Prime Minister Benjamin Netanyahu is expected to announce a partial freeze in settlement housing construction when he attends a tripartite summit with Presidents Barak Obama of the U.S. and Mahmoud Abbas of the Palestinian Authority on the sidelines of the annual U.N. General Assembly opening session in late January in New York. At the summit, which has not been confirmed but is widely expected, the Israelis and Palestinians are expected to announce resumption of final status peace talks, suspended last year.

According to several sources, two years would be allotted to completion of talks on an Israeli-Palestinian peace agreement.

The freeze would resolve a dispute over settlement construction that had been simmering since President Obama's late spring speech in Cairo, after which the U.S. demanded a unilateral complete freeze in building in Jewish settlements in the West Bank. At first Netanyahu resisted, due to strong opposition from large segments of his right-leaning governing coalition. But over the course of repeated meetings with U.S. Mideast envoy George Mitchell, the Netanyahu administration has sought to negotiate a deal which would defuse the atmosphere of crisis with the U.S. over one isolated issue of settlements.

According to reports in Ha'aretz, the diplomatic process envisioned by the Obama administration is not identical with the process set up at the 2007 Annapolis Mideast conference, and is based on three main tenets: that talks will follow the Mideast "road-map" established by the Quartet, the forum of the U.S., U.N., European Union and Russia dealing with the Middle East; that the target for completing agreement will be two years; and that unlike Annapolis, the United States would take an active role, including "a seat at the negotiating table."

About three weeks before the mooted summit was due to take place, there was no guarantee that Netanyahu's coalition partners, among them ministers Moshe (Boogie) Ya'alon and Benny Begin, son of party founder Menachem Begin, would buy into such a deal. Insiders were not discounting the possibility of a revolt inside the government, which could include Likud back-benchers with close ties to the settlement movement.

One reported move might calm the dissidents. In early September, it was said that Netanyahu intended to approve plans for hundreds of new West Bank housing units before a moratorium on construction "for a few months" is considered. The Jerusalem Post quoted a source who said that the temporary moratorium, which would be called a reduction in the scale of construction rather than a freeze or moratorium would be put in place if the "conditions are right," namely if Arab states were forthcoming in providing Israel with normalization gestures, similar to what the U.S. expects from Israel.

Placating members of his own coalition is one thing, though, and getting U.S. backing is another. Within hours after the plan was published, the White House went on the record with an expression of disapproval. The EU also rapped the move, saying it opposed settlement construction of any kind.

Relations between Israel and the Palestinian Authority on the West Bank have improved in the last 18 months. The change, as reported by Ha'aretz, is reflected in statistics: There have been no suicide attacks in Israel since February 2008. In the first eight months of 2009, 13 Palestinians (and four Israelis) have been killed in security incidents in the West Bank, compared to 51 Palestinians (and no Israelis) in the previous year. As forces of the government of President Mahmoud Abbas and Prime Minister Salam Fayyad have curbed violence, Israeli intervention has lessened. Israeli and PA security forces and their American advisers cooperate.

Much of the change, says Ha'aretz article by military correspondent Amos Harel, stems from the changed attitude of Abbas's Fatah party towards Hamas, in the wake of the Islamic fundamentalist group's 2007 take-over of Gaza. They realized that a crackdown was necessary to prevent a similar Hamas coup on the West Bank, and began taking appropriate steps defending themselves, rather than continuing to leave that vital mission to Israel. These actions on the security front, have actually bolstered their international negotiating position, and allowed them to keep on refusing to make concessions in the ongoing bargaining process, not only with Hamas, but also with Israel.

Prime Minister Benjamin Netanyahu may have considered the recruitment of former IDF Chief of Staff Moshe (Boogie) Ya'alon a major achievement before the 2009 elections. But now, with Ya'alon installed as strategic affairs minister and deputy PM in Netanyahu's coalition cabinet, the prime minister may be having some second thoughts.

