Pentagon Will Continue Financing Arrow Missile Development Project

Military cooperation between Israel and the United States appears alive and well regardless of the recent strains in their political relations.

The United States will continue to fund development of Israel’s Arrow anti-missile missile system by the government-owned Israel Aircraft Industries, despite its history of failure to date.

IAI, for its part, plans to raise capital on the New York and Tel Aviv stock exchanges, its director general, Moshe Keret, disclosed Monday. IAI has also signed an agreement with the General Dynamics Corp. to build F-16 jet fighters on an American-style assembly line.

The Arrow, Israel’s contribution to the U.S. Strategic Defense Initiative, was designed to be the world’s most sophisticated anti-missile system.

The Pentagon has just signed an agreement with IAI allowing it to proceed with the second stage of the Arrow project, Keret announced.

Defense Secretary Dick Cheney pledged last month that the United States would pay 70 percent of the costs.

U.S. participation will total $320 million. The United States funded 78 percent of the first stage costs, which amounted to $160 million.

IAI plans to finance its share of the second-stage costs through the stock issues and by “privatizing” some of its assets, Keret said.

The Arrow, known in Hebrew as the Hetz, has had a troubled history to date. Its first three prototypes failed in their test flights last year, the third in a spectacular midair explosion after going out of control.

In January, the Arrow project manger, Dov Raviv, chairman of IAI’s top secret Malam factory, was suspended in the wake of allegations he took tens of thousands of dollars in bribes.

The value of SDI itself, a pet project of the Reagan administration, has been called into question in the United States since the Cold War ended with the demise of the Soviet Union.

It could face severe budget cuts or abandonment by the time the Arrow is ready for operational deployment in 1996.