THURMONT, Md. — Israel announced Wednesday it would cancel a controversial $250 million military radar plane sale to China, bowing to fierce U.S. pressure on the second day of the Camp David Middle East peace summit.
Prime Minister Ehud Barak's spokesman Gadi Baltiansky told Reuters that Israel had informed Washington and China of the decision to drop the signed deal to export the Phalcon high-tech early warning radar.
"We do not intend to continue with the deal," he said. "Israel will not do anything to harm the United States."
The news came as Barak was secluded with President Clinton and Palestinian President Yasser Arafat at the heavily guarded hilltop presidential retreat in Maryland for open-ended negotiations on the toughest issues in the Middle East peace process.
The Israeli concession had been widely expected and removed a key obstacle to U.S. congressional approval of a major aid package to modernize the Jewish state's armed forces as part of an overall peace settlement, diplomats said.
The deal, which U.S. officials feared could have given China an edge over Taiwan, had sparked open tensions between Israel and its closest ally, prompting Congress to threaten to cut existing aid as well as jeopardizing future expanded military assistance.
A U.S. official confirmed the move, saying, "It was a goodwill gesture on Barak's part." The Israeli announcement also filled a news vacuum created by the three sides' agreement on a blackout on the contents of the summit, expected to last about a week.
With the two sides far apart on the issues at the heart of the Israeli-Palestinian conflict, sources said U.S.-drafted bridging proposals would be presented to the delegations Thursday.
U.S. officials offered only sketchy logistical details of the summit due to the news blackout.
"The president is up and is expected to meet with members of the American team in the next hour," White House spokeswoman Nanda Chitre said Wednesday morning.
After conferring with his team, which includes Secretary of State Madeleine Albright, Clinton was due to meet Barak and Arafat separately, a U.S. official said.
The U.S. side is hoping the inspiring location — site of the first peace agreement Israel negotiated with an Arab enemy, Egypt, in 1978 — and the isolated nature of the talks, away from the daily debate back home, will provide a formula for an accord ending the 52-year-old Israeli-Palestinian conflict.
But just as prior peace negotiations have failed, so too could this one prove elusive to Clinton's dreams of reaching a long-sought peace deal before his term expires in January.
A more important deadline is Sept. 13, the day Israel and Palestinians have set for a final agreement.
Arafat has warned that he would declare a Palestinian state on that date if there is no final peace accord. If he did that, violence could explode again between the two sides.
Back in Israel, Cabinet minister Haim Ramon, responsible for Jerusalem issues, said he doubted Barak and Arafat would resolve a dispute over the status of the holy city, which both claim as their capital, during the summit.
"This is the heart of the heart of the Jewish people," Ramon told the Foreign Press Association. "So far I can't see that we can reach a final agreement, a comprehensive agreement over the issue of Jerusalem. . . . I believe that what we have to do is to delay the issue of Jerusalem, to agree to disagree, and delay it for the next five, six years."
In Gaza, Arafat's Fatah organization said it had declared a state of emergency in Palestinian areas to avoid violence if the Camp David talks ended without agreement.
Edward Djerejian, a former U.S. ambassador to Israel and Syria, said crisis management to avert violence was one of the main purposes of the summit.
"If this summit does not succeed and Arafat declares a Palestinian state by Sept. 13, I think there is a good chance, unfortunately, of violence in the region," he told CNN.
With little information available on the talks, White House spokesman Joe Lockhart was due to hold a briefing Wednesday at a media center set up in a school in the town of Thurmont about five miles east of Camp David.
Israel wants to keep Arab East Jerusalem, occupied in the 1967 Arab-Israeli war and swiftly annexed. Palestinians are demanding that East Jerusalem be the capital of their future state, a demand that Israelis say Barak cannot swallow politically.
On borders, Palestinians want a settlement based on U.N. Resolution 242, which calls for an end to Israeli occupation of the entire West Bank and Gaza, seized in 1967.
Israel rejects a return to prewar borders. News reports say Israel has offered Arafat 80 percent of the occupied lands for a state, while Israel would rent or annex the rest.
Israel wants to create three big blocks of settlements on occupied West Bank land and annex them to Israel. Some 170,000 Jews live in about 145 settlements in the West Bank and Gaza, home to 3 million Palestinians. Palestinians and the international community consider settlements illegal.
Palestinians demand a "right of return" to present-day Israel for Arabs who fled when the Jewish state was created in 1948. Israel objects but has considered compensation for those who lost property.