Ya'alon caused a minor uproar in mid-August with publication of his statements that he was "not afraid of the Americans," and that leftist groups opposed to Jewish settlement in the West Bank were a "virus" infecting Israeli society. On another occasion, Ya'alon urged Israel to resettle the former village of Homesh, in an area of the West Bank from which Israel withdrew in the 2005 disengagement, calling the former settlement a strategic asset in the face of Palestinian terror. As for the disengagement itself, he said that the evacuation of Gaza and small parts of the West Bank, provided a "tailwind for Islamic jihadism."

Perhaps more significant than the remarks themselves was the company in which Ya'alon made them – at a closed meeting with the "Jewish Leaderhship" faction of the Likud party led by right-wing extremist Moshe Feiglin. For the past five years Feiglin and his nationalist followers have been trying to establish themselves as a significant part of the broader Likud party. Netanyahu strongly opposes this effort, both out of ideology and because it damages the Likud's image as a mainstream, center-right party. Before this year's elections, he used the party machinery and loopholes in the Likud Constitution to deny Feiglin a prominent place on the Likud list of candidates. It therefore is galling to the prime minister to see Ya'alon, his hand-picked prize, courting a group which has been considered on the fringe of the Likud.

President Shimon Peres paid a visit to the Muslim former Soviet republics of Azerbaijan and Kazakhstan in late June and early July. In Baku, the Azeri capital, Peres attended Azerbaijan-Israel business forum at which Azeri President Ilham Aliyev called on Israeli business people to invest in his country, visited the Baku University and spoke at a synagogue in the city.

The Peres visit to Kazakhstan was marred by a walkout of Iranian representatives during his keynote address at an interfaith conference in Astana. "We have come to listen to religious leaders," a member of the Iranian delegation told the Jerusalem Post, "and Peres is not a religious leader." Representatives of the conference's host, Kazakh President Nursultan Nazarbayev, had told the Iranians that a walkout on Peres at the two-day Congress of World and Traditional Religions would amount to a walkout on Nazarbayev. Nazarbayev promoted and sponsored the conference, a third of its kind, as part of a broader effort to position Kazakhstan as a meeting ground for discussing religious differences.

The delegation accompanying Peres included Minister of Industry, Trade and Labor Binyamin Ben-Eliezer; Minister of National Infrastructures Uzi Landau; Minister of Science & Technology Daniel Hershkowitz; Defense Ministry director-general Pinhas Buchris and 60 CEOs and heads of leading Israeli companies.

An Indian delegation headed by Mumbai Police Commissioner D. Shivanandan and including Maharashtra Additional Chief Secretary Chandra Iyengar visited Israel in July, for consultations on the prevention and dealing with terror like last November's attack in Mumbai. According to Indian sources, the delegation that met with officials, made contact with about 30 firms and attended a seminar on "safe cities" - was the first stop on a tour that was to include the U.S., the U.K., other European locations, China and South Africa. On his return to India, Shivandan caused something of a stir by saying, "Unlike Israel, which reacts to any terror attacks promptly, India lacked the killer instinct against those who carry out such attacks."

$2.2B in defense aid for Israel was included in the 2010 State and Foreign Operations Appropriations bill passed by the U.S. House of Representatives on July 9. In addition, Israel will get $555M appropriated in a supplemental funding bill passed in June 2009. The total of $2.775B in military aid is under the second year of the 10-year, $30 U.S.-memorandum of understanding. The aid bill also appropriates $500M to the West Bank and Gaza, $100M to train Palestinian security forces, and $1.29B and $513M respectively for Egypt and Jordan.

Russia has a contract to provide Syria with powerful MiG-31e interceptor fighter jets but has not begun delivering the planes, according to an Associated Press report from Moscow. The wire service cited a report in the Russian newspaper Kommersant, quoting Alexi Fyodorov, head of Russia's state-run United Aircraft Corporation, as saying a 2007 contract to sell MiG-31e fighters to Syria has not entered into force but was being implemented. The paper said Russian arms sales officials have denied such a contract exists.

The MiG-31e has the capability of firing simultaneously at several targets at a distance of up to 180 km. Deliveries to Syria would be liable to alter the balance of power in the region, the AP report said. Reports of the sale surfaced in 2007 but were quickly denied by Moscow and the official state arms-trading monopoly Rosoboronexport, which issued a statement saying "Russia has no plans to deliver fighter jets to Syria."

