Arms control, geopolitical paradoxes, and the defense industry's resilience. These themes frame a data-driven analysis of the strategic and financial outcomes of Leonardo S.p.A. 's defense contracts with Israel that followed the escalated nature of the conflict in Gaza since October 2023. The Italian government claims to have implemented a formal restriction to new arms approvals but the state-owned defense corporation is still maintaining its supply chain, most notably through the U.S. Foreign Military Sales (FMS) mechanism and its contractual obligations to the F-35 multinational program, showcasing a geopolitical paradox. Leonardo's success in attaining an unprecedented order backlog of €44 billion and the industry operational stability highlight a normative weakness in Italy's Law 185/1990, which puts industrial profit and strategic interdependence ahead of compliance with risk assessment under International Humanitarian Law (IHL). The following regulatory opacity might contribute to future commercial opportunity costs in the larger MENA region and jeopardize the legitimacy of the EU's unified export stance. 

The events that followed October 7, 2023, have served as an overwhelming testing ground for the credibility of European arms regulations on exports, leading to a clear conflict between supranational normative commitments and domestic industrial ambitions. At the core of this controversy appears Leonardo S.p.A., the Italian's biggest defense company, 11th in the world, and the 3rd largest in Europe (representing 8% of the total sales within the respective European industry). Leonardo is an integral member of the European Defense Industrial Base (DIB) and has an extensive presence throughout the MENA region, which has historically included major customers like Egypt and Turkey. For Rome, this commercial alignment has crucial geopolitical significance.

Figure 1.

The Italian government attempted to navigate meticulously in its diplomatic stance by publicly declaring that it will take a "cautious approach" to granting Israel additional military export licenses. However, the convoluted reality of the global defense industry, within which components circulate through companies in allied states and distribution networks are closely linked, complicates unilateral attempts at moral or strategic distance. The true measure of a state's foreign policy is not its declared stance but rather the operational status of its largest state-affiliated companies.  

To what extent do Leonardo's enduring commercial ties with Israel and the resulting extraordinarily favorable financial outcomes indicate and shape the wider geopolitical structures of power and normative coherence across the MENA region? This investigation poses this as its primary research topic. By providing specific details on contracts and financial performance in addition to the official narrative of legitimacy, the analysis will address this. Second, the strategic costs, legal loopholes, and critical viewpoints that characterize Italy's conscious compromise between geopolitical integrity and financial interests will be examined.

A detailed assessment of material transfer data indicates that Leonardo's operational continuity depends on a purposeful strategy of legal avoidance carried out through institutional insulation. Italian Deputy Prime Minister Antonio Tajani asserted that "contracts for the sale of weapons to Israel have been 'blocked since... October 7'," but according to publicly available ISTAT data, exports of "weapons and ammunition" peaked in December 2023 at €1.3 million, effectively defying the notion of a total halt. This continuity is sustained by three primary industrial realpolitik mechanisms:

This legal defense, however, is essentially contradicted by the concomitant rise in ISTAT export data and the documented transfer of militarily important components. The financial results support this calculation. In the first quarter of 2024, Leonardo DRS reported a 21% YoY growth in revenue reaching $688 million and an additional 43% in adjusted EBITDA. The Leonardo Group is targeting new orders of roughly €21 billion in 2025, with a record-breaking order backlog of over €44 billion. Global instability is now officially integrated as a long-term strategic growth driver, as CEO Roberto Cingolani has confirmed by explicitly defining this industry's upward trend in terms of "the strong growth that we all expect because of the geopolitical situation", shielding the organization from minor reputational exposure linked to specific conflict zones. 

