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Sino-Israeli arms deals
Upsetting a delicate balance?
Eugene Kogan
9/15/2004

Israel keeps a low profile when it comes to cross-strait security issues; the official line of Israel's Ministry of Foreign Affairs's (MFA) is that there is nothing to discuss. Moreover, Taiwan's repeated attempts to resume official ties with the Israeli government have been rebuffed at every turn. Taiwan's defence attaché in Israel can barely get an appointment with the Israel Defence Force (IDF) Foreign Relations liaison, despite lively discussions at the non-governmental level. No published articles or books address the China-Taiwan issue, and it seems as though the matter of Taiwan simply does not concern the Israeli government.

When it comes to contact with China (PRC), however, the Israeli Ministry of Defence (MOD) promotes a clear-cut policy. China is an extremely important trade partner for the Israeli defence industry. As a result, the MOD, which oversees the arms trade with China, has ensured that Israel maintains a positive relationship with the PRC, while avoiding any contact with Taiwan which might disrupt this partnership. Though the MFA maintains a divergent policy with regard to Taiwan, it is not involved in arms exports, and therefore has very little to say on Israel's stance regarding cross-strait security issues.

However, Israeli arms exports to the PRC have strained Tel Aviv's relationship with its most important diplomatic, economic, military and political benefactor – the United States. Israel must strive to satisfy U.S. concerns without alienating the Chinese, who hold the key to its defence market. This will require the utmost care and skill, attributes which have been so far lacking. Witness the statement of Ephraim Sneh, chairman of the defence planning subcommittee of the Israeli Knesset, on Israel's failed attempt to export the Israeli-manufactured Phalcon airborne early warning system to China: "The way we handled the Phalcon issue was clumsy, to say the least, and in the process, our relations with China were seriously damaged." [1] US-Israel relations have also been temporarily strained, but certainly not damaged.

The U.S. administration's ambiguous policy with regard to potential Israeli arms deals with China poses a serious headache for Tel Aviv. As the Phalcon incident demonstrates, Washington's stance can quickly shift from observer to participant when it considers its interests to be at stake. The unrelenting political pressure on Israel not to deliver the Phalcon system put the Israeli government on the spot, highlighting the difficult balancing act Tel Aviv must maintain between U.S. demands and clear signals of dissatisfaction from China. The Phalcon incident inflicted serious damage to Israel's overall diplomatic relationship with China and Israel's credibility as an independent arms exporter. Furthermore, it demonstrated just how dependent the Israeli government is on the goodwill of the U.S.

According to one Israeli official, Israel's stance toward China differs from that of the Americans, though Tel Aviv takes Washington's opinion into consideration. [2] But Israel-China relations are no mere academic dispute, as such a statement might lead one to believe. In the early 1990s, Israel passed up defence agreements with Taiwan so as not to damage its fledging relationship with China. It seems less likely, however, that Israel would pass up defence agreements with China to avoid damaging its relations with the U.S. As a result, the possibility of Israel trying to restart negotiations for the sale of Phalcon to China cannot be ruled out. Both Israel and China are beginning to revive the broad-based strategic cooperation agenda that came to a halt in July 2000, following the cancellation of the Phalcon deal. [3] However, Israeli officials have acknowledged that any further arms sales to China would be carried out cautiously and in consultation with Washington to prevent the possibility of another de facto U.S. veto. [4]

The Israeli MOD is fully aware of the critical importance of the potential Chinese defence market for Israeli defence companies. However, as former Assistant Secretary of State James Kelly has warned, arms deals between Israel and China "are likely to cause a disagreement [between the U.S. and Israel] in the future" – especially if Israeli weapon systems sold to China restrict U.S. operations in Asia. Israeli-developed armaments proposed for sale to the China's People's Liberation Army (PLA) include the Tavor personal assault weapon, pilot training systems, advanced communication and surveillance gear and a range of unmanned aerial vehicles. Although these systems do not constitute major weapon systems, neither are they non-combat related defence goods. Again, the Israeli and American interpretations of what constitute combat related defence goods might be different and this may lead to disagreement. The U.S. has made it clear that, when it comes to arms sales to China in particular, consultation with Washington must be the first step. Although Israel may resent such an imposition, the cost of not complying with Washington's demands might be some portion of the nearly $2 billion in Foreign Military Assistance that the U.S. provides to Israel annually.

In the meantime, it appears that the Israeli MFA will continue to be marginalized by the MOD in discussions over Taiwan and China. Zvi Gabai, deputy Director-General for Asia-Pacific Affairs at Israel's MFA, has said that Israel values its relations with Taiwan and intends to cultivate deeper bilateral cooperation in non-defence related fields. Bilateral defence cooperation and a strategic triangle that includes Washington have also been discussed, though an official policy has yet to be developed.