AP quoted Israeli defense officials as saying they were not surprised by Russia's intention to sell Syria the advanced jets but concerned that the deal, if consummated, would alter the regional balance of power.

A European Union expert on piracy, Estonian Admiral Tarmo Kouts, has implicated Israel as the mastermind behind the mysterious hijacking of a Russian freighter in July. In an early-September interview with Time Magazine, Kouts said that the interception of the freighter, Arctic Sea, the ship's subsequent disappearance before being retrieved by the Russian Navy off the West African coast, bared the marks of an Israeli operation, which he termed the most likely explanation. "There is the idea that there were missiles aboard, and one can't explain this situation in any other way," he told the magazine. In response Russia's ambassador to NATO, Dmitri Rogozin, said that Kouts should stop "running his mouth."

According to the official Russian explanation of the incident, the boat was simply transporting a shipment of timber when it was hijacked by pirates who originally claimed to be environmentalists. After the pirates turned off the ship's tracking device in late July, the boat effectively disappeared. Russia sent out a search party, and on August 17, the ship and its crew were rescued. According to two widely circulated scenarios, the ship was hauling missiles to Iran, either from Russia itself or in a smuggling operation run by the Russian mafia, and was either intercepted by Israeli commandos, possibly of the Israeli Navy's elite Flotilla 13 unit, or by the Russians themselves, wishing to halt a rogue operation that was against Moscow's interests. Adding to the speculation, according to various reports, were the facts that Israeli President Shimon Peres paid a surprise visit to Moscow shortly after the incident, that the ship never sent out a distress signal, and the unusually long time it took the Russian navy to locate the freighter.

Sweden's government, arguing that it has no control over its country's "free press," has steadfastly refused to condemn a story accusing Israel of "killing Palestinians to trade their organs." The story, which has been deemed a total fabrication by all responsible authorities, was published on August 17 by Aftonbladet, a left-leaning Swedish newspaper. In the story, journalist Donald Bostrom attempts to link what he was told by Palestinians while researching a book in the West Bank in the early 1990s to the July arrest in New York of Levy Itzhak Rosenbaum, an Orthodox Jew, on charges of running a black market kidney ring.

As a result of the icy reception he was expected to receive, Swedish Foreign Minister Carl Bildt in early September cancelled a planned visit to Jerusalem.

The pilot of an Israel Air Force F-16I warplane managed to land his aircraft safely on an uninhabited patch of Negev desert in early September, after the $100M plane had an engine problem on a routine flight. When he discovered that he could not slow down the plane's engine, a very rare event, the pilot shut off power and glided to safety.

No Doom, the Doctor Says

New York University economics Prof. Nouriel Roubini, widely known as "Dr. Doom" because he was one of the few in his profession to predict last year's global economic crisis, says that Israel is leading the way out of the downturn. According to a report in Globes, Roubini told Israeli President Shimon Peres during a conference they both attended in Italy: "I monitor Israel's economic figures, which clearly show that there is no doubt that Israel is one of the first countries to recover from the global economic crisis. Israel is leading the way out of the crisis." He added that he greatly valued the actions of Bank of Israel Governor Prof. Stanley Fischer over the past year.

Israel is snapping out of recession faster than had been anticipated by anyone, the Bank of Israel confirmed in early September. In an update of its economic forecasts, the central bank said that it expected growth for 2009 to reach 0%, up from the minus 1.5% it had previously predicted. It said that the economy grew by a surprising 1% in the second quarter, and that GDP growth in the second and third quarters was anticipated at 2.5%. And in 2010, the bank said, growth was expected to reach 2.5%, up from the previous prediction of 1.5%.

At the same time, the central bank said that unemployment, long considered a "lagging indicator," which does not react quickly to changes in the macroeconomic situation, would rise slightly for the balance of 2009, reaching 8.1% by year's end. A steep decline in imports is anticipated, causing a $7B surplus in terms of trade. For 2010, the central bank predicted a 6.3% increase in exports, to be offset in terms of trade figures by a 6.9% increase in imports. It also foresaw continued, though slight, rises in unemployment, to a level of 8.3%.

