Jerusalem Post

(April 21) - Israel paid a heavy financial and political price after the US forced it to cancel its controversial sale of the Phalcon early-warning airborne system to China. But as Marc Daugherty reports, Jerusalem is now hoping to sell the Phalcon to India - and keeping its fingers crossed that this deal will go through

When the Israel Aviation Industries agreed three years ago to supply China with the Phalcon early-warning airborne system, it initially seemed a good deal - one that would pump at least $1 billion into the local economy and help solidify growing ties between this country and Asia's regional superpower.

But Israel proceeded without adequately weighing the deal's political impact in the United States, which is committed to the defense of Taiwan against any possible Chinese aggression. The Phalcon (an acronym for "phased-array L-band conformal radar system") is an advanced radar aircraft with the ability to track at least 60 targets up to a radius of about 400 kilometers. Former US secretary of defense William Cohen expressed concern that its supply to Beijing "could shift the balance of power [between China and Taiwan] and possibly involve us in some negative, adverse way."

Taiwan's supporters in the US Congress reacted much more strongly, vowing to punish Israel with aid cuts if it went ahead with the delivery of the Phalcons. Bowing to American pressure, Israel canceled the deal in 2000 after China had already paid a $250 million deposit on the system.

Now it was China's turn to be outraged, and it demanded Israel not only return its deposit, but pay an additional $1 billion in compensation. Even former Israeli ambassador to Beijing Ora Namir scathingly condemned the cancellation of the Phalcon sale, saying Israel had "spoiled" its relations with China, adding that "we deserve the biggest punishment possible for our behavior during the Phalcon deal."

That "punishment" was finally agreed upon two months ago, when after a long and protracted negotiation process Israel announced it would pay China a hefty $350m. in compensation for the aborted deal.

Yet despite all this, Israel is now weighing whether to once again sell the Phalcon to another Asian superpower: India, equally embroiled in highly sensitive diplomatic and security disputes in the region.

Already two years ago Israeli press reports were touting: "India next in line for Phalcon spy planes." A month later, further reports claimed "US may ground Israel-India Phalcon deal" over concerns the deal "could undermine stability in South Asia."

Last December the Indian weekly The Economic Times declared "US okays Phalcon sale to India" and "Get ready for Phalcon." But the next month Bharat Rakshak Monitor, an Indian defense issues monthly, reported "US asks to downplay Phalcon deal with India."

Israeli Ministry of Defense Deputy Spokesman Stavit Leon comments only that "Israel and India are conducting negotiations for the purchase of early warning aircraft. No contract has yet been signed. The US is not opposed to the deal."

Israel's concern over US opposition to a deal appears palpable. But possible American objections are not the only factor. India has a long history of tense relations with its northern neighbor, China, and after being denied the Phalcon, the Chinese don't seem happy about its possible sale to a regional competitor.

So why, after the China-Phalcon disaster, would Israel be looking to push ahead with another possible controversial sale to India?

THE ANSWER can in part be found in the development of relations between the two nations during the past decade, and even prior to that. Ten years ago Israel opened its embassy in New Delhi, after India agreed to establish full diplomatic relations. Since then, the relationship has taken on the tenor of a level-headed love affair - even more so, considering the two countries' ever-stronger defense ties.

"Although diplomatic relations were established only in 1992, the connection between India and Israel is very deep. Israel had been present well before 1992," according to India's ambassador to Israel, Raminder Singh Jassal. "There is a significant population of about 60,000 Israelis of Indian origin in Israel who arrived in the 1950s and 1960s. They formed a bridge between India and Israel. Second, you've had a consul general in Bombay well before 1992."

After India's official recognition of Israel in 1950, the Jewish Agency opened an office in Bombay to send Iraqi, Afghan, and European immigrants to the young Jewish State. Eventually the office turned into a consulate.