The MOD's reaction to any potential defence exports to Taiwan would be less than positive, as the prevailing attitude within the MOD is that Taiwan is not an Israeli issue, but rather a question for the U.S. and China to resolve. According to Eran Lerman, a former IDF colonel and intelligence officer, Israel must also maintain a very low profile in its non-commercial dealings with Taiwan. But, he added, Israel will need to rethink its strategic decision (made in the early 1990s) to minimise relations with Taiwan and maximise relations with China, especially in the field of defence trades. This rethinking is unlikely to be made in the foreseeable future, as the Chinese defence market remains very attractive to the Israeli arms industry. Nor is the Israeli policy of simultaneous sales to China and Taiwan pursued in the early 1980s likely to be revived, as Israel's orientation towards China continues to increase and Beijing maintains its demand that Israel not to sell arms to the island. MOD Director-General Amos Yaron was less diplomatic about the prospects for Israeli-Taiwanese cooperation. In a March 2002 interview he stated: "China is a very important country for us and we do not want to initiate anything that can put us in a situation where our relationship [with Beijing] will suffer. There is no chance of changing our policy regarding Taiwan." [5]

Despite such strong statements endorsing continued Israeli-Chinese cooperation, there has been some discontent among Israeli defence firms trying to realize the potential of the Chinese arms market. As Lerman went on to say, "I would expect non-combat related defence sales [to China] to persist, but as far as the sale of major weapon systems or significant cooperative defence research is concerned, people are beginning to realize that [the Chinese] market realities are not living up to their potential." [6] Israel is interested in promoting the sales of its state-owned defence companies – Israel Aircraft Industries, Israel Military Industries and Rafael Armament Development Authority – to China to make up for a substantial fall in domestic orders. However, privately owned companies such as Elbit Systems Limited and Elisra Tadiran Group see their market in the United States. As a result, these companies do not view China as a natural customer and therefore do not deliver military items to PRC.

That being said, Israeli-Chinese cooperation seems likely to continue. Training programs for PLA representatives and police at the Israel Military Industries Academy for Advanced Security and Anti-Terror Training are currently under discussion. Another possible area of future cooperation involves the leasing of Israeli unmanned aerial vehicle services. MOD Director-General Yaron reiterated these two projects, citing homeland security and counter-terrorism as potential areas for expanding Israeli-Chinese cooperation. The active participation of Israeli security experts in the preparation for the forthcoming 2008 Olympic Games can be seen as one notable example of this type of cooperation. [7] Whether Phalcon-style arms exports to China will reappear on the Israeli-Chinese agenda remains to be seen. It seems, however, that the MOD's dilemma of selling arms to China without upsetting the delicate balance of power across the Taiwan Strait, and thereby upsetting the Americans, remains, for the time being, unresolved.

Dr. Eugene Kogan is currently a guest researcher at the Research Institute of the German Council on Foreign Relations in Berlin. He is a defense industry analyst with expertise on Russia, Eastern Europe, Israel and China.

This article appears on AFAR with permission from Jamestown Foundation, China Brief.

Notes
1. Defense News, 15 December 2003.
2. http://www.haaretzdaily.com/hasen/pages/ShArt.jhtml?itemNo=19055
3. Defense News, 15 December 2003.
4. Ibid. According to Internet sources (http://www.globes.co.il/serveen), on March 14, 2004 a delegation of senior MOD officials headed by the MOD Director-General Amos Yaron left Israel on a visit to China. The visit was the first since Israel cancelled its sale of the Phalcon system to China. The current visit was designed to signal a return to business as usual. The current Israeli export of Phalcon to India has been accomplished by consultation with Washington and was finalised in early March 2004. The latest export underlines the sensitivity of the Phalcon export to Asian countries and Israel's realization that without being given the green light from Washington the deal will not proceed. According to Internet sources (http://www.defensenews.com/story.php?F=2615859&C=asiapac), on February 4, 2004 South Korea unveiled a US$1.7 billion project to buy four airborne early warning aircraft. Yonhap news agency said candidates included aircraft from four companies: France's Thales, Israel's Israel Aircraft Industries (IAI)/Elta, American Link Simulation and Training and Boeing. It remains to be seen what kind of policy the U.S. will pursue vis-à-vis Israel and how much pressure will be put on the South Korean government to buy US-built aircraft. The U.S. government is likely to stress the crucial importance and necessity of the US-South Korean military alliance in favour of buying US-built aircraft. As a result Israel will have to formulate a clear policy as to what it will do under such circumstances. Israel's ad hoc policy may deal further damage to an already badly dented Israeli reputation.
5. Defense News, 25-31 March 2002.
6. Defense News, 25-31 March 2002.
7. Defense News, 15 December 2003. Undoubtedly, the Israeli management system called Secure-M, which is being deployed throughout the city of Athens, home of the 2004 Summer Olympic Games, will provide the Chinese government with an opportunity to assess the usefulness and effectiveness of the system that could be employed in Beijing in 2008. According to Roy Hess, president of Mer Incorporation, a subsidiary of the Holon-based Mer Group that manufacture the Secure-M, since the Israeli product Mabat 2000 surveillance and security system was installed in Jerusalem's Old City, incidents of crime and terror have dropped by some 90 per cent.


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