The improvement in the economy was reflected by reports of the major banks for the second quarter. Aggregate net profits of the five largest banks, Hapoalim, Leumi, Discount, Mizrachi Tefahot and First International, reached NIS 1.5B, nearly double the aggregate for the first quarter, while the average return on equity rose to 9.5%, according to a report in Globes.

Meanwhile, the OECD issued its predictions. It foresaw Israeli GDP shrinking by 2% this year and growing by 0.2% in 2010. According to the prediction, Israeli exports are due to fall this year and rise 2.6% in 2010, inflation will be 2.5% in '09 and 1.1% in '10, and unemployment will rise to 8.3% in 2009 and 9.3% next year.

Industrial output rose by a seasonally adjusted 2.1% in June 2009, compared with May, the first growth so far in 2009, the Central Bureau of Statistics said in mid-August. Growth encompassed all sectors: high-tech, including pharmaceuticals, rose by 2.2% in June, mixed high-tech (chemicals, refining, and machinery) was up 1.1%, mixed low-tech (mining and quarrying, plastics, and metals) rose by 2.9%, and low-tech output (textiles, printing and food) increased by 1.9%.

Standard & Poor's affirmed its 'A/A-1' foreign-currency and 'AA-/A-1+' local-currency ratings on the State of Israel. In a mid-July report, the ratings agency has also left Israel's outlook on "Stable." S&P said that it sees Israel's current economic and fiscal problems as temporary, while the budgetary deficit of 6% this year and 5.5% next year are balanced by improved liquidity in Israel and world markets.

Israeli-Palestinian trade rose to NIS 20B (over $5B) in 2008, according to the Customs Division of the Israel Tax Authority. This included NIS 14.6B (up 28%) of domestic trade and NIS 4.6B in Palestinian imports and exports through Israeli ports (an increase of 12%).

Elbit Agricultural Ventures, a subsidiary of Israel's Elbit Imaging, will invest $100-$125M in establishing a dairy farm in India's Andhra Pradesh state, according to reports in the Times of India and other sources. The dairy, approved by the state government, will be located in the Chotoor district, cover some 366 acres and house about 10,000 cows, imported from New Zealand. The Dairy and the creamery, part of which will be set up in the Kadapa district, are expected to produce about 400,000 liters of high-quality milk daily.

Andhra Pradesh, in southeastern India, is the country's fourth largest state by area and fifth largest by population. Its largest city is Hyderabad.

Elbit Imaging is controlled by Israeli entrepreneur Motti Zisser. Zisser's holdings also include Europe Israel MMS Ltd., which develops and runs malls and properties in Israel, Europe and India via Plaza Centers NV, and several life-science companies, including InSightec and Gamida Cell.

Profits of East Mediterranean Gas Co. (EMG), whose owners include Egyptian businessman Hussain Salem and Israeli Yosef Maiman, from gas sales to Israel will reach $180M this year, compared to 2008's $50M. Much of the profit comes from sales to the Israel Electric Corp., which is seeking to reopen its contract with EMG. EMG also has contracts, for gas piped across the Sinai desert from Egyptian fields, with Israel's Nesher Cement and Dorad Energy.

Africa-Israel Investments, a major real estate player owned by diamond industry billionaire Lev Leviev, is in financial trouble. In a report published in late August, the company said it had lost NIS 1.52B (over $400M) in the second quarter of 2009, compared with a previous loss of NIS 12M (over $3M) in QII/08. In addition, it said that it was unable to meet its financial obligations and, at the recommendation of its auditor, would seek a settlement with bondholders.

Among the reasons for the crisis, the company said, was that the sale of some of its income-producing properties had decreased cashflow, that current financial conditions in the world had made it difficult to obtain the financing needed to redevelop and improve properties in its substantial portfolio, and that it was impossible, in the short term, to rely on improvement in its main markets, the U.S., Russia and Europe.

A debt arrangement would be difficult to reach, said Globes, quoting capital market sources. It said that Africa Israel had 13 outstanding bond series amounting to about NIS 9B ($2.3B), some of which conflicted with others.