The basic structure of Indo-Israel relations was laid down by India's first prime minister, Jawahar Lal Nehru, who kept the relations low key in deference to the value he attached to the relations with the Arab countries. Nehru, a cofounder along with Egypt's Gamal Abdul Nasser of the now defunct anti-Western Non-Aligned Movement, was known to keep cool towards Zionism. Until the 1980s, most successive governments in New Delhi would agree to meet visiting Israeli officials, without officially upgrading the level of diplomatic representations. India from time to time also sought discrete military advice.

Jassal notes that "Israeli and Indian early political leaders understood and appreciated each other quite a bit. Prime minister Ben-Gurion's house in the Negev featured a portrait of Mahatma Gandhi. The Indian people have always regarded with admiration and sympathy the miracles the Israelis have brought about in this land. Both India and Israel represent very ancient civilizations, but both are young democratic countries lead by visionary leaders.

"When relations in 1992 were established, it opened the floodgates of unspent energy waiting to be released," Jassal continues. "From 1992 to today, civilian trade figures went up eight times to one billion dollars."

The pace and mere amount of high-profile defense contacts in the past three months seem to reflect a blooming relationship. Last November, a large defense delegation lead by Israeli Defense Ministry Director-General Amos Yaron met his Indian counterpart in New Delhi for their semi-annual strategic dialogue. When Foreign Minister Shimon Peres visited India in January, he described Indo-Israeli ties as being in their "highest and best season," and boasted "the world changed on September 11 into terror and anti-terror camps and in the new war, India and Israel were ranged on the same side."

January also saw the first meeting of the India-Israel Joint Working Group on counter-terrorism, which was held in Jerusalem, with National Security Council Chairman Uzi Dayan who held discussions with Indian security officials. More such meetings are planned.

Increasing security consultations betweeen the two countries also reflect the impressive volume of advanced arms deals concluded between them, according to a recent report published by the Indian- based Institute for Defense Studies and Analyses (IDSA). India is reportedly planning to spend some two to three billion dollars on made-in-Israel weapon systems in the coming years. Its shopping list is impressive: according to the IDSA report, it includes long-range IAI manufactured "Heron" Unmanned Air Vehicles; photo-imagery satellites made by EL OP; advanced pod mounted ground reconnaissance radars for India's Mirage 2000 aircraft; Mig-21 refurbishments; naval electronics; Barak anti-missile systems to defend India's aging fleet; and laser guidance kits to turn dumb bombs into smart ones.

But the relationship runs far deeper than just arms deals. "India views Israel, with its high technology and modern economy, as a model for emulation," asserts Zvi Gabay, director of the Israeli Foreign Ministry Asian Desk.

This appears all the more true since the Hindu nationalist Bhartiya Janata Party (BJP) wrested power during the 1998 elections from the noticeably more pro-Arab Congress party.

"The interior minister, L.K. Advani, is viewed as India's strongman," says Gabay. "He looks up to Israel for its steadfast doggedness in resisting its adversaries. Furthermore, since September 11, Israel and India feel a greater sense of kinship in their fight against terrorism. India was very appreciative that Israel was among the first countries to severely condemn last December 13th attack on the Parliament in New Delhi."

Gabay notes that India had its own September 11, when the radical Muslim terrorist outfit Jaish-e-Muhamad (the Army of Muhammad) "tried to take out India's entire power elite."

DESPITE all this, Ambassador Jassal tries to downplay the military aspects of Indo-Israeli relations.

"Defense cooperation is only one of many dimensions of this relation. There are misleading press reports, which highlight only this aspect. The relationship is not limited to one dimension only. The relationship is not directed at any one country," Jassal warily cautions, when asked about the Phalcon deal.

No doubt, India appears keen not to upset its traditionally good ties with Arab states and Iran. New Dehli's traditional policies towards Israel have been strongly influenced by its fear exceedingly healthy Indo-Israeli ties will leave India without influence on the Arab world.

