China Crisis Straining U.S.-Israel Ties

Arms Sales Flap Intensifies

By Marc Perelman

Published August 05, 2005, issue of August 05, 2005.

In what is turning out to be a rare, protracted crisis between close allies, Israel and the United States remained sharply at odds this week over the sensitive issue of Israeli arms sales to China.

In interviews with the Forward, Israeli officials confirmed reports that Defense Minister Shaul Mofaz had canceled a planned trip to Washington last month because the two sides failed to reach agreement on American demands that Jerusalem tighten its weapons exports, particularly to China. Israel had initially claimed Mofaz canceled the trip in response to new Palestinian violence.

“We are continuing our mutual efforts to solve the issue soon,” Defense Ministry spokeswoman Rachel Ashkenazy told the Forward. She said it was pointless for Mofaz to come to Washington until the dispute — seen by experts as the most serious American-Israeli rift in more than a decade — is ironed out. Reaching agreement could take several weeks, she added, partly because Israeli attention is focused on the upcoming Gaza pullout.

Israel’s delicate balancing act on China is likely to be affected by the recent deal struck between America and India, which could allow Jerusalem to shift some of its dealings from Beijing to New Delhi. For now, however, the China deadlock remains paramount.

At the heart of the clash are two opposing views of China. For Bush administration officials, Beijing poses the main challenge to American economic and military hegemony, and threatens several allies, notably Taiwan. Israeli officials, on the other hand, see China as an emerging world power with the potential to be an important ally.

These diverging views appear to have played out recently in several bold bids by Chinese entities to take control of high-profile companies in Israel and the United States.

On Tuesday, faced with furious objections from American lawmakers, the state-owned Chinese oil group CNOOC dropped its bid to buy the California-based Unocal Corp. In Israel, by contrast, politicians seemed to welcome the prospect of Chinese investors taking part in a tender for Tel Aviv’s rail system and seeking a controlling stake in Bank Leumi, the bank founded in 1902 by Theodore Herzl to fund Zionist development efforts in Palestine.

Some Israelis saw the potential deals as a hopeful sign that the budding Israeli-Chinese economic relationship had not been hurt by tensions over military sales. Israel has been forced to cancel several signed arms deals with China, to Beijing’s visible annoyance.

The most recent arms dispute involved the sale to China in 1999 of Harpy-model drone aircraft, manufactured by the state-controlled Israel Aircraft Industries. Some of the unmanned planes were returned to Israel last year for what Jerusalem called routine maintenance. Washington, however, denounced the procedure as an upgrade involving sensitive American technology. It was thus seen as a possible violation of American-Israeli understandings barring “re-transfer” of American military technology without permission from the Pentagon.

After months of behind-the-scenes bickering, the Pentagon in April suspended some information-sharing with Israel regarding the multi-country F-35 fighter jet project.

Soon after, Israel replaced senior defense officials who had been accused by top Pentagon officials of disingenuousness on the Harpy situation. In June, Israeli Foreign Minister Silvan Shalom offered a public apology. Israeli officials then claimed a forthcoming memorandum clarifying Israel’s obligations would settle the issue.

American officials are said to be seeking a memorandum of understanding that would grant Washington a virtual veto over Israeli arms sales.

But the haggling has continued, with Washington reportedly adding some demands. Among them are a call for a new Israeli law to be enacted within 18 months tightening export rules, as well as a written apology from Mofaz over the Harpy affair. The new demands reportedly prompted Mofaz to cancel his Washington trip July 26.

Pentagon spokesman Lawrence Di Rita told reporters July 29 that the talks were making good progress but declined to lay out a timetable.

Further complicating the three-way arms dispute is the entry of a new factor: the tentative American-Indian deal reached last month during a visit to Washington by India’s prime minister, Manmohan Singh.

The agreement, aimed in part at cementing ties with India to isolate China, grants India full access to civilian nuclear energy materials and a wide range of American military technology in exchange for international inspection of its civilian nuclear program. Such sales have been forbidden since India openly tested nuclear weapons in 1998, and experts say the new deal puts the treaty in question.

At the same time, the deal is seen as easing pressure on Israel’s nuclear program, while opening up possible new markets for Israeli arms sales. India previously benefited from American-Israeli tensions over China when Jerusalem was forced in 2000 to annul the planned $1.1 billion sale of its Phalcon airborne radar system to Beijing. The Israeli system was eventually sold to New Delhi in 2003.

Other Israeli-Indian deals are in the works and the first joint air force exercise involving the two countries is scheduled to take place later this year.

“The trend is toward easier export licensing, including from Israel,” said Teresita Schaffer, director of the South Asia program at the Center for Strategic and International Studies in Washington.

The agreement could also impact Israel’s nuclear status, since India is part of a small group of countries, together with Pakistan and Israel, which have nuclear weapons capabilities but are not signatories to the Nuclear Nonproliferation Treaty. Jerusalem maintains an official ambiguity on the issue of nuclear weapons, but is widely believed to posses the bomb. India and Pakistan tested bombs in 1998.

Some experts worry the net effect on Israel could be negative, however.

“The nuclear deal with India is a double-edged sword for Israel, but in my opinion makes Israel less safe,” said Jon Wolfstahl, deputy director for nonproliferation at the Washington-based Carnegie Endowment for International Peace. “On the one hand, the Bush administration’s acceptance of India’s nuclear status makes it that much less likely that Israel will ever face pressure from the United States to abandon its nuclear capabilities. On the other hand, the move will make it that much harder to convince the world to confront Iran’s nuclear ambitions.”

Tehran quickly denounced the American-Indian deal as indicative of a double standard, arguing that it rewarded a country that flouted its international obligations for years while Tehran is a signatory to the nuclear treaty and claims to be pursuing legal nuclear activities (see related story, this page).

Melissa Fleming, a spokesperson for the International Atomic Energy Agency, described the American-Indian agreement as a positive step toward a pragmatic adjustment of the nonproliferation regime, moving toward a framework that could include India, Pakistan and Israel.

Henri Sokolski, executive director of the Nonproliferation Policy Education Center, said that Israeli officials he had talked to in the wake of the India deal had expressed hope that Washington would now lift its opposition to the sale to Israeli institutions of American so-called super-computers used in nuclear research.

“The initial reaction from fairly tough-minded Israelis was ‘Great, we’ll get the super-computers,’” he said. “But it would just drive the Egyptian and other Arab states crazy.”

Arab countries have for years complained about what they say is the preferential treatment that Israel receives from the United States on the nuclear issue. Several months ago, Egypt threatened to leave the nonproliferation treaty over the issue.

In a separate development, American officials recently alleged that Saudi Arabia was conducting illicit nuclear-related activities. Inspectors from the International Atomic Energy Agency were dispatched but found no evidence of such activity, said Fleming, the agency spokeswoman.

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