The possibility of a government bailout was ruled out by Finance Minister Yuval Steinitz. "This isn't a happy event, but neither is it an event that will have a macroeconomic effect on the economy. This is a single incident, and no financial institution is threatened. The risk here is 1%, or less, as far as pension savings are concerned," Steinitz said.

According to a report in The Marker, a small Israeli company based in Herzliya north of Tel Aviv is turning huge profits by playing the market, utilizing a secret algorithm. According to the report, Final keeps its actual system secret, but the algorithm is said to compute variability in the price of future contracts in fractions of a second by identifying linkage between dozens of parameters simultaneously. The Marker said that the company, which shuns publicity and has only been reported on once previously, in Yediot Aharonot economic section, anticipates profits of about NIS 700M (about $185M) this year.

Final is one of a number of companies around the world engaging in algorithmic trading; The Marker says that the various algorithmic systems now account for about 70% of trading on North American exchanges.

Apax Partners, the international private equity firm, has collected substantial dividends from its two major Israeli investments, according to a report in Ma'ariv. Apax, which in 2008 paid NIS 2.2B (approx. $580M) for a 56% stake in Tnuva, took a NIS 320M dividend from the produce and dairy marketing firm. In addition, since 2006, Apax has collected NIS 1.2B in dividends from Bezeq, about half of what it paid for the Israel phone and telecom firm.

Elbit Systems in July acquired BVR Systems of Rosh Ha'ayin, northeast of Tel Aviv, a provider of training, simulation and debriefing systems for air, sea and ground forces, for $34M. BVR's signature product is its EHUD AACMI pods, used to track the exact positions of aircraft participating in air combat training, for use in subsequent debriefings. The firm also produces data links and avionics.

Israeli businessman Ilan Ben-Dov has agreed to pay Hong Kong-based Hutchison Whampoa about $1.38B for a 51% share in Partner Communications, which under the Orange brand is Israel's largest cellular service provider. The heavily leveraged transaction is to be financed by a combination of money borrowed from Hutchison itself, credit from banks Leumi and Mizrahi Tefahot, and a $100-$200M bond issue by Ben-Dov's Scailex.

A week later Tapuz People Ltd., an Internet site owned by Ben-Dov's Suny Electronic Inc., will donate about $10,000 to a Jerusalem-based charity for child cancer victims as part of an out-of-court settlement of a lawsuit by Israel supermodel Bar Refaeli. Refaeli said Suny used her name in ads for Samsung mobile phones, which it is the sole importer to Israel.

Israel's Supreme Court has ruled out a proposed deal that would have allowed Bezeq, Israel's main landline telecom provider, to take over satellite TV broadcaster YES. Bezeq's attempt to increase its 49.8% stake in YES was opposed by the Antitrust Authority and the Eurocom group, which owns 32.6% of YES.

Bank Hapoalim, Israel's second largest financial institution, has called off its planned acquisition of NuVerse Advisors LLC, a New York-based wealth management firm. The purchase, agreed in mid-2008 as part of Hapoalim's effort to fortify its position in international private banking, particularly in Latin America, was canceled due to global financial conditions. According to Globes, the decision to cancel was reached several months ago, but not made public.

Defense contractor Elbit Systems has moved to purchase 19% of Mikal Ltd. for $18M, the two firms announced in mid-June. The deal, which begins with a loan and is subject to approval of Israel's Antitrust Authority, also includes an Elbit option to pick up the remainder of Mikal's equity from shareholders. The Mikal group operates through three main branches including Soltam Systems Ltd. in the field of artillery, the field of armored fighting vehicles led by Symar Ltd. and the field of optronics, led by ITL Optronics Ltd. The group owns companies both in Israel and throughout the world.

Nice Systems, a maker of digital recording and monitoring systems based in Ra'anana, in the high-tech belt northeast of Tel Aviv, registered two acquisitions in late August and early September – Hexagon, an Israeli-based maker of cellular location-tracking technology, for $11M, and Fortent, a New York-based software firm for $73.5M. According to Nice, Hexagon technology can be used by law enforcement and internal security agencies, while Fortent, which will be integrated into Actimize, a subsidiary acquired by Nice in 2007, provides the financial service with analytics-based protection against financial crimes such as money laundering. Fortent's client list includes JPMorgan Chase, Royal Bank of Scotland and Mizuho, the Japanese bank.

