TEL AVIV, Israel — Israel is readying its newest spy satellite, Ofeq-8, for launch by the middle of next year, but production orders for a next-generation Ofeq-9 are stalled pending a cost-sharing and technical agreement with a prospective partner country.

The Ofeq-8, in final construction at Israel Aerospace Industries (IAI), will be launched into low Earth orbit by Israel’s indigenous Shavit launcher, also built by IAI. It will house a high-resolution panchromatic payload, built by Elbit Systems Elop, similar to Israel’s operational in-orbit Ofeq-5 and Ofeq-7 satellites, launched, respectively, in 2002 and 2007.

Israel lost its Ofeq-6 in September 2004, when it crashed into the Mediterranean Sea due to an electrical malfunction that failed to ignite the Shavit’s third-stage motor.

“Ofeq-8 belongs to the same generation of our two earlier electro-optical satellites. Like [Ofeq-5 and Ofeq-7], it will be launched by our national launcher,” an Israeli expert said. “Beyond that, details guiding the next generation of electro-optical satellites remain to be determined.”

In interviews here, leaders of the Israeli space industry bemoaned funding, technical and political uncertainties that are obscuring a clear picture of Israel’s military space plans. At the beginning of the decade, the road map for the Ministry of Defense (MoD) included plans for a dedicated military communications satellite. It was dropped about five years ago in favor of enhanced downlinks and ground stations to support services from Israel’s Amos and other commercial satellites.

Aside from the fully funded and soon-to-be-completed Ofeq-8, Israel has cooperative plans with India to build and launch a second synthetic aperture radar (SAR) satellite, dubbed TecSAR-2, in late 2011. But beyond those two programs, government and industry sources say, not even MoD knows at this point how many satellites it can expect to deploy, what specific capabilities they will possess, and which launchers will be used to insert them into orbit.

Officials attribute the uncertainty to funding shortfalls, which have forced MoD to seek foreign investment to supplement its approximately $80 million annual budget for military space.

Government and industry sources here said MoD has begun negotiations with a prospective Asian partner for the follow-on Ofeq-9, also known here as OPSAT-3000. Israel’s military censor prohibits identification of the prospective partner. The next-generation satellite will feature an advanced panchromatic camera and possibly a multispectral imaging payload. But until Israel and its potential partner can harmonize respective capability requirements and agree on a final configuration, the project remains in development.

Similarly, choice of a launch vehicle to insert Ofeq-9 into orbit will depend on conclusion of a government-to-government agreement. If the foreign partner joins the program, it most likely will demand deployment into polar orbit, which cannot be done from Israel due to geographical limitations.

Israel faced the same situation with the 2008 launch of TecSAR, which used an Indian Polar Satellite Launch Vehicle rocket to deploy the radar satellite into the polar orbit demanded by its Indian partner.

“Every Israeli remote sensing satellite, whether civilian or military, is designed to be launched with Israeli launch vehicles. But whether this happens depends on multiple factors, one of them being the needs of our partners,” said Tal Inbar, head of the Space Research Center at Israel’s Fisher Institute for Strategic Air and Space Studies.

Chaim Eshed, director of space programs for Israel’s MoD, declined to comment on military space plans or on ongoing discussions with prospective satellite partners. “I believe we’re on the path to realizing our goals,” he said.

At a Nov. 3 Tel Aviv University symposium entitled “Israeli Space: Crisis or Opportunity,” Eshed said MoD is actively supporting efforts by the Israel Space Agency and leading Israeli aerospace firms to secure significant, multiyear government funding for commercial space initiatives that would ultimately benefit national security needs.

Retired Maj. Gen. Itzhik Ben-Israel, chairman of the Israel Space Agency, said Israeli government investment in space is woefully less per capita or as a percentage of gross domestic product (GDP) than any other developed nation and most developing nations in the world. “The minimum that Israel should invest is $120 million to $150 million per year –– some 0.1 percent of GDP — not including MoD spending,” said Ben-Israel.

According to Ben-Israel, a former lawmaker who served for many years as MoD’s director of defense research and development, Israeli defense industries sell more than $5 billion in defense technologies per year, which accounts for some 10 percent of global arms exports.

“There’s no reason in the world why we shouldn’t invest in the space market, where there are much less suppliers and our unique capabilities offer the added value needed to reap tremendous returns,” he said.

Ben-Israel cited Israel’s selection by the French Space Agency CNES to build the satellite bus and payload for Project Venus, a multispectral mission to monitor water quality due for launch in mid-2012. The Israeli government committed $30 million of non-MoD funds for the project, which is viewed here as a springboard for future business.

A much larger program, in cooperation with the Italian Space Agency, now awaits government funding approval before an Israeli-Italian agreement, initialed in June, can be concluded. The prospective two-satellite program, dubbed Leonardo, envisions a 250-color hyperspectral payload for civilian imaging purposes. Israel needs to come up with half of the 160 million euros estimated for the program, he said.

“As an industry, we can’t continue to grow unless we increase sales,” said Yossi Weiss, IAI corporate vice president and general manager of the firm’s missiles and space group. In order to preserve Israel’s space industrial base, significant government funding is required over the long term, Weiss said. He added that government and industrial efforts to attract private equity investment in the industry have not been successful.

 Industry executives here noted that in 20 years, 13 Israeli satellites of various types have been launched into space. Weiss and other executives acknowledged that Israeli industry must do its part to become more efficient and competitive. A “wake-up call” for IAI, conceded Weiss, was SpaceCom’s 2008 decision to hire a Russian firm to build its newest Amos 5 spacecraft, despite IAI’s 17 percent holdings in the Tel Aviv-based owner and operator of the military communications satellites.

“I’m not saying that there’s a single point of blame,” Weiss said. “But after 20 years in space, there’s no national space policy and no central body for multiyear planning. … It’s insulting, depressing and frustrating.”

Gabby Sarusi, Elbit Elop vice president for imagery intelligence, told Nov. 3 conference participants that new orders for his firm’s specialty electro-optic payloads are drying up, and it remains uncertain how much longer Israel can remain a player on the world’s remote sensing market.

“Usually I’m optimistic, but now we’re at the hour of truth. I feel the link connecting the previous generation to the next generation is unraveling, and we might have to suffice with the impressive legacy we’ve built up over the past 25 years,” Sarusi said.