Israel is looking to sell off older F-16s to make way for the F-35.

WASHINGTON: A major arms sale between two close American allies is probably dead after the State Department objected to the transfer of sensitive technologies from Israel to Croatia, US and European officials tell Breaking Defense.

Croatia, a NATO member, was preparing to buy 12 used F-16 Barak fighters from Israel for $500 million. The Israelis want to offload the F-16s to make room for the new F-35 Joint Strike Fighter, which will carry most of its combat load in the years to come. For Croatia, the deal would give it a modern warplane to replace its aging fleet of MiG-21s, a Soviet design that originally entered service in 1959. 

The rejection comes as NATO allies are pumping tens of billions into defense programs, with a slew of NATO members — Britain, Canada, Denmark, Italy, the Netherlands, Norway, and Turkey (plus potentially Belgium) — and several non-NATO allies including Finland, Israel, Japan, and South Korea, joining the program.

Talks began between the two countries last year, and were joined by the US in June, as Washington must agree to any third-party sales of US-made equipment. Negotiations proceeded until December, when the State Department stepped in to block the sale over concerns that Israel was planning to hand over technologies it wasn’t authorized to transfer. The US has said Israel must strip the jets of the upgrades it has made over the years before transferring the aircraft.

A senior administration official said the US “wholeheartedly supported Croatia’s acquisition of a NATO-compatible fourth generation aircraft from Israel, and worked to make this transfer a reality.” The Americans were always clear about the “specific technical conditions” under which it would support the deal, the official said, and the US will “remain committed to assisting the Republic of Croatia in its procurement of NATO-compatible combat aircraft.”

Israeli Prime Minister Benjamin Netanyahu, eager to sell of the planes, personally raised the issue with Secretary of State Mike Pompeo during their meeting in Brazil earlier this month, but he was unable to change the American position, according to Israeli media reports.

The Croatians, for their part, are now concerned that the cancellation of the $500 million deal will reduce their defense spending — which is less than a billion dollars a year — by a significant amount. That might put the country in the crosshairs of the Trump administration and NATO, both of which have been pressing for increased defense spending. Zagreb currently spends about 1.2 percent of its GDP on defense, well below the NATO goal of two percent.

Former Defense Secretary Mattis meeting with Croatian officials.

The government in Zagreb had issued a tender for the fighter buy last year, and it spoke to Greece, South Korea and Sweden about buying older jets — and was offered a package of Lockheed Martin’s latest F-16V fighter. The Swedish bid for SAAB’s Gripen fighter was a close second to the Israeli offer, something a Croatian official suggested may now be the frontrunner as the country rushes to find a replacement. 

While Israel is trying to sell off many of its legacy fighters to make way for the new F-35s coming their way, the US has argued that by transferring the planes with the upgrades intact, Israel would profit from a program that was part of a US military aid package. The deal would have also likely meant some work for F-16 maker Lockheed Martin, who would have provided parts and services.

Such transfer packages are not uncommon between US allies, but the State Department and Pentagon keep a close watch on the specific technologies changing hands, and any potential loss of intellectual property for US defense firms, which was a major concern in this case. In the past, the US has forced Israel to scrap high-tech arms sales to China — notably upgrades to the Phalcon radar plane and the Harpy drone —  but blocking a sale to a NATO ally is a very different matter.

The State Department was unable to comment due to the government shutdown. The US Embassy in Zagreb also declined to comment as they are unable to speak with the press during the shutdown.

Former Defense Secretary James Mattis traveled to Zagreb last summer to underscore the US commitment to NATO allies in the Balkan region. In a meeting with several defense chiefs there, he warned about Russian influence, saying “what we’ve all been sharing in NATO is keenly felt in Southeastern Europe.”

Croati’s defense budget, as of 2017, was the eighth-smallest in NATO. SOURCE: Stockholm International Peace Research Institute (https://www.sipri.org/)