But Caveats Could Kill Shared Operating Scheme

By BARBARA OPALL-ROME
Posted 10/12/07 20:47

Sources here and in Washington confirmed the U.S. greenlight for Beijing’s participation in a unique operational program run by Imagesat International (ISI), a Dutch Antilles-incorporated firm based here that owns and manages Eros-series spacecraft.

Under the firm’s Satellite Operating Partner (SOP) program, customers like India enjoy complete autonomy and discretion in the way they choose to operate the satellite. The program allows partner customers to select Eros B targets and stream imagery directly to their own ground stations, effectively controlling a 2,500-kilometer radius of coverage around the ground station.

In China’s case, however, Washington is insisting on the right to impose so-called shutter control in times of tension or national emergency. Moreover, the prospective China program would require 24-hour notice of Beijing’s satellite targeting plans, an onerous condition that could prove to be a deal breaker, sources here said.

Although Israel’s MoD is the official regulatory authority for ISI exports — and Eros B is a commercial system not subject to the U.S. State Department’s Munitions List control — officials here felt compelled to submit the possible China deal to U.S. review. A bilateral agreement signed in 2005 by former U.S. Defense Secretary Donald Rumsfeld and former Israeli Defense Minister Shaul Mofaz obliged prior consultation, and close consultation on Israeli exports to countries that could threaten U.S. national security.

The agreement is one of the vehicles by which both governments aim to avoid periodic disputes over Israeli exports to countries deemed problematic by Washington. Two such disputes – both involving Israeli deals with the People’s Liberation Army Air Force — mushroomed into full-blown crises from which Israel’s defense establishment has yet to fully recover.

Neither the Pentagon nor Israel’s MoD would officially comment on Israel’s negotiations with China or Washington’s willingness to allow the prospective deal to proceed.

As one former U.S. executive branch official explained, “We don’t officially acknowledge our supervisory role or our de facto veto right over their exports.” He added, “It’s a matter of courtesy to our Israeli friends, who are very serious about their sovereignty and in guarding their reputation on the world market.”Maayan Markin, an MoD spokeswoman, offered: “It is not our policy to comment on deals that are executed around the world, and so to in this case.”
Pentagon spokesman Bryan Whitman was unable to provide DoD comment by presstime.

Peter Rodman, a former U.S. assistant secretary of defense for international security affairs, claimed no independent knowledge of the specifics surrounding the prospective Sino-Israeli satellite deal.

Nevertheless, he said he knows China is scouring the world market for advanced capabilities, and that many Chinese entities would stand to benefit from Israeli technologies.

Rodman, one of the officials involved in repairing U.S.-Israel ties in the aftermath of China-related export disputes, said he was pleased to hear that the new process of consultation is working.

“We’ve set up procedures to solve the problem, and the Israelis have been very forthcoming,” he said. “This might be an example of how both sides can be reasonable, and that we won’t automatically block anything they try to sell.”

Killing with Kindness

But industry executives here suspect Washington’s caveat-heavy consent to the China satellite deal was intended to torpedo any move by Tel Aviv to revive high-technology, dual-use trade with Beijing.

Another Israeli government official said Washington might have approved the deal as a way of compensating Israel for business and other losses incurred by joining the American embargo against Venezuelan President Hugo Chavez and his anti-U.S., left-leaning government.

“I certainly hope this [U.S. approval of the prospective Eros B deal with China] is not an empty gesture. If this agreement with the Chinese will be signed, it could mark the beginning of improved relations with Beijing,” said the official, a former government minister. “Our American friends are aware of our strong national interest in developing ties with China, an important member of the U.N. Security Council with significant influence on events in this region.”

In an Oct. 12 interview, a leader of the Israeli defense industry said the chances of China agreeing to the U.S.-caveated deal were virtually nil.

“The imposition of shutter control and the 24-hour targeting approval is insulting to the Chinese, and could cause more damage over the long term in Israeli-Chinese ties,” he said. “Washington is not interested in Israel’s need to repair its relationship with China or in compensating our industry for lost business. It is interested in gathering information on what China is interested in looking at.”

But Andrei Chang, a Hong Kong-based specialist in Chinese security affairs, speculated that even with the U.S.-imposed penalties, Beijing may still be willing to enter into a deal with Israel.

“China’s remote sensing capabilities are very limited, and right now, they really have only one serious outside supplier,” Chang said. “China may determine that it is in its interest to develop an alternative channel to Russia through the Israelis, whose technology they have put to good use in the past and would like to benefit from in the future.”

Raw Deal for Taiwan

While Israel, the United States and even China may benefit from the prospective deal, Taiwan is finding itself in a position of neglect and betrayal, diplomats familiar with cross-Strait relations here said.
Taiwan joined ISI as the first SOP customer outside Israel on Eros A, the company’s first satellite launched into orbit in 2000. Under the deal, ISI was required to provide Taipei with a second satellite by 2004.

But for a variety of reasons, details of which are recorded in a major lawsuit against ISI majority shareholders filed July 7 in New York Southern District Court, the company could not provide the satellite and was forced to compensate Taipei.

When ISI finally launched its second satellite — now known as Eros B — on April 26, Taiwan expressed its interest in rejoining the SOP program. But Israel’s MoD was already planning a big deal with the People’s Republic and refused to approve the deal.

Reached through his attorney, Steve Wilson, a former founding executive of ISI and a lead plaintiff in the ongoing litigation, said there is no legitimate basis to revoke Taiwan’s license in favor of mainland China.
According to Wilson, ISI management, majority shareholders and Israel’s MoD acted against the interests of the company and its shareholders when the politically-driven aspirations of repairing relations with Beijing superseded solid, legitimate business considerations.

“Taiwan was our first paying [Satellite Operating Partner] customer, providing millions in dollars of much-needed revenue for the company each year,” Wilson said in an Oct. 10 statement. “To give up something tangible for something that is a long shot simply reiterates how ISI, its satellites, its customers and now its unique and proprietary service concept; have been misappropriated.”

Diplomats from Taipei declined to comment on the issue when contacted at the nation’s Oct. 10 national day celebration in Tel Aviv.

Shimon Eckhaus, managing director of ISI, did not return calls seeking comment.

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