Defiant Arens Defends Israeli Weapons Sales : Controversy: He denies U.S. arms have been resold. Washington says intelligence reports show otherwise.

Israeli Defense Minister Moshe Arens, responding to growing criticism of his nation’s weapons exports, said Saturday that Israel will continue to sell arms to any country it chooses, including China, because it needs the funds to keep its defense industry humming.

Arens denied that Israel has ever sold U.S.-developed arms without Washington’s permission. But his defense of an aggressive export policy underlines concerns that Israel has undercut American efforts to check the spread of sophisticated military equipment, especially to nations such as China that are denied access to Western arms.

U.S. officials, citing intelligence reports, discount the denials of Arens and other leaders of Prime Minister Yitzhak Shamir’s government. These officials say there is overwhelming evidence that Israel resold some U.S. weapons and used American-supplied technology in developing some of the Israeli-manufactured weapons it has sold overseas.

The controversy underscores concerns that Israel and Washington sometimes pursue sharply divergent goals on defense matters, despite Washington’s longtime commitment to Israel’s security and its annual grant of more than $2 billion in military aid.

The dispute also adds new friction to U.S.-Israeli relations at a time when they were already strained by Washington’s opposition to Israel’s policy of building Jewish settlements in the occupied West Bank and Gaza Strip.

Meanwhile, an Administration official confirmed that Assistant Secretary of State Richard A. Clarke, whose office supervises anti-proliferation efforts, will soon be “rotated” to another job despite his desire to remain in his present post until the latest controversy dies down.

Responding to a report in Friday’s Wall Street Journal stating that Clarke might face severe disciplinary action, possibly even dismissal, the official said that “Clarke is not being fired, that’s a lot of junk.”

Nevertheless, the official said there was no chance that Clarke would be permitted to retain his post as chief of the State Department’s Politico-Military Bureau. Other officials who are about to be rotated also would prefer to remain where they are, the official said, but the department’s policy is to make the changes.

“Clarke feels that these leaks are intended to ruin his career,” the official said. “I can understand how he feels. I don’t know anyone who is happy about this.”

The Journal, reporting on the results of what it said was a six-week investigation, said the State Department inspector general’s office has prepared an audit criticizing the Office of Defense Trade Controls for its failure to crack down on Israeli abuses. The office is under Clarke’s supervision.

State Department spokesman Richard Boucher confirmed that Inspector General Sherman Funk was circulating a report on the office’s activities among other State Department officials. But Boucher said the report did not focus solely on Israel. He said it would be made public, probably in about two weeks.

Under U.S. law, purchasers of American weapons may not resell them to anyone without Washington’s permission. The statute also prohibits a foreign government from exporting weapons produced locally using American-supplied technology or produced locally with American financing.

The latter provision would block sales of the Arrow anti-ballistic missile that Israel is developing under contract with the U.S. Strategic Defense Initiative program. Although the Arrow relies on Israeli technology, its development is being financed by Washington.

Interviewed on CNN’s “Newsmaker Saturday” television program, Arens said Israel must export weapons because its domestic industrial base is too small to support the sort of arms industry it needs for its defense without foreign sales.

“Nobody should be surprised that Israel sells some of the products of its defense industry to a number of countries, including China,” Arens said.

The latest controversy began when U.S. officials revealed intelligence reports indicating that Israel had resold U.S.-supplied Patriot antimissile missiles to China, which apparently intended to study the technology in order to modify Chinese offensive missiles to evade Patriot defenses.

While denying the report about the Patriots, Arens defended Israeli sales to China even though Beijing is a frequent supplier of weapons to Israel’s Arab adversaries.

“China is not a country in a state of war with Israel, but other countries, including the United States, for that matter, are selling weapons to countries that are in a state of war with Israel, who’ve gone to war against Israel in the past and who may go to war against Israel in the future,” Arens said.

Sales to China are especially sensitive in the United States because Washington broke off all defense cooperation with Beijing following the suppression of the democracy movement there in 1989. Even if Israeli sales follow the letter of U.S. laws, they still undercut American policy considerations.