There seem to be signs of a revival in high-tech employment, in the doldrums for the last year with major layoffs by many firms. Globes reports a pick-up in hiring, with some companies reviving positions that had been frozen due to economic hard times. One employment company, for example, said that demand for high-tech employees was 37% higher in July 2009 than in June, 8,991 postings for jobs, compared with 6,555.

Israeli start-up Jajah, a provider of VoIP (Voice over Internet protocol) telephone calls, will provide Microsoft with telephony trunking services under the terms of a strategic agreement between the two companies. The agreement allows enterprises using Microsoft Office Communications Server 2007 to make high quality voice calls over Jajah’s platform to any network or other device. Jajah, founded in 2005, provides cheap Internet calls on landlines and cellphones, claims that its service saves customers 98% of the cost of long-distance calls. In March, Jajah (which so far has raised $31M) raised $2.5M as part of a $5M fourth fund-raising round. Globes speculates that the money came from existing investors Globespan Capital Partners, Intel Capital, Sequoia, and T-Venture Holding, a unit of Deutsche Telekom.

Jerusalem-based drug development company Bioline Rx has made its first major deal, a $285M agreement with Ikaria Holdings of New Jersey for Bioline's BL-1040 drug for heart attack patients. The deal, announced in June, was pending approval of the Ministry of Trade & Industry's Office of the Chief Scientist, which initially backed the project through one of its technology incubator projects.

According to published reports, BL-1040 deals with cardiac remodeling in a way that differs from current heart attack therapies, which focus on reopening a blocked coronary artery using stents or balloon-like angioplasty to re-establish blood supply. BL-1040, a liquid polymer that is injected through the coronary artery, helps damaged tissue to heal as a more compact, less dilated and tighter scar, resulting in improved long-term cardiac function, a Bioline official said. When BL-1040 reaches the ischemic tissue it undergoes a liquid-to-gel phase transition and forms a "scaffold" that provides mechanical support to the injured tissue during the recovery period.

Israel's Finance Ministry and the Office of the Chief Scientist in the Ministry of Trade & Industry in mid-August published a request for proposals on guidelines for the planned National Biotech Fund. The fund, based on government contributions of NIS 200-350M ($50-$75M), is expected to be leveraged to about $200M through foreign investments.

Data-recording specialist Nice Systems, based in Ra'anana, has won a $55M multi-year contract to provide its NiceTrack technology for advanced telecom interception from a government agency it declined to name. Implementation is due to begin next year.

India's cabinet in mid-August approved a $1B deal to purchase 18 Spyder advanced surface-to-air missile systems from Israel's Rafael Advanced Defense Systems. Delivery is due by 2012.

The Spyder, built by government-owned Rafael, is part of India's effort to upgrade its badly outdated anti-aircraft and missile defenses, which still rely on antiquated Soviet era OSA-AKM [SA-8 Gecko] and ZRK-BD. The system uses missiles originally designed as air-to-air fighter-launched weapons in a ground-based system.

The truck-mounted Spyder combines medium-range Derby 4 and short-range Python 5 missiles. It is an all-weather, network-centric, self-propelled, multi-launch, quick-reaction air defense system. Vertical launch enables 360-degree missile dispatch within two seconds after the system identifies a target as hostile. Spyder is capable of simultaneously engaging a number of targets and can operate day or night.

India is purchasing Israeli Unmanned Aerial Vehicles (UAVs) in two separate deals worth a reported total of $100M. According to Globes, they involve two "troops" of 6-8 IAI-made Heron reconnaissance UAVs and two naval rotary UAVs for the Indian Navy.

C Music missile-defense systems will be installed in dozens of Israeli flag commercial airliners under the terms of a $76M Ministry of Transport contract with defense contractor Elbit Systems. C Music is a commercial variant of Music, an infra-red countermeasure system that has been deployed for some time on military aircraft and helicopters. The advanced system uses laser beams to divert shoulder-fired anti-aircraft missiles (known as Man-Portable Air Defense Systems, or MANPADS) off their intended course. In the past, there have been reports that El Al, the national air carrier, had installed SkyGuard, an anti-missile system developed by IAI, which deploys incendiary flares to divert incoming missiles. Some European countries reportedly objected to overflights by airliners with the flare-based system, on the grounds that falling flares might cause fires when they reach the ground.

