- The Washington Times - Tuesday, December 18, 2001

JERUSALEM China is demanding $2 billion in compensation for cancellation by Israel last year of an agreement to sell Beijing its Phalcon airborne early-warning system, according to an Israeli newspaper.
The deal was canceled after intense pressure was placed on Israel by the United States. China had by then already paid for the first of four Phalcons it intended to purchase.
The Tel Aviv daily Yedidot Achronot reported that Israeli defense ministry officials said they had expected China to demand $500 million in compensation, twice the cost of the first plane, and were astonished when the figure was four times as great. The sum China is now demanding, said the officials, reflects the anger in Beijing.
Israel's former ambassador in China, Ora Namir, said in an interview on Israel Radio yesterday that President Clinton had threatened Israeli Prime Minister Ehud Barak that if Israel did not rescind its agreement on the Phalcon, he would cancel last year's planned summit at Camp David between Mr. Barak and Palestinian leader Yasser Arafat.
At the time, Mr. Barak had believed the summit would bring the long-sought peace agreement between Israel and the Palestinians. Mr. Barak, now out of office, said yesterday that Mrs. Namir's claim was "inaccurate," but he declined to elaborate.
The former ambassador was highly critical of Israel for its handling of the Phalcon deal. She said that while there may have been early indications from the United States that it would not impede the sale, the opposition from Washington grew to be clear and firm.
The opposition, she said, did not stem from the American arms industry objecting to Israel's competition, as has been widely reported.
"It grew from the fear in the U.S. of the growing power of China," she said.
The United States had argued that the Phalcon, which can monitor and direct air activity over great distances, could theoretically be used against American planes in the event of a conflict involving Taiwan.
Mrs. Namir, now retired, said she had been kept out of the loop during negotiations for the strategic aircraft. "The damage to our relations with China is terrible," she said. "We have lost, at least at this stage, a real friend of Israel, the second-most powerful country in the world."
She noted that China, before it established relations with Israel a decade ago, had been aligned with the Arabs.
It subsequently became a friend of both and was a true admirer of Israel's achievements, she said.
A senior defense ministry official, Gen. Yitzhak Ben-Israel, declined to confirm the $2 billion compensation claim but said the amount was "tremendous" and that Israel is negotiating with Beijing over the amount to be paid.
Israel was supposed to sell China four Phalcon planes in a deal totaling $1 billion. China claims that it expended large amounts in preparing the infrastructure for the Phalcon system.
An Israeli defense ministry delegation last month visited New Delhi to discuss the sale of at least one Phalcon to India on the assumption that the United States would not object to sale of the system to that country.

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