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One billion dollars – that's how much some experts said April’s joint Israeli-US-French effort to shoot down an Iranian attack on Israel cost. It is about 4 per cent of Israel’s pre-war 2022 defence budget of $23.4 billion – although allies footed much of the cost.
That shared cost – and problems making missile-killing missiles – is in the spotlight due to the joint US-Israeli production of key interceptors.
After another strike on October 1 of around 180 ballistic missiles, it raises the question of sustainability for Israel, if Iran is thought to have many more long-range missiles in its estimated arsenal of 3,000.
April’s attack consisted of maybe 300 drones and cruise missiles, and by some estimates 100 ballistic missiles that barrel down from the edge of space at more than five times the speed of sound.
The second attack presents an unprecedented problem – there have never before been such big ballistic missile attacks, raising the question of whether enough interceptors can be built quickly. The US announced it would send the Terminal High-Altitude Air Defence (THAAD) system to reinforce Israel's defences on Monday.
Arrow 3, Israel’s high-altitude missile interceptor, is produced by US firm Boeing and Israel Aerospace Industries (IAI) in coordination with the US Missile Defence Agency. IAI subsidiary Stark Aerospace Inc makes the “canisters” for the missile in the US, which contain its complex electronics. About 50 per cent of Arrow 3's parts are made in the US, according to IAI including "significant" components. IAI also said, in 2017, that production was spread across 20 states.
Here things become challenging. Missiles require advanced materials and electronic subcomponents that are sourced from a limited number of suppliers, such as defence tech firm PacSci EMC. Having niche component producers across the supply chain can place a strain on production.
“Because a lot of these munitions are produced stateside, it's competing with their own order book of these defences,” says David Walsh, a defence industry consultant.
“One of the things that was identified as a major flaw in the US defence industrial base is using only, for example, one supplier for small rocket motors, which is a real problem if you want to ramp up production in a hurry.”
Even in Ukraine, Russia’s largest attacks involving more than 100 missiles have sometimes involved low-flying cruise missiles. The sheer number of ballistic missile attacks on Israel strains their high-altitude interception.
Cost is a second issue. With the Arrow 3 costing around $3.5 million each, intercepting Iran’s missiles so far would cost a billion in total – if all missiles were intercepted this year. The system can “choose” not to intercept if it calculates an inbound missile will miss, but this advantage has its limits if hundreds are launched.
The Arrow price tag also comes on top of other interception costs for lower altitude threats, countered by systems like David’s Sling, which has missiles costing about $1 million, and the cheaper Iron Dome, which tackles short-range rockets. Iran’s ballistic missiles are thought to cost anywhere from $80,000 to $3 million, but the country has prioritised building up its arsenal for decades.
“What the Iranians are using is the Shahab 3 for the most part, which is a derivative of a North Korean design called the Nodong. Estimates are kind of hard to nail down, but that's estimated to be about $3 million a unit. So there's not an enormous disparity in price,” says Mr Walsh.
“The cost differences are not as serious as people think, but in terms of potentially forcing the Israelis to run out completely, that's more of a risk.”
Drone, missiles and dollars
While ballistic missiles are far more expensive than most of the drones in April’s attack, it is extremely expensive to take them down: some missile interceptors cost up to $10 million.
Nato and Israel expend significant resources trying to find low-cost ways of shooting down drones, which can easily be “swarmed”, draining air defences that use extremely costly interceptor missiles until the precious missiles simply run out.
Iran-made drones used against US forces in Iraq, Syria and Jordan cost anywhere from a few thousand dollars to several hundred thousand. The US and EU have naval missions in the Red Sea parrying drone and missile attacks on Israel and against ships. Standard Missile 2s used to hit some Houthi drones cost around $2 million, against drones costing up to $50,000.
Wes Rumbaugh, an expert on defence procurement and missiles at the Centre for Strategic and International Studies, explains the strain on production of the Standard Missile, but says it is manageable.
“Some have raised concerns about SM-3 procurement rates based on the 2025 [US] budget request of only 12 interceptors, but the data from prior years is more encouraging. Over the 10 years prior to 2025 (2015-2024), the US has procured nearly 500 SM-3 interceptors, suggesting its inventory is healthy despite the recent expenditures of interceptors in the defence of Israel. The SM-6 procurements have been similarly healthy at a level of 125 missiles per year since 2017.”
Meanwhile, the cost of shooting down drones is falling: a fairly low-powered laser can take down a small drone for a couple of dollars a shot, although the technology is in its infancy. Machine guns and multi-cannon weapons, using modern (albeit expensive) radar, can also fill the sky with flak, with relatively affordable bullets.
For Israel and allies, this leaves the problem of high-cost missiles to tackle other missiles. Mr Rumbaugh also highlights a need for more funding for US interceptors.
“Expanded production would likely require additional funding to provide a continued demand signal. If the US engagements in the Red Sea and Israel have truly stressed interceptor inventories, then supplemental funding to replace expended missiles would be an appropriate response.”
For Arrow 3, the system will benefit from an export deal with Germany last year, which could integrate the system into the European Sky Shield Initiative, a coordinated air defence and procurement program.
Niche capability
Israel's Arrow 3 missile relies on exquisite technology. Its ground-based Green Pine radar uses the latest active electronically steered array (AESA) radar, the gold standard for modern air defence that uses gallium nitride chips – a material that can handle high voltages and dissipate heat. Extra power translates into more focused, longer range beams without overheating, reducing the need for bulky cooling systems.
About 2,300 antennas allow for powerful, rapidly steered radar beams over very long distances, up to 900km, with high-fidelity identification of targets at distance.
This early warning allows the system to identify different types of missiles on the edge of space, several thousand kilometres away. Meanwhile, ground-based computers calculate the point of launch and impact, evaluating whether it is worth intercepting the missile.
An interceptor missile is then fired, travelling up in some cases beyond the karman line, above 80km, where it makes its interception. Receiving datalinks from the radar, even at high speeds over hundreds of kilometres, the Arrow interceptor eventually uses its own seeker to close with the ballistic missile.
By this point, it is using an infrared sensor to detect the hot enemy missile against the freezing blackness of space, guided to directly hit the weapon using small rocket motors.
Its microelectronics have to withstand high G-forces and extreme temperatures moving at three kilometres a second.
There’s no public data on Arrow production or stockpiles, but it's likely that in the years before the Gaza war, an adequate stockpile has been built up. That could change if Iran keeps up its missile barrages, Mr Walsh says.
“As long as the Americans are there to support them, and there's been no sign so far that they won't be, the problem is kind of attrition by exhaustion. Making the Israelis run out of interceptors, and relying on the fact that production is quite hard to ramp up in response. The Iranians have had some of their missiles in service since 2003 so they've had 20 years to stockpile.”
