U.S. Pressing Israel on Arms-Transfer Reports : Technology: A State Department audit is expected to focus on intelligence claims of reselling of weaponry, including Patriot missiles to China.

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Brushing aside Israel's public denials, the Bush Administration said Friday that it is pressing Prime Minister Yitzhak Shamir's government for an explanation of intelligence reports indicating that Jerusalem has sold U.S.-supplied military technology to China, South Africa and other nations.

"We have some concerns and we are discussing it with the Israelis," Assistant Secretary of State Richard A. Clarke told reporters on Capitol Hill.

State Department spokesman Richard Boucher confirmed that the department's inspector general, Sherman Funk, plans to issue an audit later this month of the activities of the Office of Defense Trade Controls, the organization charged with preventing buyers of American weapons from reselling them to other countries.

Boucher said the report was worldwide in its scope. But the audit was understood to focus on intelligence reports that Israel sold Patriot missiles to China; used U.S.-supplied technology in its Jericho II offensive missile, which was sold to South Africa, and sold other U.S. weaponry to such countries as Ethiopia and Chile.

The office is part of the department's Bureau of Politico-Military Affairs, which Clarke heads. The Wall Street Journal reported Friday that the audit will recommend disciplinary action against Clarke. Clarke denounced the story as "slanted and pejorative," but another Administration official said, "This is an office that over the years has had a lot of problems."

Boucher said the inspector general's report is not yet in final form. But he indicated that a draft has been completed and is being circulated to other department bureaus for comment.

Israeli Defense Minister Moshe Arens, in the United States for speeches and meetings unrelated to the latest controversy, said Israel sells weapons abroad for much the same reason that the United States does--to keep its defense plants open and operating. But he flatly denied that U.S.-supplied technology was ever diverted to arms manufactured for export.

"Our industrial base is microscopic compared to the U.S. industrial base, and so Israel has no choice but to export some defense items," Arens said in an interview on ABC television.

In the interview, Arens said Israel has sold "some exports to China." Although Israel's arms relationship with Beijing has been known in the West for several years, no Israeli official had previously confirmed it.

Arens charged that someone was trying to damage U.S.-Israeli relations by circulating false accusations against Jerusalem. "I don't think it's President Bush or the secretary of defense or the secretary of state, but somebody out there is trying to muddy the waters," Arens said. In Jerusalem, government officials echoed that assertion. "This is not the first time that someone in Washington has tried to make us look bad," said government spokesman Yossi Olmert. "There is definitely an effort to inflate the troubles between us."

On Thursday, Administration officials confirmed a report that there was intelligence information that Israel had sold the sophisticated Patriot air defense missile to China. On Friday, the Wall Street Journal published what it described as a six-week investigation of Israeli diversion of American technology to China, South Africa, Ethiopia and Chile.

In Israel, government officials suggested that the Administration was trying to heighten friction between the two countries because of a continuing dispute over terms for a $10-billion loan guarantee, which Israel has requested to provide housing and jobs for immigrants from the former Soviet Union.

But other Israeli observers said the current flap seems to be motivated by a longer-term U.S. dissatisfaction with Israel's arms sale policies to the Third World. They pointed out that Washington has long been opposed to Israel's exchange of sophisticated technology with South Africa at a time when a U.N. arms embargo was in place against the Pretoria regime. Israel also sharply increased its arms sales to China after Beijing was temporarily cut off from Western goods following the 1989 crackdown on pro-democracy demonstrators in Tien An Men Square.

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