Monday, April 13, 2015

How Germany financed Israel’s nuclear weapons program


Israel’s nuclear weapons capability ceased to be a secret quite some time ago. Although Israel sticks to its rhetoric of “intentional ambiguity” and punishes any mention of its nuke program by its citizens as a criminal offense, most of its details have been exposed, except one:

Who financed the program?

That last Israeli nuclear secret is finally revealed: the country that financed Israel’s nuclear weapons program was with almost absolute certainty the Federal Republic of Germany. The recent explicit denial by Israel’s former President Shimon Peres does not invalidate this finding. Even Israeli top officials still remain obliged not to reveal anything about Israel’s nuclear weapons in general, and German-Israeli nuclear cooperation in particular.

Israel’s nuclear history began in 1952 with the founding of the Israeli Atomic Energy Commission. In July 1955, Israel signed a contract offered by the U.S. in the framework of the “Atoms for Peace” program on acquiring a small research reactor for the peaceful use of nuclear energy. However, Prime Minister Ben Gurion and the Director General of the Ministry of Defense, Shimon Peres, were already following a hidden agenda at the time. In November 1956, Peres asked the French Defense Minister Maurice Bourgès-Maunoury: “What would you say if Israel were to create its own potential for retaliation?” A year later, Peres signed three secret agreements with representatives of the socialist government Mollet. France supplied a 24 megawatt heavy water reactor, lent Israel 385 tons of natural uranium, agreed to cooperate on the research and production of nuclear weapons and lend support for the constructing of a reprocessing plant to produce plutonium.

Construction of the reactor began around the end of 1957-58 near the town of Dimona in the Negev desert. By 1964, the reactor was completed, the reprocessing plant followed one year later. By the end of 1966 the Israeli engineers had mastered the craft of making a bomb. At the start of the Six Day War (1967) Israel possessed two warheads; at the outbreak of the Yom Kippur War (1973) it had between 10 and 20.

All these developments were initially undertaken under heavy secrecy. However, in 1960, the plant in Dimona was spotted by US reconnaissance. Moreover, French President Charles de Gaulle now demanded that Israel should publicly reaffirm that its nuclear program was civilian only. Israel complied. At the end of 1960 Ben-Gurion declared publicly that the reactor was intended solely for the peaceful use of nuclear energy. He added that Israel was also building a scientific center for the study of arid zones near the reactor.

The Israeli government initially deflected public pressure to justify the construction work in Dimona with this obvious lie. Yet many international observers remained suspicious. Labelling Dimona a “textile factory” did not solve the problem either. However, there simply was no solid evidence to prove that Dimona was serving military purposes. This success was partly due to Peres having created in 1957, a special secret unit devoted exclusively to the protection of Israel’s military nuclear program called LAKAM (a Hebrew acronym). Even the intelligence service Mossad, which worked not only abroad but also knew what was going on within Israel, remained in the dark. Isser Harel, then Head of Mossad, later complained: “LAKAM was built behind my back and without my knowledge.” But LAKAM was successful – until 1986.

In October 1986, the “Sunday Times” published information by Mordechai Vanunu, an Israeli engineer who had worked in Dimona from 1976 to 1985. According to him, Israel was producing 40 kg of plutonium per year, which was sufficient for 8 to 10 bombs. Vanunu’s information was credible, not least because he had photographically documented the inner workings of Dimona, including the model of a hydrogen bomb. Now it became clear that “Dimona” was not just a heavy water reactor, but included a complex of nine other buildings, of which at least one was built six floors underground and contained the core of the system, the reprocessing plant to produce plutonium. Dimona was a fully-fledged nuclear weapons factory; the only outside supplies it required was natural uranium and heavy water for operating the reactor.

From Vanunu’s statements on the production capacity of Dimona, one can deduct that Israel currently has at least 200 strategic nuclear weapons of the Hiroshima / Nagasaki category (15 kilotons) as well as nuclear artillery shells.

Even after Vanunu’s revelations one question never entered the debate: How could a rather poor country like Israel finance a site the size of Dimona, where up to 2,700 people were working? The question was not asked because it was considered answered long ago. In the early 1960s, when the only issue was the civilian use of Dimona, Ben Gurion placated the critics by assuring them that the project would be financed outside the regular state budget – namely by international donors. The responsibility for this project was with Peres: “Not one penny came from the government budget. The project was financed from contributions I raised from Jewish millionaires who understood the importance of the issue.” Peres claimed to have raised more than $40 million, an amount he said to have covered half the cost of the reactor.

This statement by Peres is not the only available quantitative indication of how much money was acquired from international donors. It also raises the question as to who paid for the other half of the reactor. The other question is: Who paid for the entire Dimona complex, which included much more than a reactor and thus must have cost several times as much?

To this day, there is only one reference on a specific source of foreign funding for the Israeli nuclear weapons program beyond the $40 million acquired by Peres. When the issue of German-Israeli relations had again become a controversial topic in Israel, Ben Gurion warned in a background conversation with Israeli newspaper editors on March 31, 1963 that a confrontation with the Adenauer government was not in Israel’s interest. He said it could upset the development of an Israeli deterrent the importance of which could not be overestimated both for the security of Israel and the prevention of future wars.

Ben Gurion’s remarks were not only fairly straightforward, they also reflected the truth: Since 1961, the Federal Republic of Germany had been funding the Israeli nuclear weapons program, disguised as a contribution “to the development of the Negev”, a hobbyhorse of Ben Gurion since the days of the founding of Israel.

How did this happen?

