JERUSALEM - Israel and Greece have signed their biggest ever defense procurement deal, which Israel said on Sunday would strengthen political and economic ties between the countries and the two countries' air forces launched a joint exercise.

The agreement includes a US$1.65 billion contract for the establishment and operation of a training center for the Hellenic Air Force by Israeli defense contractor Elbit Systems over a 22-year period, Israel's defense ministry said.

I am certain that (this program) will upgrade the capabilities and strengthen the economies of Israel and Greece and thus the partnership between our two countries will deepen on the defence, economic and political levels.

Benny Gantz, Israel's defense minister

The training center will be modelled on Israel's own flight academy and will be equipped with 10 M-346 training aircraft produced by Italy's Leonardo, the ministry said.

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Elbit will supply kits to upgrade and operate Greece's T-6 aircraft and also provide training, simulators and logistical support.

"I am certain that (this program) will upgrade the capabilities and strengthen the economies of Israel and Greece and thus the partnership between our two countries will deepen on the defense, economic and political levels," said Israeli Defense Minister Benny Gantz.

The announcement follows a meeting in Cyprus on Friday between the UAE, Greek, Cypriot and Israeli foreign ministers, who agreed to deepen cooperation.

The Israeli and Greek air forces on Sunday launched a joint exercise in Greece, the Israeli military said.

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In at least one past exercise over Greece, Israeli fighter planes practiced against an S-300 posted on Crete. The Russian-made air defence system is also deployed in Syria and Iran, Israel's foes.

A source in the Hellenic National Defence Command said the S-300 had not been activated in the joint exercise that began Sunday.