Israeli arms deals with China are continuing to make waves in relations between Jerusalem and Washington. The Pentagon has frozen Israel's planned $50 million participation in the development of the Lockheed Martin (LMT ) F-35 Joint Strike Fighter -- a huge project that could total over $250 billion. The immediate cause for the Pentagon's decision was an Israeli move to supply Beijing with spare parts to upgrade its fleet of Israeli attack drones. Israeli defense industry sources say that by curtailing Israel's role in the F-35 project, the U.S. is signalling to the European Union that it should retain its 16-year-old embargo on arms sales to China -- an issue that has caused tension between Washington and the EU. In 2000, Israel bowed to U.S. pressure to refrain from selling $1 billion worth of Phalcon early warning planes to Beijing.
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