On March 14, 1960, Adenauer and Ben Gurion met in the Waldorf Astoria Hotel in New York City. At this meeting the two heads of state agreed that the Federal Republic would offer Israel a ten-year loan of $ 500 million – then two billion Deutschmarks – for supporting the “development of the Negev”. The deal was not an agreement in a strict technical sense. It didn’t, therefore, require the involvement of the German Bundestag nor the Cabinet. It was implemented through the top secret “Operation Business Partner” (“Aktion Geschäftsfreund”). As Niels Hansen, a recently deceased former high level official in the German Foreign Office and longtime German ambassador to Israel, wrote in his well-informed book “Aus dem Schatten der Katastrophe” (“Out of the Shadows of Disaster”), the necessary arrangements were laid down in December 1961 between the Israeli Chargé d’Affaires in Germany, Felix Eliezer Shinnar, and Rolf Lahr, a Deputy Foreign Minister. The subsidized loans would be handled under the budget line “Support for developing countries through bilateral capital grant aid”. The state-owned “Kreditanstalt für Wiederaufbau” (KfW) was entrusted with the implementation. The purpose was loosely defined as “industrial and infrastructure projects”. The average interest rate was to be 3.6%.

These formal conditions were in line with arrangements for capital assistance to developing countries. However, the actual implementation of “Operation Business Partner” followed different “rules”. In the words of a high-level German official, “unlike in all other cases in which … (the KfW) is active in the field of financing development, the use of the funds made available for Israel were never checked … there have never been any talks with the Israeli partner ‘Industrial Development Bank of Israel’”. Shinnar mentions that one had to report about the use of funds “at regular intervals,” yet this was a mere formality. Accordingly, the information on the purpose of the loans was terse: “Development of the Negev”, “textile factory”, or “nuclear-powered desalination plant in the Negev”. None of these projects, which in principle would not have required secrecy, was ever realized. And yet the money kept flowing.

Against this background it is not surprising that the KfW to this day steadfastly refuses to make available the “top secret” documents on payments to Israel in the context of “Operation Business Partner.” However, this is not essential for finding out what happened to these transfers. As Hansen commented on the basis of Foreign Office documents, the payments under “Operation Business Partner” were made until 1973. In total, more than two billion DM were transferred. Over the years, the conditions for open years, interest and redemption were amended several times – the last time in 1989 to a term of 30 years, ten years, and 2% interest rate, respectively.

A strong piece of evidence that “Operation Business Partner” was about Dimona is the fact that the official Israeli justification for the plant in Dimona mirrored the language used by the German Foreign Office. As Dan Ravid and Yossi Melman report in their book “Spies Against Armageddon”, Blumberg, the Head of LAKAM, would justify the enormous movements of soil at Beersheba as being part of the construction of a large textile factory; occasionally, though reluctantly, he also mentioned a sea water desalination plant; although the absurdity of such a plant in the desert was not lost on him.

The German lenders and the Israeli borrowers used the same terminology: “development of the Negev”, “textile factory”, “desalination”. In other words, the German money from “Operation Business Partner” went directly into the Dimona project, i.e. into financing a nuclear production site. The overall cost of the Dimona nuclear weapons factory – regardless of the actual transferred amount of about two billion DM (500 Mio $) – remains unknown for as long as the French government, which had sold essential components of the system (in particular the reactor and reprocessing plant) is not disclosing its bills. At the current stage one has to assume that the loans provided through “Operation Business Partner” were sufficient to finance the entire nuclear plant. Given the extremely favorable financial terms of “Operation Business Partner” (overall it lasted for over 30 years, with 2% interest) one can conclude that Germany did not only finance the Israeli nuclear weapons program by way of loans, but de facto paid for most of it. As German negotiator Kurt Birrenbach argued in 1965, “in economic terms a long-term loan with a low interest rate comes very close to a grant.” Converted to the current price level, the total amount of credit that Israel received from Germany in the context of “Operation Business Partner” was about € 5 billion. From a strictly economic perspective, 4 out of these 5 billion had been converted into grants.

Only once was a prominent West German politician linked to the financing of Israel’s nuclear program. On 19 January 1996, “Ha-aretz” published a story about “the German colony in Dimona”. It mentioned a “forgotten Israeli novel” from the sixties, which had used so many pseudonyms that it had evaded censorship. However, decrypting the story is not all that difficult. The central message of the article is the claim that the German Defense Minister Strauss had made available DM 500 million to finance the reactor in Dimona. He had taken the money from an unauthorized fund of the German government – a move for which he later was forced to resign.

To this day, these statements have not been backed up by concrete evidence. What is probably true is that Strauss did not only push for “military aid” to Israel, but was also involved in shaping the origins of “Operation Business Partner.” Peres, who since the late 1950 used to visit Germany several times per year, met almost exclusively with Strauss. Their second meeting, which took place in December 1957 in Strauss’ private home in Rott am Inn, yielded an interesting piece of information. When Peres told the German journalist Rolf Vogel about the meeting, he said that “Germany sought to provide reparation to Israel in a broad sense, i.e. it tried to help protect Israel against the threats of the future.” It is perhaps in this context that one should recall Strauss’ repeated comments that there were things which could only be revealed at a much later stage.

The new evidence about “Operation Business Partner” closes the last gap in the research on the German-Israeli nuclear relationship. That these revelations appear as Germany and Israel are celebrating the 50th anniversary of the establishment of diplomatic relations is a coincidence. However, it provides for considerable satisfaction. Germany’s financial support for the development of the Israeli nuclear weapons program has given the Jewish State a unique insurance for survival. Those who initiated and implemented “Operation Business Partner” can be proud.

Hans Ruhle is a respected German military and security analyst who has written for many international publications. He was director of policy planning at the German Defense Ministry 1982-1988, and General Manager of the NATO Multirole Combat Aircraft Development and Production Management Agency from 1990 to 1995.


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