Concern growing in defense establishment that following unilateral statehood announcement, countries will ban Israeli military products.

Concern is growing in Israel over the possibility that following a unilateral declaration of statehood by the Palestinians later this year, countries around the world will boycott Israeli military products.

The concern, voiced by leading officials in the defense establishment, comes ahead of the Paris Air Show next month, where Israeli hardware will be on display in pursuit of new sales.

“We need to prepare for the possibility that a unilateral declaration of statehood by the Palestinians at the United Nations in September will lead to a boycott of Israeli military hardware,” a senior defense official said this week.

In 2010 and 2009, Israel was the fourth largest exporter of weaponry and military platforms in the world, behind the United States, Russia and France. Blue-and-white defense exports reached around $7.5 billion each year.

The defense establishment has already been concerned with how 2011 will end financially for the large companies – Israel Aerospace Industries, Elbit Systems and Rafael Advanced Defense Systems – due to the global economic recession and to the West’s planned withdrawals from Iraq and Afghanistan.

Business with Turkey – once a key customer – has come to a near standstill as tension continues to rock the relationship between Jerusalem and Ankara over last year’s Israel Navy raid on the Mavi Marmara protest ship.

The two markets believed to be most at risk in the event of a boycott are Europe and South America. Sales to Europe have remained steady over the years but Israeli companies have been seeking larger contracts in South America.

One example is Brazil, which signed a confidentiality agreement with Israel in 2010 under which it cannot transfer classified technology to a third party, paving the way for Israeli companies to offer some of their most advanced systems.

A demonstration of the growing Israeli interest in South America was seen by the large turnout of Israeli companies at the Latin America Aerospace and Defense Expo that was held in Rio de Janeiro in April.

The defense companies are vying for contracts as well as homeland security deals ahead of the Soccer World Cup in 2014 and the Olympics in 2016, both to be held in Brazil.