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Israel Halts Chinese Phalcon Deal
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Wade Boese

Aiming to end a prolonged public dispute with Washington, Israeli Prime Minister Ehud Barak told President Bill Clinton on July 11, the first day of a U.S.-brokered Middle East peace summit, that Israel would not complete a 1996 deal that would have given China its first advanced airborne early-warning (AEW) capability. Although upsetting China, the Israeli cancellation averted U.S. congressional threats to withhold aid to Israel if the AEW deal went forward. Washington and Tel Aviv are now holding high-level talks on strengthening their "strategic relationship" and avoiding similar future conflicts.

The United States went public last fall with its long-held opposition to the estimated $1 billion deal for four Phalcon radar systems when the first Russian-supplied plane destined for China arrived in Israel to be outfitted with the system. Designed to provide simultaneous long-range tracking of multiple air and surface targets, the Phalcon radar system, according to U.S. government officials, could impact the Taiwan Strait military balance in China's favor.

Citing the "need to help intimate relations" with the United States during and after the summit, Israel, the largest recipient of U.S. foreign assistance, publicly announced on July 12 that it would stop implementation of the Phalcon deal. The announcement emphasized that Israel considered itself to be "together with the United States in the midst of an effort to achieve historic decisions which are related to [Israel's] vital interests." While the summit ended July 25 without a negotiated settlement between Israel and the Palestinians, reported Israeli expectations are that if a future peace deal is concluded with the Palestinians or Syria, the United States will provide significant military and financial assistance to Israel.

In announcing the cancellation, Israeli spokesman Gadi Baltiansky stated Israel would "continue to look for ways to implement the [Phalcon] deal" if circumstances changed. However, U.S. congressional and administration sources, as well as an Israeli official with close knowledge of the issue, said the deal is off. The Israeli official noted that "no one" expects circumstances to change in the short or medium term.

Barak resisted U.S. calls earlier this year, even in personal meetings with Clinton and Defense Secretary William Cohen, to void the sale. (See ACT, May 2000.) Describing the final decision as "difficult," the Israeli official pointed to a combination of Cohen's April 3 visit, when he forcefully voiced U.S. concerns, and rising opposition by U.S. Congress members, including long-time Israel supporters, as turning points in Israeli thinking on the issue.

Senate Majority Leader Trent Lott (R-MS) and four other senior senators sent a bipartisan April 6 letter to Barak expressing their "deep concerns" with Israel's military cooperation with China and warned it could negatively affect U.S.-Israeli relations. The senators implied that Israel would risk the potential "multi-billion dollar U.S. aid package" being discussed as part of a possible peace agreement with Syria if the Phalcon deal went forward.

Representative Sonny Callahan (R-AL), chairman of the House Appropriations Subcommittee on Foreign Operations, Export Financing and Related Programs, proposed legislation to hold back Israeli aid worth $250 million—the value of one Phalcon system—unless the Pentagon certified that the deal did not pose a threat to U.S. national security. Clinton requested a total of $2.82 billion in U.S. aid for Israel over the next fiscal year.

Senate Foreign Relations Committee Chairman Jesse Helms (R-NC) also filed, but never officially introduced, the Callahan language on the Senate side. Helms, according to one of his spokesmen, "expected more from an ally than to provide this type of weapon system to a potential adversary." Remarks by Israeli Deputy Defense Minister Ephraim Sneh in mid-June suggesting Israel could cut imports from the United States if Washington cut aid had further raised Helms' ire.

Callahan dropped his legislation after Israeli Ambassador David Ivry informed the congressman of Israel's decision to stop the sale. Speaking to the House that day, Callahan called the cancellation a "tremendous step in the right direction." Helms' spokesman described the senator as "greatly relieved" by Israel's decision.

Barak, according to Baltiansky, expressed his "sorrow" by letter to Chinese President Jiang Zemin for Israel's cancellation of the deal and reassured him that Israel attached "great importance to her relations with China." Israel started marketing arms to China in 1979.

A Chinese foreign ministry spokesman said July 13 that the deal should be "honored" and that no other country should interfere in Chinese relations with other states. Later that day, Cohen, who was in Beijing when Israel announced its plan, said Jiang raised the issue as one of "concern." Cohen acknowledged U.S. opposition to the sale, but denied it reflected any attempt to "contain China."

Clinton announced July 27 that the United States would conduct a "comprehensive review" to improve U.S.-Israeli relations, including the maintenance of Israel's "qualitative edge" and the modernization of the Israeli military. Although State Department officials would not comment on the talks, the first round of which took place August 7 to 9 in Washington, they reportedly included discussions of Israel vetting with the United States arms sales to specific countries—China, India, Pakistan, and Russia.

Posted: September 1, 2000