was elected as Israeli prime minister for the second time in spring 2009 - his previous tenure was between 1996 and 1999 - three German submarines were in service and construction on two additional vessels had already begun. That meant that the country would soon have five submarines available - the number that Israeli security officials, after careful analysis, had determined would be sufficient for the country's security needs, according to numerous officials familiar with the evaluation. Nevertheless, the fleet was not finished growing.

Not long after Netanyahu took over the helm of the government, the German defense company and submarine supplier Thyssenkrupp replaced its representative in Israel. For almost two decades, the role had been played by a highly decorated, extremely well-connected Israeli war hero, who had previously served as deputy military attaché in the Israeli Embassy in Washington. People like him were often used as a kind of broker to land defense contracts. As a rule, such middlemen between state and industry have a degree of expertise - in this case, military expertise.

The Middleman

The new Thyssenkrupp representative in Israel had never attracted much attention as an expert for defense, much less for submarines. His name was Michael Ganor, known as Miki, and while he had served in the navy, he later earned his money in real estate. Today, he is a key figure in the corruption case, along with a handful of men from the close circle of advisers surrounding Netanyahu who likely played background roles in German-Israeli defense deals. Ganor's predecessor testified under oath that Thyssenkrupp was essentially blackmailed into hiring Ganor.

The witness said that Israel told Thyssenkrupp it would only continue ordering submarines from the country if Ganor replaced him as the company's representative in Israel. "Allowing the other side to dictate who represents you locally is a rather unusual approach," says Tido Park, a specialist for commercial criminal law in Dortmund. "That is especially true when there is no clear objective reason, such as a special qualification. Normally, that kind of thing should set off the alarm bells at a company."

According to Thyssenkrupp, the precise reason for the change in personnel can no longer be clarified so many years later. But the hiring of Ganor, the company says, had been reviewed by an external law firm in 2009 and the new representative in Israel had also completed a compliance check without any red flags being raised. By the time his contract was terminated in 2018, Ganor is thought to have been paid almost 11 million euros in commissions from Thyssenkrupp. That, at least, is the number that is frequently talked about inside the company.

But what qualified real estate businessman Ganor for such an influential defense industry job? It is unclear whether Ganor and Netanyahu knew each other, and both have denied it. They have only confirmed that they lived for a time in the same upscale neighborhood of Caesarea, a settlement on the Mediterranean coast. But his predecessor believes he knows what Ganor's mandate was. He has claimed in sworn testimony that Ganor was tasked with "taking over the relationship between Thyssenkrupp and relevant positions in the Israeli government and replacing them with corrupt relations."

A task, according to testimony from former Israeli Defense Minister Moshe Yaalon, given him following the direct intervention of "different key figures in Israel." One of those could have been the deputy head of the Israeli National Security Council at the time, a friend of Ganor's from his time in the navy. A court document made public in 2018 indicates that he received financial kickbacks to help install Ganor in his new position. He has denied the allegations.

The Assignment

With a new prime minister in office and a new company representative in Israel, the next deal between Israel and Thyssenkrupp quickly took shape. Both Netanyahu and Miki Ganor and his network began working toward the purchase of a sixth submarine, despite prevailing expert opinion that five were enough for the country's defense. "The peripheral benefit of a sixth submarine" would "not sufficiently justify the enormous costs," wrote Netanyahu's then-deputy prime minister Moshe Yaalon in his sworn deposition. The several-hundred-million-dollar project, he wrote, would "come at the cost of other defense requirements."

What nobody knew at the time: Prior to becoming prime minister, Netanyahu had bought 4 million shekels worth of stock in a steel company called Sea Drift, the equivalent today of around 1 million euros, and held onto the stake despite rising to the position of prime minister. Sea Drift was a Thyssenkrupp supplier, the company with which Israel was doing business. " The whole thing stinks," commented Itamar Rabinovich, the former Israeli ambassador to the U.S. In insisting on the purchase of a sixth submarine from Germany - against the recommendations of many experts - Netanyahu maneuvered himself into a classic case of conflict of interests.

In his sworn testimony, Netanyahu's deputy Moshe Yaalon spoke of an "aggressive, in parts completely illogical, approach for the benefit of Thyssenkrupp's interests in Israel." Ehud Barak, who was defense minister at the time, spoke of "behind-the-scenes business interests." But by the time public prosecutors addressed the issue, the statute of limitations had already expired. In March 2012, the German and Israeli governments finally signed the deal for the sixth submarine, the Drakon. Once again, consistent with the conviction that Israel's security could never be up for negotiation, Germany agreed to absorb a third of the costs, although it capped its involvement at 135 million euros. Construction began that same year in Kiel, with completion of the 500-million-euro vessel potentially coming in 2021.

