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ISRAEL - July 12 - China Radar Deal Cancelled.

Israel calls-off the sale of a US$250m radar system to China and says it wants the US to compensate it for the cancellation. Experts warn the cancellation could damage future Israeli arms sales. The defence ministry says in a statement that PM Barak would talk to US officials about "ways to compensate industry in the framework of future business with the Americans".

On July 12, Israel announced it had cancelled the sale to boost relations with Washington in the light of a crucial US sponsored peace summit with the Palestinians at the Camp David presidential retreat. US officials feared the Israeli-made Phalcon early warning radar system fitted on a Russian-built aircraft could give China a military edge over Taiwanese and US fighters if a conflict broke out with Beijing. Israel was under enormous pressure to cancel the deal after Congress threatened to cut the US$2.8 bn it gives the Jewish State annually. (Israel is the largest recipient of US aid.) A spokeswoman for Israel's defence ministry says Israel and the US had not yet begun to talk about compensation, but she adds: It is clear that the cancellation of the deal causes Israel grave economic damage". She declines to give further details on the amount Israel might request to compensate government-owned Israeli Aircraft Industries or when the talks would take place. (Israel lost hundreds of millions of dollars by cancelling the deal. It had also signed options to fit several more aircraft with the sophisticated radar system.)

Former defence minister Arens says the cancellation had caused a 'severe blow" to Israel's credibility in the lucrative international arms market. He says: The defence industry cannot exist without exporting some goods. This [cancellation] will affect its ability to make this deal and others because it raises questions in the mind of customers that Israel will cancel future deals". Military analysts say Israel funds its qualitative military edge over its Arab neighbours through the production and sale of sophisticated weapons. Analyst Gerald Steinberg says he expected Washington might make up for the financial loss by giving Israel US defence contracts. But he says the cancellation would still hurt Israel's arms and high-tech industries. He says: They [arms sales] are the largest [areas] in the economy in terms of employment and sales. Loss of jobs here could have a very major economic impact", adding: It also leaves a bitter taste among many Israelis and decision makers who believe Israel has been shown to be totally dependent on the US which is protecting its own markets". On July 13, Chinese Pres. Jiang Zemin expresses his displeasure at the cancellation during a 90-minute meeting with US Defence Secretary Cohen in Beijing. A US official says Kiang "clearly wasn't pleased about it".
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Publication:APS Diplomat Recorder
Article Type:Brief Article
Geographic Code:7ISRA
Date:Jul 15, 2000
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