Sales of Israeli armor for global vehicles are soaring, according to a late-August report in Globes. In the last year, according to the paper, local manufacturers of armor for vehicles and armored vehicles have registered orders of $700-900M, a number that seems to be growing.

Among the beneficiaries of this boom, spurred by the need to protect troops and security personnel from terror attacks, is Plasan Sasa, based in Kibbutz Sasa near Israel's northern (Lebanese) border. In early August, Plasan won a $200M contract for armored kits on 1,700 U.S. military vehicles, followed by a $300M order to armor over 2,000 trucks used by the U.S. military in Afghanistan. Production, much of it at Plasan's Israeli facilities, is projected at nearly 1,000 vehicles a month in order to meet a February 2010 delivery deadline.

Another smaller Israeli winner is Arotech, a maker of lightweight armor for vehicles. Its best-known product is the David, based on the Landrover Defender. Arotech reported a $432M orders backlog, and a subsidiary is bidding on an Indian contract for patrol vehicles in the aftermath of last year's Mumbai terror attacks.

Hatahof, based in northern Israel, recently said it had new contracts worth about $80M from an undisclosed foreign customer, which outside sources say may be Turkey. Another player in the growing market is Rafael, which recently unveiled CLARA (Composite Lightweight Adaptable Reactive Armor), which protects vehicles against armor-piercing missiles.

VSI, a joint U.S. venture of Elbit Systems and U.S. defense contractor Rockwell Collins, said in June that it had received a $54M order for helmets and other systems for Lockheed Martin's F-35 aircraft. Earlier this year VSI was awarded contracts worth $120M from Boeing and the U.S. Air Force.

Sharp increases in the projected price have prompted the Israel Navy to look for alternative places to build two new missile fast patrol boats it had been planning to purchase in the United States, according to a report in the Jerusalem Post. In 2008, the Navy had submitted a request for proposal for Lockheed Martin's Littoral Combat Ship (LCS). After the estimated cost of the LCS rose from an original $220M to $400M, with the prospect of reaching $600M, Israel began investigating other possibilities. These include building a 2,000-ton vessel designed by Germany's Blohm and Voss, makers of the Meko family of corvettes and frigates, at the Israel Shipyards in Haifa. It would be the first time an Israeli shipyard, which in the past has built the Dvora-class fast attack patrol boat, had ever built a large missile ship.

The joint panel on privatization of government-owned IMI reached two key decisions in June, according to Calcalist: to sell the company as one unit, including its Ashot Ashkelon subsidiary, and to sell initially, 49% of the equity in the company on the stock market, and/or to buyers. The reported decisions by the committee consisting of representatives of IMI, the Government Companies Authority and the Histadrut trade union federation, have not been confirmed or denied in other news media. They came in the wake of late-spring agreement by unions inside IMI to privatize via stock offering, provided the rights of IMI workers are protected.

The questions with IMI workers are close to being settled. To be determined are the conditions for early retirement of some 700-1000 workers. Calcalist quoted one source close to the negotiations as saying, "There is still a Via Dolorosa to pass through before the end of the stock issue."

Part of IMI, the Small Weapons Division, was privatized in 2005.

IAI has closed a deal worth over $100M with an unnamed foreign customer for Harop "loitering munitions," the firm said in mid-June. Harop, which can be launched from a variety of UAV platforms, can search for, detect and hit land or sea-based moving targets accurately and at long range. Each Harop unit consists of launchers and a mission control center.

In a separate deal, Germany's Ministry of Defense has approved a project, with IAI in partnership with prime contractor Rheinmetall Defense, that will utilize Harop. IAI has other projects with Rheinmetall Defense, including some involving UAVs.