Submarines from this latest generation are, at 68 meters, around 10 meters longer than their predecessors. The vessels, built specifically to Israeli specifications, have another unique feature as well: Their torpedo tubes are 10 centimeters wider, allowing for the launch of ballistic missiles with a range of 1500kilometers. That means they could theoretically reach Israel's enemy Iran. Whether the missiles can be outfitted with nuclear warheads that could be used in a "second strike" is one of Israel's most closely kept state secrets. But the possibility alone is intended as a deterrent. It is an ideal retaliatory weapon.

The fact that Thyssenkrupp was struggling economically at the time likely played a role. Any order was welcome, particularly for a submarine, one of the most expensive military products around. A single order could secure hundreds of jobs. As such, the German government was not only happy to help out with the financing of Israel's sixth submarine, but also urged the Netanyahu government to provide its approval for the sale of two additional Thyssenkrupp submarines to Egypt.

The Neighbor

Israel and Egypt may have signed a peace deal in 1979, but the relationship remained characterized by deep distrust. In a worst-case scenario, the submarines from Germany could be used against Israel - weapons from a company that bore the names of two industrial magnates who had been deeply involved with the Nazis under Adolf Hitler. It seemed out of the question that Israel would approve of the Germany-Egypt deal. Yet the government of Benjamin Netanyahu indicated in 2010 that it would not stand in the way of the delivery to Egypt of two German submarines - under the condition that the configuration of the Egyptian vessels would be inferior to those in Israel's possession.

And despite the fact that Israel's political ties with Egypt would worsen following the fall of longtime Egyptian President Hosni Mubarak, Israel would go on to approve the sale of two additional submarines to Egypt. The former general Amos Gilad, who, as one of the most experienced security experts in the Israeli Defense Ministry, had served under six different defense ministers and three prime ministers, recalls today that he "clearly communicated his opposition, to the Germans as well." He says it was clear to everyone "that the additional sales of submarines to Egypt was out of the question." Defense Minister Moshe Yaalon and the rest of the security apparatus apparently assumed at the time that with the Israeli veto, the issue had been resolved and Egypt would not be adding on to its fleet of two German submarines. They were wrong.

The Authorization

The official word in Berlin in the spring of 2015 was that Israel had also agreed to the second deal with Egypt. Yaalon, who was defense minister at the time, recalls choosing an unusual path to seek clarification. He says today that he asked Israeli President Reuven Rivlin to ask Angela Merkel directly during a state visit to Germany whether such permission had been granted and, if so, by whom? In his affidavit, Yaalon writes: "On his return to Israel, the president told me that reviews by the chancellor had revealed that Germany had indeed been told by Mr. Netanyahu that Israel had changed its position on this sensitive issue." Netanyahu stood by his denial - until he admitted the allegation, presumably inadvertently, in a March 2019 interview with Israel's Channel 12 TV station.

Netanyahu claimed at the time that security reasons dictated that the approval for the submarine sale without consulting the German government's security apparatus had to be kept secret. But experts reject that claim. "When it comes to submarines or other strategic weapons systems, there is no secret that the defense minister should not know about," says former General Amos Gilad. Tamir Pardo, who served as the head of the Israeli intelligence agency Mossad from 2010 to 2015, also views this as a highly suspicious move: "I have never before encountered this kind of concealment from the highest representatives of the security apparatus in Israel."

It's possible that something entirely different was supposed to be kept secret: That Miki Ganor, Thyssenkrupp's representative in Israel, may have pushed through the Egypt deal together with his network and that he might have been paid to do so. That's what security expert Gilad is now claiming. "I have no doubt today that Ganor and his friends and associates received financial rewards from Thyssenkrupp for their services and assistance in persuading the Israeli authorities to drop their opposition to the submarine sale to Egypt." When asked for comment, Thyssenkrupp said that an internal investigation had found no evidence of payments to decision-makers at the time. The company said the allegations were "incomprehensible."

The Warships

Israel's interest in vessels had expanded beyond submarines. Israel also wanted to acquire small warships, called corvettes, to patrol the open sea as part of military efforts to protect planned natural gas production in the Mediterranean off the country's coast. Initially, Israeli defense experts planned to put the construction of the special ships out to international tender, a process that would result in a bidding war between experienced shipyards in South Korea, Italy, Spain and the United States.

