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China demands Israel cough up $2 billion for cancelling Phalcon

Special to World Tribune.com
MIDDLE EAST NEWSLINE
Tuesday, December 18, 2001

TEL AVIV ø China is said to have demanded $2 billion from Israel for the cancellation of their contract for the supply of the Phalcon airborne early-warning system to Beijing.

Israeli officials said the figure was relayed from Beijing to the Jewish state during talks on the conclusion of the Phalcon deal. Under pressure from the United States, Israel suspended the Phalcon sale in July 2000 and in October formally cancelled the deal.

Officials said the Chinese demand is way beyond Israel's financial capabilities. They said they had assessed that Beijing would demand $500 million in compensation.

"We thought that the Chinese would move on after an apology and a pledge for cooperation in other fields," a senior Israeli official said. "Now, it looks as if the Chinese want to break the dishes."

China paid most of the $250 million for a first Phalcon system, installed on a Russian-built Il-76 transport aircraft. But U.S. pressure stopped Israeli plans to transfer the aircraft last year.

Since then, the Il-76 aircraft has been languishing at the facility of Israel Aircraft Industries, the prime contractor of the Phalcon project.

Israel's former ambassador to Beijing, Ora Namir, said, the cancellation of the Phalcon was decided by then-Prime Minister Ehud Barak.

Barak quoted President Bill Clinton as saying that he would not convene an Israeli-Palestinian summit unless the Phalcon deal was cancelled. "We deserve the greatest punishment for this [Phalcon cancellation]," Namir said.

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