The government of the People's Republic of China is suing Israel for about $2 billion in compensation fees over the cancellation of the sale of four Phalcon reconnaissance planes. The sale of the planes was suspended in July 2000 under intense American pressure, due to fear that the advanced military technology would be used against Taiwan or fall into the hands of enemy states.
Maj.-Gen. Yitzhak Ben-Yisrael, head of the Ministry of Defense's Armaments Research and Development Administration, was not willing to confirm the amount of the compensation sought by the Chinese, as reported in Yediot Aharonot, but did say that it was "enormous." Discussions over compensation fees to the Chinese were ongoing, he said. Ha'aretz reported last week that the Chinese were demanding $1 billion in damages and compensation.
The Defense Ministry Spokesman's Office released a
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Israelis "cannot imagine the extent of the harm that we did" - Ora Namir, former Israeli ambassador to China |
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In August, an Israeli delegation, headed by Amos Yaron, director-general of the Ministry of Defense, met with its Chinese counterparts in Beijing to discuss ways to compensate the Chinese for the cancellation of the Phalcon sale. Israel's proposed compensation package, according to DefenseNews.com, included the return of China's Russia-built aircraft; additional cash; offers to sell less controversial civilian and defense equipment, including unmanned aerial vehicles and pilot training devices; and the possible transfer of manufacturing technology and testing gear. The compensation package was intended to forestall the breach of contract lawsuit and to repair bilateral ties between the two countries.
Israel had originally agreed to sell the Chinese four planes in 1996 at a total cost of $1 billion. The Chinese made an advance payment on the first plane, which had been fitted with the Phalcon airborne early-warning technology but which was never delivered. In their legal brief the Chinese said they had made expensive preparations to accept the four planes. Israeli sources said the large amount sought by the Chinese was due to their intense anger at the cancellation of the deal.
The Phalcon is a re-fitted cargo plane that is loaded with advanced electronic-warfare equipment used for reconnaissance flights. Radars installed on board allow operators to survey an area, and locate and track targets. In Israeli service, the Phalcon system is mounted on a Boeing 707 airframe, with radar elements in an enlarged nose, under the tail, and in two flat panels on either side of the aircraft permitting 360-degree coverage. The version chosen by China would have been mounted in a fixed dome on the top of the aircraft.
Israel announced the suspension of the Phalcon sale to China in July 2000 under pressure from the American government, but formal cancellation of the deal was only made a year later, according to Janes' Defense Weekly. According to Janes, an attempt was made by the Sharon government to revive the sale, but the Bush administration rejected it. "Once we saw that the new [U.S.] administration was not willing to consider [the sale], we had to make a decision," a senior official in the Prime Minister's Office told Janes.
At the time of the deal's suspension, Israel had expected compensation from the United States. It was feared that the cancellation would cause extensive damage to Israel's defense industries. But even Israel's staunchest allies in the Congress warned that the U.S. would cut Israeli military aid if the deal went through. U.S. officials also suggested that implementation of the deal would cause the U.S. to withhold certain types of military technology from Israel. After the deal was suspended, Israeli officials were only compensated by their expectations of significant U.S. financial and military aid if and when a peace deal was worked out with the Palestinians or Syria.
Clinton said Phalcon cancellation was price for Camp David
Israel's former ambassador to China Ora Namir told Israel Radio on Monday that former U.S. President Bill Clinton set the cancellation of the Phalcon sale as a condition for holding the Camp David summit last year.
"Clinton announced to [former Prime Minister Ehud Barak], unequivocally, that 'if you don't officially cancel the Phalcon deal, there will be no Camp David,'" Namir said. "The Americans warned us," she said. "I knew that the deal would not go through."
Namir said the cancellation of the sale "spoiled" Israel's relationship with China. She said those who were unaware of what China was willing to do for Israel, "cannot imagine the extent of the harm that we did."
In a statement released to Israel Radio, Barak said Namir's "claims were not exactly accurate and created an incorrect picture. In view of the sensitivity of the Phalcon matter to Israel's vital interest it would not be fitting to elucidate further."
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