But that's not what happened.

Netanyahu's people were "subject to a steamroller of pressure, from the prime minister's office and representatives of the National Security Council" to prevent the publication of the tender, recalls Dan Harel, who served as director general of the Defense Ministry at the time. Instead, the contract was awarded without any tender to a proven partner: Thyssenkrupp. And that, "even though Thyssenkrupp, as a company, neither specialized in the manufacture of such boats nor had any experience building them," then Defense Minister Yaalon recalls.

By then, Thyssenkrupp had already built five submarines for the Israeli navy and a sixth one had been ordered. Now there was an order for four more corvettes with an order volume worth hundreds of millions of euros - and Ganor would, of course, rake in a handsome commission.

A Defense Ministry legal adviser on the matter testified that he had previously received a phone call from David Shimron, who is Netanyahu's personal lawyer and also happens to be his cousin. Even today, it is unclear what role he played in the negotiations with Thyssenkrupp. At times, he acted as Miki Ganor's legal adviser, and sometimes he sounded to those involved as if he were speaking for the prime minister. Given the close ties between Shimron and Netanyahu, people within the Defense Ministry assume that Netanyahu ordered the tender to be stopped.

When approached for comment, Shimron said all his discussions with the ministry have been consistent with the law and with the instructions he had been given. "But when the relative of a key politician comes into the picture on a billion-dollar deal like that, it should draw increased attention in the compliance department," says compliance expert Tido Park. At Thyssenkrupp, company officials agree and admit that it is no longer possible to say for sure if or when the company was aware of the relationship between Netanyahu and Shimron. The company says that Shimron had been acting as Ganor's lawyer, which is why he wasn't subjected to a compliance review. Shimron himself says he was never approached by Thyssenkrupp about his relationship to Netanyahu.

Ultimately, Thyssenkrupp once again won the contract, which was signed in spring 2015, with the German government contributing around a quarter of the 430-million-euro purchase price. Miki Ganor, the middleman between the German corporation and the Israeli government, allegedly earned a significant commission.

The Plan

And even that isn't the end of the story. Although Israel had already achieved its strategic goal by that point in 2015 - five submarines for its own offshore security, plus a sixth one on order - Netanyahu still wanted more. Three more submarines at a total purchase price of around 1.8 billion euros. One participant in the conversation recalls how the prime minister "banged his hand on the table" and initially called for a seventh submarine, which the military experts present said wasn't necessary.

A short time later, Netanyahu allegedly presented his Defense Minister Moshe Yaalon with a paper containing "instructions from the prime minister" for a new five-year army plan. Yaalon asserts that he remembers "with certainty directive No. 1 from the prime minister," which called for the size of the submarine fleet to be increased to nine. Yaalon, who has gone from being a supporter of Netanyahu to an opponent, says that, in general, "Netanyahu during my term as defense minister acted inappropriately and contrary to the position of the security apparatus several times" in order to seek "to expand business with the company Thyssenkrupp."

In June 2017, the German Federal Security Council approved the sale of the seventh, eighth and ninth submarines to Israel. They are scheduled for delivery starting in 2027. Israel claims it intends to use them to replace old vessels.

At the time approval was given for that deal, Israeli journalist Raviv Drucker had already reported on possible corruption in the Thyssenkrupp deals. He also exposed the problematic dual role played by David Shimron as both Netanyahu's personal lawyer (and cousin) and also as legal adviser to Thyssenkrupp's representative in Israel on the other side. Netanyahu has rejected all criticism. "The security of Israel requires the acquisition of submarines and the renewal of the submarine fleet," he says. "(I)ncreasing the security and strength of the state of Israel is the only consideration that guided me in acquiring the submarines." In his view, that should be enough to settle the matter.

The Investigations

In July 2017 and again in September of that year, a number of people in Netanyahu's orbit were detained in a series of spectacular arrests. Police placed his lawyer and cousin Shimron, who denies any wrongdoing, under house arrest. The authorities also briefly detained a former navy chief and a man Netanyahu was just about to make chairman of the National Security Council. They reject the allegations against them. Ganor, too, was detained for 10 days, before being transferred to a police guesthouse for further interrogation. Ganor and his circle were accused of bribery, fraud, money laundering and tax evasion.

