An investigation into European Union funding programmes reveals that millions of euro have gone to Israeli companies that develop technology that can be used for military purposes such as the development of drones by Israeli entities.
A small amount in grants has also been made directly to Israel’s ministry of defence.
Funding has continued to flow to Israeli entities since its government imposed a siege on Gaza in 2023 and after the International Court of Justice warned in early 2024 of a plausible risk of genocide, something EU countries have an obligation to prevent under international law.
This month, the Israeli ministry of defence announced the signing of a contract with Tel Aviv start-up Xtend, known for its Skylord drone system that overlays graphics on to live footage from drones.
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“Xtend has won a tender, worth millions of dollars, to supply thousands of FPV (first-person view) drones to the IDF ground forces,” the ministry announced on August 20th.
The start-up’s website states that Skylord has been contracted by Israel’s ministry of defence since 2020.
“The IDF has recognized Xtend’s family of products called Skylord as one of the most effective technologies for urban warfare missions, specifically indoor and close-quarters combat,” reads a statement by Xtend’s chief executive and co-founder Aviv Shapira on its website.
Xtend received €50,000 in a grant from the EU’s Horizon Europe research funding programme for the purposes of developing Skylord between January and June 2020.
The grant was used to assess the feasibility of “our novel Skylord Xtender drone system ... for the intuitive control of drones in indoor and GPS denied environments”, according to company’s report to the EU about the results of the grant.
“We have successfully undertaken our first indoor test flight in our offices, with the Xtender drone showing significant potential in spatial awareness, obstacle avoidance and intuitive flight control,” it reported.
Israeli entities received €1.3 billion in the EU’s Horizon Europe research funding between 2014-2020 and €1.1 billion since 2021, according to EU figures, delivered in a mix of grants to companies and to academic researchers.
The Horizon programme is supposed to only fund research and development for civilian purposes. Entities in the defence sector are not automatically excluded but can only receive funding for projects that “focus exclusively on civil applications”, according to a 2024 European Commission white paper.
In July 2023, the Israeli state-owned Rafael Advanced Defense Systems was awarded €442,750 in EU Horizon funding as part of a consortium to develop “underwater security surveillance to deter intruders”, a project presented as having civilian applications that is due to run until 2026.
Israel’s ministry of defence was also part of the project, and was awarded €100,000.
In July this year, the Rafael company account posted a promotional video for its Spike FireFly drone on social media site X showing what appears to be surveillance footage from Gaza. The video shows a drone hover above a man as he walks down a street, before chasing him and exploding as he ducks for cover.
“Spike FireFly identifies the target, tracks it, and neutralizes the threat” reads the text imposed over the video, before it finishes with the Rafael company logo.
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A European Commission official told news site euobserver that the commission was “aware” of the video and was looking into it.
“If evidence of noncompliance arises within the context of the action, all appropriate measures will be implemented ... including the possibility to recover fully or partly the awarded funding from the grantee,” the official said.
Other Horizon funding has gone to directly support the development of drones by Israeli entities.
The “Respondrone” project ran from 2019 to 2022 with the aim of developing the use of drones by first responders to find people in emergency situations.
This is, on the face of it, a civilian application. However, the Israeli state-owned Israel Aerospace Industries (IAI), which makes drones used by the IDF, received €1.4 million in EU funds in the project. The Israeli ministry of defence received just under €140,000 as part of the project.
Between 2022-2023 Israeli start-up Sightec received just under €2.5 million in Horizon funding to develop a technology “that enables drones to perform complex tasks autonomously” in “urban environments”, “using minimal network bandwidth, beyond line of sight and without GPS”. The project, called Autofly, referred to civilian uses such as deliveries and “inspection”. However, the Sightsec website describes its products as “for security”, “real-time detection and tracking” and to get around “jamming” of drones.
IAI is also part of an ongoing Horizon project: it was awarded a grant of €426,858 as part of a consortium of European companies and institutes that are researching use of hydrogen in aviation in a project running from 2024-2027.