"India doesn't want to leave Pakistan with exclusive access to the Arab world on the Indian subcontinent, as a result of India's warm ties with Israel," says Gabay

Earlier this year the Indian daily Hindu sounded off a worrisome note in an editorial on the BJP coalition's high profile ties with Israel: "The dramatic risk that the Vajpayee administration has now taken to make common cause with a bellicose Israel on the question of fighting externally-sponsored terrorism seems to be the result of some flawed strategic thinking in New Delhi."

The Tribune, another leading daily, also cautioned the government "to move cautiously in developing relations with Israel... With the installation of the Ariel Sharon government in Tel Aviv, the situation has become worse. In such an atmosphere, any enthusiasm that India shows to get closer to Israel may send a wrong signal to the Arab countries, many of whom have traditionally friendly relations with New Delhi. The second factor is related to Pakistan, which will leave no stone unturned to mislead Arab friends of India."

Internal Indian politics could also strain its relationship with Israel. The BJP coalition, tainted by scandal and recent electoral setbacks, is looking as frail as its aging leader, Vajpayee. If the current ruling BJP coalition collapses, this could cause a return to government of less Israel-friendly politicians in New Delhi.

Jassal tries to reassure on the potential consequences of change of government in New Delhi. "On foreign policy in India there is a broad consensus. Relations with Israel cut across all parties. India is too large a country to be pressured by anyone."

Gabay is also confident Israel's relations with India are firm, because the latter's "high profile ties with Israel are informed by its strong desire to get closer to the Americans."

BUT EVEN if ties between New Delhi and Jerusalem remain strong, other factors complicate a possible Phalcon deal between them.

India's complex territorial disputes have led to numerous border skirmishes, and even war, with neighboring nuclear rivals Pakistan and China. Chinese-Israeli relations are still tense as a result of the cancellation of the Phalcon deal with China, and Israel could slowly get sucked into the quicksand of Indo-Chinese rivalry.

It wouldn't be the first time. In 1962, continuous tensions between India and China along their shared border erupted into outright military conflict. The IDSA depicts the development of early Indo-Israeli defense ties as a direct result of that border war between China and India, which found the latter at a distinct military disadvantage; "Before the two countries established full diplomatic relations, they clandestinely cooperated on military and intelligence matters," says an IDSA report. "It was in January 1963, three months after the border conflict with China, that the government of India first showed willingness to consult Israeli specialists in military matters."

According to Jane's Intelligence Review, "New Delhi's antipathy towards Beijing escalated after India's Hindu nationalist-led government assumed office in 1998. Indian Defense Minister George Fernandes repeatedly referred to China as 'enemy number one' and accused Beijing of deferring outstanding disputes, intruding into Indian territory and arming Pakistan."

An Israel Phalcon sale to India at this time is certain to aggravate Beijing. "There are some press reports that Israel wishes to sell the early warning system to some other countries. We have taken notice of that," Chinese Foreign Ministry Spokesman Zhang Qiyue recently told the The Times of India - adding a clear warning to Jerusalem, "We hope that the various countries will make their efforts to preserve stability and peace in South Asia."

EVEN more worrying than a possible Chinese reaction might be Pakistan - and its new-found, post-September 11 closest ally, the US. An American administration especially concerned about keeping the peace between India and Pakistan at a time when it is counting on both nations as key allies in its war on terror, might see Israeli military involvement with India as an unwelcome complicating factor.

The US also recently vetoed Israel's sale of Arrow anti-ballistic missiles to India, reportedly citing fears that the sale of such missiles might violate the Missile Technology Control Regime (MTCR), which bars the transfer of critical technology for missiles with ranges greater than 300 kilometers and 500 kilogram warheads. According to Jane's, the Americans say they fear India might use the technology to develop ballistic missiles. Israel is not an MTCR signatory, but has pledged to abide by it.

Dr. Imri Tov, who until 2001 served for 13 years as Israel's Ministry of Defense chief economist, notes that "unlike the Phalcon, the Americans paid for the Arrow's development. It is therefore natural they should have a say in its export. But with the Americans, you should never say never. If a war brakes out between Pakistan and India, you'd be surprised how quickly the US might even encourage such a move."

