The actual marginal cost of production of a Tamir interceptor is low and reflects the costs of the basic raw materials; metal, fuel, explosives and electronic components used in its manufacture, and the labor required to run the assembly line. If the IDF ends up ordering 10 times as many interceptors as originally estimated, then their "cost" will likely drop to around $5,000. At 100 times as many the "cost" will approach the marginal cost of less than $1000.
Thirdly, the real cost of the rockets and missiles which Iron Dome intercepts is vastly underestimated by most commentators. Grad rockets may well cost Iran only $1,000 each on the open market, but this is not the delivered cost to Hamas in Gaza.
The supply line from Iran to Gaza is an extremely convoluted and expensive one which involves huge losses from IAF action bombing convoys and factories in Sudan, and interception by western navies. Large bribes have to be paid at every step of the way, particularly to the Beduin in Sinai and the Egyptian soldiers in Rafah who are supposed to be stopping the smuggling.
And the losses continue once the Grad gets to Gaza, with the IDF regularly destroying rocket caches. Thus, 1,000 Grads, which cost Iran $1 million to purchase, may end up as 300 Grads which cost a further $2 million in "delivery charges." This turns a $1,000 Grad rocket in Iran into a $10,000 Grad rocket in Gaza.
With each upgrade the interception rate will improve and the range of missiles it can intercept may also improve further. It is therefore that we can expect Iron Dome to reach a 95 percent or higher interception rate in the next year or two, and to continue to improve as the speed and processing power of the computers that make up its brain and eyes (radar) advance.
The practical upshot of this is that the number of rockets per Israeli fatality has risen from 50-75 (Lebanon and Gaza pre-Iron Dome) to 300 in 2011 (75% interception) and around 500 in 2012 (90% interception), despite Hamas using more lethal rockets.
The strategic implications are that the current rocket-based terror strategy of Hamas and Hezbollah has been rendered both ineffective and economically unsustainable. I estimate it is currently costing Hamas (and thus its patron Iran) around $5m. (500 rockets at $10,000 each) to murder a single Israeli. When Iron Dome reaches 95% interception rate these figures will double and at 97.5% they will double again.
Contrary to some suggestions, the terrorists cannot bankrupt Israel by firing millions of rockets because the real cost of their rockets exceeds the marginal cost of the Tamir interceptor.
Monday, November 26, 2012
Iron Dome is Helping Bankrupt Hamas
Some math shows that the Iron Dome missile defense system is helping to bankrupt Hamas as the cost of killing one Israeli through rockets is now $5 million. Once again Reagan was right and missile defense is key: