The Bush administration is refusing to cancel sanctions it placed against Israel, even though the Jewish State has cancelled its deal with China regarding maintenance of Unmanned Aerial Vehicles. Nixing the China was done under intense US pressure and damaged Israel's military industry.

America began freezing joint security projects and delivery of defense equipment to Israel as part of the sanctions.

The sanctions were placed as a result of a bill calling for a five-year ban on the purchase of defense materials from any country selling arms to China. Israel sold China unmanned drones in the early '90s and committed itself in the contract to upgrade the drones from time to time. The crisis erupted when the US accused Israel of violating the US ban on selling arms to China by upgrading the drones, demanding that Israel break the agreement with the Chinese and even refuse to return the Chinese drones themselves.

The US is now demanding that Israel and Defense Minister Sha'ul Mofaz issue a written apology, enact Knesset legislation preventing future episodes and allow increased US monitoring of Israel's security-related exports through the signing of a joint memorandum that accepts the sanctions.

Mofaz canceled a planned trip to the US following the announcement of the increased US demands. Israeli officials claim the meeting was cancelled due to events in Israel, though a date for another meeting was not set.

Mofaz had wanted to discuss the lifting of sanctions against Israel and the ending of the crisis between the countries and was prepared to capitulate to nearly all of the American demands.

Members of the Israeli delegation in Washington D.C. told Israel's largest daily Yedioth Acharonot that after Israel announced it would give in to most of the US demands, the American delegation, made up of Pentagon and State Department officials revealed more demands and displayed contempt for the Israeli delegation.

The US, who torpedoed Israel's multibillion-dollar sale of Phalcon strategic airborne radar systems to China in 2000, continues to sell arms to countries such as Saudi Arabia, who do not recognize the right of the Jewish State to exist.

As that crisis snowballs, the FBI investigation of AIPAC seems to be turning toward employees of Israel's US Embassy. The FBI is demanding that Naor Gilon, head of the embassy's political department, be interrogated in connection to the case of Pentagon Iran expert Lawrence Franklin, who was caught in an FBI sting operation passing on classified material relating to Israeli security.

Embassy officials usually have immunity and are not allowed to be investigated by foreign countries regarding issues related to their work. Israel has offered the FBI the possibility that Gilon would respond to questions in writing.

The FBI request indicates that Israel is now suspected of being involved in the Franklin case, which until now was portrayed as involving only the AIPAC Israel lobby group.

Israel's Channel 10 reported Wednesay that FBI agents are on their way to Israel in order to take further steps with regard to the case.