Ganor himself reached a leniency agreement with the judiciary in July 2017 in exchange for his cooperation as a key witness. In return, he was expected to get off with a year in prison and a fine equivalent to around 2.5 million euros. But in March 2019, he suddenly retracted his testimony. The payments to an entire network of people involved in the Thyssenkrupp deals that he had previously admitted were no longer bribes. Now he claimed that they had been consulting fees.

After the Süddeutsche Zeitung made a request for comment through his lawyer, Ganor said he was confident that his "innocence" would soon be recognized. The Public Prosecutor's Office in Essen, where Thyssenkrupp is headquartered, began looking into the case on suspicions of bribery of foreign public officials and tax evasion. Prosecutors later transferred the matter over to their colleagues in the nearby city of Bochum who specialize in white-collar crime. Prosecutors there opened an official investigation. They believe that by labeling bribes as consulting fees, they may have been claimed as tax deductions. Suspects in such cases are relatively easy to identify. Suspicion first falls on those who signed the tax return - usually a senior executive. In the case of Thyssenkrupp, they would be easy to identify, but the authorities opened an investigation into unknown persons.

In summer 2017, public prosecutors in Germany were also provided with a copy of the final report on Thyssenkrupp's internal probe. It concludes that "there was no corruption on the part of Thyssenkrupp employees" - but the Israelis involved were not questioned because the internal investigators were not allowed to interview them as long as the official investigations were continuing in Israel. Nor, according to the company, could Thyssenkrupp fully explain how Ganor suddenly became a middleman - or why it didn't trouble anyone that David Shimron, the cousin of the Israeli prime minister, was suddenly involved.

The German-Israeli submarine affair also should have caused a major stir in Germany. But not even the sensitive question of what Israel actually needs the boats for has put a damper on business. Officially, Berlin still holds the position that there is no evidence that the submarines provide Israel with a nuclear second-strike capability. Experts have long been convinced of exactly that, and the question also comes up from time to time within the Federal Security Council in Berlin. But the answer given from the German Defense Ministry is always the same: They don't have any definitive answers.

The truth is that most of the politicians on the Federal Security Council, which convenes secretly, don't really want to know. They only bring the subject up publicly on rare occasions, as Karsten Voigt, the SPD's former foreign policy point man in parliament, did in a letter to the editor sent to German newsmagazine Der Spiegel. In it, he wrote, "I, for one, agreed to the delivery of the submarines with full awareness of their potential use as part of Israel's nuclear deterrence strategy. I saw and still see these deliveries as a perfectly legitimate tool for enhancing Israel's security."

The Election

The German government has been insisting for years now on including an additional clause in the deal already concluded with Israel concerning the delivery of further submarines. According to reporting by Der Spiegel, the clause states that new submarines will only be delivered once all the investigations have been closed. In December 2019, Israeli prosecutors announced they would indict a total of seven men in the scope of the submarine affair. But that hasn't happened. A commission of inquiry set up in 2020 was dissolved after only a few weeks due to internal disputes and it is unclear whether it will ever resume its work with a new team.

"It's very, very slow," laments Raviv Drucker, the whistleblower who went public with the affair. The Israeli media are reporting that there are plans to put Ganor and other men on trial for bribery and corruption. Netanyahu's lawyer and cousin Shimron is now accused only of money laundering - also in a case related to Ganor, but one that has no direct connection to the submarines.

And one name has been missing from the list of suspects from the start: Benjamin Netanyahu.

In a statement, the prime minister claimed that he only learned through journalists that his lawyer Shimron had also represented Ganor. Both claim they never spoke with each other about the business with Thyssenkrupp. Can such a thing be believed? Shimron "has a finger in every pot," wrote one columnist at the Israeli newspaper Yedioth Ahronoth. "And it was Netanyahu, of all people, who did not know that Shimron was involved with the submarines? Strange."

Contacted by the Süddeutsche Zeitung, a spokesman for Netanyahu rejected as "utterly baseless" all accusations relating to the submarine deals. "All the prime minister's decisions were based on professional considerations aimed at strengthening Israel's national security." Netanyahu's political future will be decided on Tuesday - and the polls aren't looking bad for his party. The chances are good that he'll be re-elected.

Potential coalition partners have already pledged their support for an immunity law after the election, one that would protect him from prosecution. The submarine affair has also fallen off the radar of German investigators. Prosecutors here dropped the case in January because there was "insufficient cause for suspicion" - at least against Germans.

Translation: Charles Hawley and Daryl Lindsey