Several Horizon projects were flagged by a group of EU officials in a February 2025 memo to EU leadership, calling on them to ensure the EU’s compliance with international law regarding Israel and occupied Palestinian territories.
The Irish Times has asked the European Commission about safeguards to prevent grants to defence ministries and defence companies being used for military purposes.
Equity stakes
A range of Israeli firms have also won funding for “dual-use” technologies that have both civilian and military applications through European Innovation Council (EIC) grants, an agency set up by the European Commission to manage part of Horizon funding.
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Israel is one of the most successful countries in winning EIC grants – in the top five, according to the Israel Innovation Authority.
Small and medium businesses that successfully apply for its funding can be awarded a lump sum grant of up to €2.5 million, plus up to €15 million in equity investment.
The investment component means the EIC gives the companies money in exchange for owning a stake in their business, or for quasi-equity such as convertible loans. The plan is to sell these stakes once the companies have grown, ideally making a profit for the EIC as the equity increases in value.
In February this year, the EIC announced that Israeli encryption company CyberRidge had won accelerator funding in “blended finance”, meaning it was awarded a grant and additional funds in return for an equity stake in the company. CyberRidge’s website states “defense” as an application of its encryption technology, alongside government, telecoms and finance. Two of its vice-presidents previously served in the Israel Defense Forces’ “Elite Technological Unit”, according to its website.
In 2024 LightSolver, an Israeli company that develops high-speed computing, announced that it had won a €2.5 million EIC grant and €10 million in EIC equity funding. According to its website, it has done work for an unnamed aerospace manufacturer, using its technology to improve the placement of rotor blades in a turbine engine.
The EU considers a range of tiny electrical components used in the microchips that power electronic devices to be “dual-use” technologies with both civilian and military uses, and has imposed export controls on them, most notably in its sanctions on Russia due to its invasion of Ukraine.
A number of Israeli companies developing chips-related technology won EIC grants and equity funding in 2024. These include Raam Technology, which develops chips for storing large amounts of data; ioTech’s Reophotonics, which develops technology for semiconductor manufacturing; and Quantum Transistors, which develops highly efficient chips for quantum computing.
Quantum Transistors received €2.5 million in a grant plus “future equity investment of €15 million”, according to an announcement on its website, which stated that its chips can be an “exceptionally powerful tool” in areas including cryptography, cybersecurity and aeronautics.
Israeli medical technology start-up MediWound won €16.25 million in EIC funding in July 2024 consisting of a €2.5 million grant plus equity investment. Its application was for an innovative treatment for diabetic foot ulcers.
However, the company had already been contracted by the US department of defense to develop a burn treatment for use on the battlefield by the US army, and this treatment is now used by the Israel Defense Forces, according to statements to media by its chief executive. Its stock has increased in value by 72.5 per cent over the course of the Gaza war.
Last June European Commission president Ursula von der Leyen proposed changing Horizon’s rules to allow the use of EIC funding for military uses.
“Many critical components of 21st-century defence are dual-use: chips and cloud services, software, satellites and AI. Our defence industry needs seamless access to the high end of these vital technologies. But today, dual-use projects are often not allowed to run on civilian platforms. We are going to change this,” she told the Nato Summit Defence Industry Forum, citing EIC funding in particular.
In July, the commission proposed excluding Israeli companies from being eligible in future rounds of EIC funding, in what it said was a response to Israel’s failure to allow sufficient humanitarian aid into Gaza.
EU foreign ministers are discussing whether to agree to the measure in Copenhagen this weekend.
The Irish Times has asked the commission whether the EIC would also sell its equity stakes in Israeli start-ups that use their technology for military applications. A response is awaited.
Anti-drone systems
Israeli start-ups and small and medium enterprises also receive EU Horizon funding through another route: the European Investment Fund (EIF), part of the European Investment Bank, which invests money through intermediary funds that specialise in venture capital.
