The $1.5 billion transaction came to public attention when it emerged that shipbuilder ThyssenKrupp Marine Systems' Israeli intermediary had retained Prime Minister Benjamin Netanyahu's personal lawyer David Shimron to act on his behalf.
The deal is now being scrutinised by authorities in both countries. The paper said Germany had inserted a clause into the contract giving it the right to tear it up if corruption allegations were proven.
Der Spiegel gave no source for its information. Ministry officials were unable to comment immediately.
Israel already has five submarines of the Dolphin Class, which can be equipped with nuclear warheads. A sixth is being built. Germany has agreed to finance a third of the costs of the contract.
Last February, it was reported that Israel Police would be turning "Case 3000," which deals in corruption allegations regarding the purchase of IDF submarines from German conglomerate ThyssenKrupp into a full, criminal investigation.
Once the case becomes a full-fledged criminal investigation, Prime Minister Benjamin Netanyahu's personal lawyer, David Shimron, businessman Miki Ganor (another client of Shimron's) and former commander of the Israeli Navy Vice Admiral Eliezer "Chiney" Marom (who headed the Navy between 2007 – 2011) are all also due to be questioned by the police. .
Israel's Justice Ministry, while not naming any suspects in the investigation, said there was no evidence that Netanyahu was involved. This comes in direct opposition to reports that former defense minister Moshe Ya'alon had told police of Netanyahu's direct involvement in the purchasing of the submarines and the tender bias in favor of German conglomerate. Ya'alon reportedly provided investigators with detailed information on the talks Netanyahu had with German government officials both for the purchase of three new submarines and for the purchase of anti-submarine warships for the Israeli Navy—without consulting the defense establishment.
Israel's submarine deal with Germany includes two main parts: The acquisition of three submarines and the signing of a contract for long-term maintenance work with the German shipyard that is represented by Israeli businessman Miki Ganor. It is the latter contract that would be more profitable to Ganor, according to defense officials.