JERUSALEM, Dec 16: Israeli arms deals with China have provoked tensions between Israel and the United States, the head of Israel's parliamentary defence committee, acknowledged on Thursday.

"There are tensions, which are hidden from the public, which have appeared over the last one or two years concerning Israeli weapons sales, particularly to China," Yuval Steinitz told Israeli radio.

His comments followed a report on Israel's private Channel Two television on Wednesday that the Pentagon was demanding the dismissal of Israeli defence ministry director general Amos Yaron over a particularly controversial deal.

US officials are furious at Israel for taking back a "sensitive weapons system" sold to China in the 1990s for upgrading, the channel said, although it did not identify the weapon.

Washington had permitted Israel to take the system back from China for repair, but had not authorized it to be upgraded, according to the report. Israel's ambassador to Washington, Danny Ayalon, denied on Thursday that the United States had sought the dismissal of Mr Yaron, saying "no demand of that nature was made".

"Questions were raised recently, but they are being examined in a good atmosphere," he said. Defence Minister Shaul Mofaz also denied the accuracy of the report, while accepting that a dossier on Israeli weapons sales to China was "in the process of clarification".

The issue has become very sensitive after Israel in July 2000 cancelled a contract to sell to China a Russian Ilyushin-76 plane equipped with its own Phalcon Airborne Warning and Control Systems (AWACS).

In March 2001, Israel agreed to pay China 350 million dollars to compensate for the cancelled sale. China had forked out a down payment of 200 million dollars on a first plane, valued at 250 million dollars, and had signed a contract which foresaw the purchase of four similar aircraft. -AFP