China refused to allow Israel Aircraft Industries to sell it to a third party.
Israel Aircraft Industries (IAI) returned the Phalcon plane to China today. The delivery of the plane had been cancelled under US pressure
The Russian-built Ilyushin Il-76, which had been stored on an IAI back-lot, was flown to China by Russian pilots. All Israeli systems, components and marks were removed before take-off.
The return of the plane was part of the deal between the Israeli and Chinese governments a few months ago. The affair clouded Sino-Israeli defense relations. Since the cancellation of the deal, China claimed ownership of the plane, refusing to allow IAI to sell it to a third party, such as India, which wants an airborne early-warning system.
China originally demanded over $1 billion in compensation. Israel ultimately paid $350 million.
The Phalcon deal was cancelled by former Prime Minister Ehud Barak, under pressure from former US President Bill Clinton.
Published by Globes [online] - www.globes.co.il - on June 10, 2002