Normative Deficiencies and the Calculus of Strategic Alliance

Supported mostly by human rights organizations and UN experts, the critical counter-narrative suggests that this industrial continuity policy could be an indication of official culpability in abuses of international humanitarian law. Over 250 humanitarian organizations (Amnesty International, Save the Children, War Child Alliance, ..) have called for an urgent stop to arms supplies, citing the "risk they are used to commit or facilitate serious violations of international humanitarian or human rights law". The Dutch Appeals Court's decision to stop the export of F-35 components after concluding that there was a "clear risk" involved is one example of a legal action with UN experts supporting this demand. Italy's main legal vulnerability is Law 185/1990's normative weaknesses.

The legislation prohibits exports to countries that violate international law, but it does not restrict exports based on the expected future risk of serious IHL, crimes against humanity, or genocide offenses. The legislation prioritizes the recipient country's past behavior over the possibility of future misuse, making the program legally sound but devoid of strategic moral considerations. Furthermore, from an international legal standpoint, this legal interpretation runs the risk of institutional control beyond the State to involve organizations (like Leonardo) that directly support state violations as well as potential public actors who support criminal policies through creative legal interpretations. In light of this systemic legal deficiency, the illegal trade in military components was made possible, exposing the government's claimed export ban.

According to reports of investigation, in an effort to circumvent the ban on new arms authorizations, tank gun forgings manufactured by Italian companies (Stamperia Mazzetti and Riganti) were reportedly transferred to Israel via middlemen under the guise of civilian forgings. The last recipient of the aforementioned 13 tons of forgings was identified as Ashot Ashkelon, which supplies parts for the Merkava battle tank and Namer armored personnel carriers, two vehicles now deployed in Gaza's battlefields. This close military ties directly contradict the government's claim that exported materials were meaningless in the crisis zone. The arms export practice does not represent an anomaly from a geopolitical perspective, but rather a conscious manifestation of strategic alignment.

Pursuing commercial profit and preserving F-35 interoperability are key components of Italy's foreign strategy to safeguard its strategic partnerships and preserve its place in NATO. In the lucrative MENA regions, which include Egypt and the Gulf States, where Italian ambiguity opens up business opportunities for competitors like Turkey, whose weaponry export revenues have increased to $7.1 billion in 2024 due to flexible contract terms, this deliberate trade-off hurts the DIB's long-term positioning. Internal problems also pose a danger to the operational stability of Italian defense logistics. In this case, dockworkers in Italian ports, precisely in Ravenna and Genoa, represent a major logistical threat to Italy's larger defense export network by successfully obstructing military supplies bound for Israel along with those directed to allies like Abu Dhabi, as in the case of the Saudi ship Bahri Yanbu.

Conclusion

The ongoing struggle between industrial economics along with the moral responsibilities of a major EU and NATO member country is aptly reflected in Leonardo S.p.A.'s operations beyond October 2023. The primary conclusion is that Italy has implemented a strategic interdependence policy that prioritizes the profitable growth of the global defense cycle and the vital crucial nature of F-35 component fabrication, as demonstrated by Leonardo's €44 billion backlog, over rigorous IHL compliance and adherence to the fundamental tenets of the EU Common Position.

The contradictory nature underlying Leonardo's contracts, which work as both drivers for unprecedented commercial expansion and tools of geopolitical alignment, is stabilized by the intrinsic fragility of Law 185/1990 combined with the practical avoidance provided by the U.S. FMS channel. This strategy entails commercial opportunity costs and risks irreversibly damaging Rome's soft power in the MENA geographical region, where rivals exploit perceived complicity. Furthermore, because of the difference between legal and immoral policy, Italian actors, both public and private, are being scrutinized more closely for potential legal liability for supporting government transgressions of international law.

Future pressure on European defense governance will arise from a mix of increasing domestic labor agitation and increasing ethical scrutiny called out from UN experts. The Italian case study serves as a sobering reminder that national industrial interests might still prevail over multilateral ethical commitments in the absence of major legislative revision that would bring Law 185/1990 into conformity with the ATT's "clear risk" threshold and a resolute EU commitment to enforce Criteria 2 of the EU Common Position. This will cause the coherence of EU foreign policy to break down and create a security environment marked by strategic contradiction.