Under the current proposal, the €150 billion loan fund can be used only for procurement within Europe.

The draft proposal released yesterday shows that the French have prevailed. The headlines in Europe proclaimed that the decision excludes the US, UK and Turkish arms industries from European procurement in the billions of euros, but Israel too will be outside the fence.

According to the proposal, 65% of the cost of procurement of defense systems must be spent in countries in EFTA (the European Free Trade Association), which consists of the EU countries plus Norway, Iceland, Switzerland, and Lichtenstein, and also Ukraine.

The remaining 35% can be spent in other countries, but only if they have signed a security and defense partnership agreement with the EU. South Korea, Japan, and the UK are expected to sign such agreements, but the US is not, because of the fear that they will not allow countries to bar the sale of certain weapons systems.

Israel and its defense companies are liable to find themselves torn between the EU requirements and the security alliance with the US, which will prevent the signing of such a strategic agreement and deny them billions of euros in potential sales. The EU plan also excludes the possibility of European countries buying weapons systems entirely designed in a country that is not in EFTA or has not signed an agreement.