By Andrew I. Killgore

FOR YEARS Israel has practiced a wheeler-dealer attitude on the sale to China of American military technology. While U.S. law prohibited such sales to China, Israel's special influence in Washington enabled it to get the best equipment, which it then profitably sold to China. The most notable example was its sale to China of the U.S.-designed and paid-for Lavi fighter plane.

Washington's protests to Israel have been met with flimflam. Now, however, the U.S. appears to be fed up with Israeli excuses. According to the Israeli daily Haaretz, there is a real crisis between Israel and the U.S., with the latter having made three demands of Israel "in order to settle the crisis."

Demand number one is that Israel provide the U.S. with details of more than 60 deals made with China in recent years, so that Washington can assess the damage, if any, to U.S. security. (One of Israel's prevarications regarding its arms deals with China has been that there are numerous Israeli businesses and individuals in the arms selling business as well-in other words, that the government itself is not really in charge.)

U.S. demand number two is that Israel closely examine its security equipment supervision system. Washington wants to know how "holes" are created in the system, how those who break regulations are punished, and why the Israeli government is not directly involved in supervision. (This demand reveals the extent of U.S. doubt about previous Israeli truthfulness.)

Demand number three is the formulation of a U.S.-Israeli memorandum of understanding (MOU) about Israeli arms sales to China. A draft can be completed once differences over Israeli supervision are ironed out.

The controversy between the U.S. and Israel created an unlikely "personal trust crisis" between the Pentagon's neocon undersecretary for policy, Douglas Feith, and Israeli Defense Ministry director general Amos Yaron. Yaron recently has written to Deputy Secretary of Defense Gordon England, who replaced neocon Paul Wolfowitz, but England replied only to Israeli Defense Minister Shaul Mofaz.

According to a June 13 United Press International report, the U.S. has imposed "tough sanctions" against Israel following a crisis over a deal in which Israel sold drones to China and subsequently undertook to maintain them. Defense Secretary Donald Rumsfeld and Secretary of State Condoleezza Rice approved the sanctions about seven months ago, with the knowledge of National Security Adviser Stephen Hadley.

The sanctions have been imposed not merely on plants that made deals with China, but on Israel's entire arms industry. One Israeli company that could be damaged is Elbit, which has made no deals with China, but is vying to sell equipment for the advanced F-22 Raptor aircraft. It has competed successfully against a British company, but if the crisis continues the U.S. may decide against Elbit.

Shortly before her latest trip to Israel and the Middle East, Rice acknowledged a sharp disagreement with Israel, saying there had been "difficult" discussions with the Israelis on sales to China. "I think they understand now the seriousness of the matter," she stated.

"We are attentive to American concerns," said Ranaan Gissin, an adviser to Prime Minister Ariel Sharon. "The issue will be solved over the next few weeks and we will work out all the points of dispute."

The Associated Press reported that Washington has halted cooperation with Israel on several projects, including delivery of sensitive equipment, and is even refusing to answer telephone calls from Israeli defense officials. Following the crisis Haaretz noted that "one can sense the repulsion toward Israel among lower and middle-ranking officials in Washington. More and more of them are saying that it is not worth doing business with Israel."

The U.S. is worried about a Chinese military buildup. This means that, for a change, we are ready to put a real squeeze on Israel.

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Andrew I. Killgore is publisher of the Washington Report on Middle East Affairs.

This article was originally published in the August 2005 edition of the Washington Report on Middle East Affairs. It is used here with permission.