Trials for Heron Unmanned Aerial Vehicles were held in Brazil in early August, to determine whether the IAI-manufactured UAVs were suitable for patrols against drug smuggling and the theft of natural resources, according to the Jerusalem Post. The tests were conducted under severe weather conditions in Parana state, in southern Brazil. The Heron is capable of staying aloft for almost 48 hours at an altitude of 30,000 feet. It has a 16.6 meter wingspan, weighs 1,200 kg. and can carry a 250 kg. payload. IAI recently entered into a joint venture with a Brazilian partner, to engage in projects in Brazil and other Latin American countries.

The main objective of Russia's $53M acquisition of 12 UAVs from Israel was to study Israeli technology in order to build unmanned aerial vehicles in Russia, the authoritative Defense News reported in mid-June. "We must take their know-how and put it to practical use," Defense News said that Vyacheslav Dzilkarn, the deputy head of the Russian governmental Federal Service for Military and Technical Cooperation, told the official Novosti news agency.

Russia will receive 2 heavy UAVs and 10 small ones, according to the report.

In February, the Russian General Staff designated to Irkut and Vega, two Russian companies, the task of developing new tactical reconnaissance UAVs. Russia started talks with Israel about the purchase of the UAVs after the August 2008 war with Georgia, during which Tbilisi operated Israeli-made drones. Russian officials, including Anatoly Isaikin, the head of the Russian official arms export monopoly, Rosoboronexport, have been making it clear that the Israeli drones will be bought in small numbers and will not be commissioned by the Russian Army. The intention, Defense News said, was always to study deployment of the UAVs.

The cost of moving the focus of the IDF from the center of the country to the Negev, in the south, over the next eight years will be about NIS 27B ($7.1B), Defense Minister Ehud Barak told a mid-July meeting of the cabinet. Barak said the relocation of about 27,000 military personnel and the movement of major headquarters and military bases was part of a national effort to reinforce and strengthen the southern part of the country.

Defense contractor Elbit systems has won an Israeli Ministry of Defense contract to set up a mission training center for pilots of IAF F-16c/d and F-16I warplanes. The 15-year project is valued at about $55M, Elbit said in a press release. The firm called the center, which will train pilots for various mission scenarios in different geographical areas, a significant breakthrough in the operational training sector, providing training capacities that are new to the IAF.

The Ground Forces Command of the IDF plans to declare three new devices as operational in the coming weeks, the Jerusalem Post reported on August 10. The devices are the Amit, a hand-held long-distance thermal imaging and targeting system that weighs less than 2 kg. and has an 8-hour rechargeable battery developed by Elbit Systems; Shahar, an eyepiece that hooks onto a commander's battle vest and connects to a small computer in a small backpack to be distributed to battalion and company commanders; and Clover, a GPS navigation device that does not require direct satellite hookup during operations.

The IDF has deemed operational an active protection system for tanks and armored vehicles known as Trophy or Aspro-A, and in Hebrew as Me'il Ruah (literally Wind Coat, or more colloquially Windbreaker). The system, developed over the course of 10 years by Rafael and Elta, a subsidiary of IAI, detects incoming anti-armor rockets with 360-degree radar, and intercepts and destroys them with what has been described as a shotgun-like blast. The system, which completed testing in August and will be installed in a battalion of Israeli Merkava tanks by next year, is reportedly the West's first operational active protection system for armor. (Russia has already developed systems called Drozd and Arena). Development of Trophy-Windbreaker was accelerated after the 2006 Second Lebanon War, during which IDF tanks suffered a number of direct hits and casualties from anti-tank rockets, including the new Russian-made RPG-29, which has a tandem warhead whose first charge penetrates existing passive defensive tank armor and makes way for a deadly second charge. The system has a relatively small kill zone, so as not to endanger friendly troops in the vicinity.

G-NIUS, a joint venture of Elbit Systems and IAI will develop a second-generation unmanned ground vehicle (UGV) for the IDF. The vehicle, called Nahshon, will be based on experience with the G-NIUS UGV Guardium, in IDF service since last year. Increased capabilities in the new design will provide more operational flexibility and provide combat support; the Guardium, with more limited capabilities, can only be deployed on security patrol missions. Guardium is based on the Tomcar, an Israeli-developed off-road recreational vehicle.