TEL AVIV Ñ China and Israel have signed a $350 million accord that
compensates Beijing for Israel's cancellation of the Phalcon airborne
early-warning alert system.
Israeli defense sources said the two countries signed the accord in
Beijing earlier this week and this formally concludes the Phalcon episode.
Under
U.S. pressure, Israel suspended the Phalcon sale in 2000 and a year later
cancelled the deal, which sparked a crisis in defense relations with
Beijing.
The amount of compensation agreed to in the accord is a complicated
formula. Israeli media reports placed the figure at $350 million, but
defense sources that the compensation could be higher.
"I hope that this is indeed the last stage of this deep crisis," David
Magen, chairman of the Knesset Foreign Affairs and Defense Committee, said.
"I hope that this crisis will be behind us."
China had demanded more than $1 billion in compensation for the Phalcon
deal. Beijing had paid more than $200 million for the first system and was
discussing exercising an option for another three Phalcons.
But in meetings held over the last year Israel whittled down the Chinese
demand by agreeing to the sale of two communications satellites and an
option for an additional eight. The satellites, to be produced by Israel
Aircraft Industry, could amount to nearly $1 billion.
The accord with China was signed by Israel's Defense Ministry
director-general Amos Yaron and his deputy, Yekutiel Mor. Both men visited
Beijing several times over the last year in discussions to end the Phalcon
sale.