But Tov adds: "The Phalcon contains no US technology, therefore no American approval should be required. The export of weapon systems is absolutely vital to finance Israel defense budget. That holds no less for the Phalcon. Most of Israel's large defense contractors such as the government-owned Israeli Aircraft Industries make up to 80% of their revenues from defense exports."

Yet the question remains whether Israel now properly understands the results of developing large expensive military platforms - such as the Phalcon or the Arrow - and exporting them without sufficient consideration and preparation for the possible geo-political consequences. The full development of the Phalcon reportedly cost IAI some half a billion dollars.

Asked whether Israel should weigh more carefully the political difficulties in developing such strategic platforms, Tov is adamant.

"Not at all," he replies. "What matters most is whether Israel needs a particular weapon system. If the answer is yes, we proceed to build it, no matter what the chances for export."

Tov sees the US attitude to Israeli arms export as the key problem, not Israeli defense planning.

"The Americans are impossibly nasty competitors with Israel for defense exports. Quite often they behave in the most predatory manner possible. Any time the Americans believe they can make a weapon as well as Israel, they'll go out of their way to make sure Israel won't produce the same. If they fail, they just make sure Israel doesn't export - period. The Phalcon is no exception."

TEL AVIV University Professor of Diplomacy Aharon Klieman, author of Double Edged Sword: Israel Defense Exports as an Instrument of Foreign Policy, believes otherwise.

Klieman notes "the formal American objections to the Phalcon deal with India, are well known. In informal conversations at the governmental level the American officials made distinctions between the Phalcon sale to China and the proposed sale to India. Following the September 11 attacks, the United States has adopted a more flexible position towards the subcontinent. As a result, the US has lifted some of sanctions imposed [in 1998] following the testing of nuclear weapons by India and Pakistan."

However, Klieman also cautions, "the closer India and Israel get to consummating the deal, the stronger opposition in Washington may become. This process of American competition is such a glaring fact of life, that anyone in Israel involved in the process of manufacture, then export of arms, would surely be aware of it."

Klieman further suggests Israel should have known better even before former prime minister Ehud Barak's tough run-in with Washington over the export of Phalcons to China, back in June 2000.

He recounts a similar episode during the 1982 Falklands War between the UK and Argentina. Israel had an opportunity to export arms, such as the Israeli-manufactured Kfir fighter aircraft.

But, according to Klieman, "it was dealt with in the narrow context of Israel and Argentina. No one took into consideration there might be a problem with Britain. And so when the war broke out, Israel found itself stuck in the middle and had to pay a heavy price. The war broke out; the British government applied the screws and indicated to Israel that if it continued to supply Argentina with arms, this would be regarded as an 'unfriendly act towards Britain' - a diplomat's byword for a move understood almost as an act of war. So prime minister Begin announced that Israel would not sign any new deals."

Israel is trying to avoid such past errors. Spurred in part by the failed Phalcon deal with China, the Foreign Ministry recently created a Division for Strategic Affairs [see article on page 5], part of whose job it to examine the diplomatic aspects of the country's arms sales.

India also seems well aware of the problem of potential fallout from a Phalcon deal.

"After the Chinese-Israeli episode, the Indians did their homework," says Tov. "They put us on notice India wouldn't sign the Phalcon contract with Israel, until the US approves the sale. That's why no deal as yet been signed."

The lucrative $1 billion Phalcon sale to India would finally propel Israel into the prestigious circle of powers capable of producing for export such complex airborne early-warning radar systems. Cancellation of the deal might perpetuate Israel's dependence on US security aid.

India's Jassal is upbeat, citing US State Department comments which, demonstrate "Washington supports the deal." The Foreign Ministry's Gabay in also keeping his fingers crossed. He notes, "obviously, the US has a much better rapport with India than with China."

Israel clearly expects that this time the US won't stand in the way of a Phalcon sale. But if it's wrong, it could turn out to be another costly mistake.


www.jpost.com/Editions/2002/04/21/Features/Features.47325.html