An Israeli news report says Israel has decided to cancel an arms deal with China, after strong pressure from the United States to call off the deal.
The U.S.-Israeli dispute centers on Israel's sale to Beijing of (HARPY) attack drones that Washington fears could threaten the security of U.S. interests in East Asia.
Earlier this month, the Haaretz newspaper said the Bush administration imposed military sanctions on Israel six months ago that had caused "grave damage" to Israel's defense industries.
The United States has not confirmed the sanctions. But last week, U.S. Secretary of State Condoleezza Rice said Washington has had some "difficult discussions" with Israel about the arms deal.
The Haaretz report also says Israeli Prime Minister Ariel Sharon has instructed envoys headed for Washington this week to agree to U.S. demands to call off the deal.
Some information for this report provided by AP and Reuters.