As of July 31st this year the EIF had signed two deals of €7.55 million and €15 million in investment funding to Israel’s F2 Venture Capital company, which backs start-ups.
F2 Venture Capital launched Israeli cybersecurity firm Regulus Cyber in 2017 and promotes it as one of its top start-ups.
Regulus states on its website that it “is a partner of all major Israeli defense integrators”, including the Israeli state-owned defence companies Rafael Advanced Defense Systems and Israel Aerospace Industries, as well as the privately-owned Elbit, which describes its drones as “the backbone of the Israel Defense Forces”.
F2 Venture Capital says on its website that Regulus’ GPS Ring system, a drone-repelling technology, “emerged as a go-to solution” in Israel’s war with Hamas.
F2 Venture Capital also announced on LinkedIn that Regulus’s technology was used “extensively” in the so-called 12-day war that broke out when Israel attacked Iran’s nuclear and military facilities in June 2025.
It is unclear what safeguards were in place to prevent EU funding from supporting Regulus’s military applications. The European Investment Bank and F2 Venture Capital have been contacted for comment.
Loans for blacklisted companies
Separately, the EIB has also extended loans of €500 million, €250 million and €96 million in three separate initiatives in 2023 and 2024 to Israel’s Bank Leumi, to be provided for climate-related projects and to support small and medium businesses. The bank has also awarded €250 million in loans to Israeli construction and infrastructure company Electra, as part of a consortium building the Tel Aviv Light Rail Green Line.
Both Bank Leumi and Electra are on a list of entities drawn up by the UN Human Rights Council that are involved in activities that facilitate illegal Israeli settlements. Both companies provide services and utilities and use natural resources in illegal settlements, according to the database, while Bank Leumi also provides banking and financial services such as loans that facilitate the building of housing and the development of businesses in the settlements.
The EIB funding was the subject of a complaint by activist group the Hind Rajab Foundation, which pursues legal action, on the basis that the International Court of Justice issued a binding opinion in 2024 ordering all states and international organisations to “prevent trade or investment relations that assist in the maintenance of the illegal situation created by Israel”.
Both Electra and Bank Leumi were excluded by the Norwegian Government Pension Fund Global due to “an unacceptable risk that the companies are contributing to serious infringements of the rights of the individual in situations of war or conflict”. Electra had built roads whose “primary purpose is to serve Israeli settlements in the West Bank”, it found.
The EIB has been contacted for comment.
Israeli state-owned defence company
The European Defence Fund (EDF) was launched in 2021 with the aim of developing Europe’s defence industry by supporting co-operation, research and development.
The Greek defence contractor Intracom Defense, which produces missile systems and communications, was acquired by the state-owned Israel Aerospace Industries in 2023. At the time it was a funding recipient in five different active EDF projects, most of which are due to run until 2026. This included being lead partner on a project to develop portable special operations forces command units, for which it was awarded just under six million euro.
This year, Intracom Defense announced it had signed further grant agreements with the EDF, including as the lead of a €42 million project called Actus to develop drone technologies.
The Actus website states that it involves 23 European entities, including the French defence company Safran and seven European ministries of defence. In May, the company announced it would be part of three new EDF projects selected for funding: Sentinel, developing energy systems for military camps; Auriga, on the development of armoured infantry fighting vehicle technologies; and 5G Compad 2 on communications.
Intracom’s continued receipt of EU funding since it became a subsidiary of a state-owned Israeli defence company was reported on in June by Investigate Europe, which highlighted concerns among human rights activists that the EU was “effectively funding an Israeli arms company linked to the conflict in Gaza”. The Greek ministry of defence told the report that Intracom Defense and IAI had signed “a special security agreement prohibiting the transfer between the two parties of classified information ... technology, materials and other sensitive information”.
A European Commission spokesperson said they considered Intracom eligible for the funding due to guarantees received by the Greek government.
