Jerusalem: Ending the dispute over cancellation of an Israeli Phalcon spy-plane sale to China, Tel Aviv has agreed to pay Beijing $ 350 million in compensation for scrapping the signed deal in the face of stiff US pressure.

The agreement to compensate China, which was apparently further angered with Tel Aviv planning to supply the same spy planes to India, was signed by director-general of Israel's Defence Ministry Amos Yaron with Chinese authorities in Beijing on March 13.

The agreement was signed in a friendly atmosphere, with both parties expressing satisfaction and looking forward to fruitful co-operation in the future, English daily 'Ha'aretz' reported on March 14.

The cancellation of the deal under stiff US pressure in July 2000, shortly after Chinese President Jiang Zemin's visit to the Jewish state, had threatened warm ties between the two countries that had developed since 1992.

Washington had contended that the spy plane would give China a strategic advantage over America's AWACS aircraft in any possible conflict over Taiwan.

Israel wants to sell three Phalcon Airborne Warning and Control Systems (AWACs) to Indian Air Force and the two sides have been negotiating the estimated $ 1 billion deal for quite some time now.

The Phalcons' radar systems will extend the Indian Air Force's range of operation giving India control and monitoring capabilities from the sky.

PTI