http://www3.haaretz.co.il/eng/scripts/article.asp?mador=14&datee=07/03/00&id=83493
'U.S. may pay Israel if it nixes Phalcon deal'
By Aluf Benn, Monday,
Ha'aretz Diplomatic Correspondent
Ha'aretz, July 3, 2000
The United States will consider compensating Israel financially if it scraps
its sale of the Phalcon airborne radar system to the Chinese military, an
American source said yesterday.
"Scrapping the deal soon would convince Congress that Israel is
operating out of friendship for the United States and an understanding of
its interests, and could find expression in an increase in the upcoming aid
legislation," the source said.
The Phalcon system was sold to China for $250 million, and the Chinese
government has deposited one third of that sum with the Israel Aircrafts
Industry. The contract includes a clause providing that if the entire deal is
scrapped, the advance must be returned. The IAF, which is assembling
the spy plane for China, has refused to say whether it would demand
compensation from the government in the event that the deal is canceled.
Speculation in Washington is mounting that Prime Minister Ehud Barak
will cancel the deal under pressure from Congress and its threats to cut
military aid to Israel. According to an American source, Barak is seeking
extensive U.S. aid to strengthen the IDF, in return for possible peace
agreements with the Palestinians or Syrians. However, according to the
source, given the current mood in Congress, there is no chance for extra
aid.
"Barak had better hurry up and not drag out the Phalcon deal until the
very day the aid request is submitted to Congress," the source added.
The Clinton administration is demanding that Israel scrap the deal with
China, but currently prefers that the pressure on Barak come from
Congress.
On Saturday, Barak spoke with Defense Secretary William Cohen and
tried to soften his objection to the deal. "We understand your interests,"
the prime minister said, seeking to ease the pressure. "There is still time
until the plane is to be supplied, and an understanding can be reached,"
Barak added, but Cohen refrained from making any promises.
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