Israeli defense firms eye Cyprus manufacturing to access EU funds

Major Israeli defense contractors, including Elbit Systems, Israel Aerospace Industries (IAI), and Rafael Advanced Defense Systems, are exploring the establishment of manufacturing plants and management offices in Cyprus. This strategic move aims to provide these companies with a foothold inside the European Union and facilitate access to the EU’s €150 billion Security Action for Europe (SAFE) financing program.

The SAFE program incentivizes defense investments by requiring that at least 65% of the value of purchased defense systems comes from EU member states or Ukraine. By producing goods in Cyprus, Israeli firms may be able to qualify their products as having an EU origin, helping them meet these procurement requirements.

Discussions regarding these potential industrial collaborations were reportedly held during a recent meeting between Israeli President Isaac Herzog and Cypriot President Nikos Christodoulides in Nicosia. While establishing a presence in Cyprus offers geographic and political advantages, companies must still meet specific EU criteria regarding establishment and executive management to access SAFE funds.