JERUSALEM -- Under pressure from the Bush administration, Israel has agreed to cancel an arms deal with China and allow US officials to review future weapons transactions in an effort to resolve a point of tension between two governments usually in lock step over security matters.
The terms of the agreement, reported in yesterday's editions of the Israeli newspaper Haaretz, are to be finalized this week during a visit by an Israeli delegation to Washington.
Under the deal, confirmed generally by Israeli officials yesterday, Israel will sign a memorandum of understanding with the Pentagon that will give US officials some discretion over the terms of future Israeli arms exports. Israeli officials characterized the memorandum as a set of ''guidelines" governing future transactions, including those in which the United States and Israel could be in economic competition.
The dispute arose last year over Israel's plans to provide spare parts for a fleet of Harpy armed drone aircraft it sold to China in the 1990s with US approval. US defense officials protested that the spare parts constituted a significant upgrade of the anti-radar aircraft, possibly including the addition of sensors able to detect radar sites even when turned off.
In response, the Pentagon ended cooperation with Israel on at least one joint weapons project and ceased contact with a senior official in the Israeli Defense Ministry.
Under the terms of the agreement outlined by Haaretz, the Israeli government will not return those parts to China and expects to pay compensation. The senior official, Major General Amos Yaron, the ministry's director general, will retire in a few months, as he said he has planned.
Concerned about China's rising military clout, the United States has expressed periodic concern over Israeli weapons sales to China for the past 15 years. The government of Taiwan, a US ally in the region, has expressed concern over the Harpy deal.
Military analysts there have said the estimated 100 Harpy drones Israel sold to China -- a deal that military analysts here say is worth as much as $70 million -- would play a key role in any Chinese invasion of the island.
Israeli officials hoped to resolve the matter last week during a visit here by Secretary of State Condoleezza Rice. Before Rice departed, Foreign Minister Silvan Shalom apologized publicly for angering the United States, although some Israeli commentators have urged the government to proceed with the deal to show a measure of independence from its most important foreign ally. The United States gives Israel $2 billion a year in military aid.
In a statement issued yesterday, the Israeli Defense Ministry said the ''proposals and agreements will be discussed within the framework of the ongoing discussions between Israel and the US."
Zalman Shoval, a Sharon adviser and two-time ambassador to the United States, said at the time of Rice's visit: ''Certainly the issue was there, on our minds and the American minds."
This is not the first time Israel has been forced to sever a deal with China to appease US concerns. Five years ago, US pressure scuttled Israeli plans to sell Phalcon reconnaissance aircraft to China, a deal valued between $250 million and $1 billion.
''The United States takes the threat of China very, very seriously," said Dan Schueftan, a senior research fellow at the Shalem Center, a think tank in Jerusalem whose members generally hold hawkish views on the Arab-Israeli conflict. ''And when it comes to Israel, our relationship is so intimate that the United States expects from us -- and I think they have the right to expect from us -- not to mess with the Americans on matters like this."
Meanwhile, in the Gaza Strip, Israeli settlers scuffled with Israeli soldiers, less than two months before the evacuation of 21 Gaza settlements is scheduled to begin. According to the military and video broadcast on Israeli television, the soldiers were razing 11 abandoned cottages and buildings near a hotel being used by about 100 settlers who arrived in Gaza recently to prevent the evacuation from being carried out. Israeli military officials feared the settlers planned to occupy the buildings.
The settlers and soldiers bumped and shoved one another before bulldozers carried out the demolitions. One Israeli soldier was arrested for refusing to follow orders -- defiance that senior Israeli military officials have said they fear will increase as the evacuation draws closer.
Hours before the incident, Sharon's Cabinet approved a plan that will offer evacuated Gaza settlers beachfront land just north of Gaza at deeply discounted prices. The discounted land comes on top of a government compensation package for each family of as much as $300,000.