BY : Forbes



Even as China continues to resist stronger international sanctions against Iran, it is reportedly planning to sell Iran an advanced fighter jet based on a model that Israel developed with U.S.-made components and taxpayer money.

Word of the deal first surfaced last week in the Russian media. According to those reports, China plans to sell 24 Chengdu Jian-10 (J-10) fighter jets to the Iran Aircraft Manufacturing Industrial Co. for $1 billion between 2008 and 2010. The J-10, unveiled by China this past January, has enough of a range to help conduct air strikes on Israel.

There's reason to take Russian reports seriously. "Some elements of the Russian press are very well informed and sometimes it's among the best because of the deep ties between the Chinese defense base and large Russian exporters," said James Mulvenon, director of the Center for Intelligence Research and Analysis and a specialist on the Chinese military.

Indeed, Russian industry would have a stake in the J-10 exports. Kremlin-friendly defense conglomerate Rosoboronexport recently signed a contract worth $150 million to deliver 50 aircraft engines to be installed on the Chinese J-10.

China has already sold Iran 43 older fighter jets and eight utility aircraft in exchange for oil. But the J-10--operationally competitive with the U.S. F-16 Falcon, developed by General Dynamics (nyse: GD - news - people ) and Lockheed Martin (nyse: LMT - news - people )--is more sophisticated and may suit as, say, the escort necessary to allow a missile-carrying warplane to reach targets in Israel.

The plane's 3200 kilometer range "is more than enough to get from Western Iran and Israel and back without refueling," observed Jon Wolfstahl, a senior fellow studying Iran and nonproliferation with the Center for Strategic and International Studies International Security Program. He hastened to add, however, that he wasn't commenting on whether such a mission would be successful, given Israel's superior air defense systems.

Chinese and Iranian officials have so far publicly denied a J-10 deal. But they generally haven't been open to scrutiny of their military hardware or plans. Notably, when Air Force Gen. Paul Hester became the first American military commander to visit the Jining Air Base in China this past summer, the Chinese army officials there refused to even show him the J-10 at the site.

Particularly galling to the Americans is the J-10's likely linage--U.S. taxpayers may have indirectly helped China develop it. The J-10 is considered by many military experts to be partially based on the defunct Israeli Lavi fighter jet platform, which itself was derived from the American F-16. The Lavi was intended to be the Jewish State's home grown, world-leading aircraft. At first the U.S. cooperated through joint research, $1.3 billion in foreign aid and the use of engines from Pratt & Whitney, a division of United Technologies (nyse: UTX - news - people ).

But the Reagan administration shifted course--it didn't want competition on the arms market--and exerted enough pressure on Israel to kill the program in the late ‘80s. Israel later shared some of the plans and research for the Lavi with China, according to military experts, reports in The Washington Report on Middle East Affairs, and in Defense News, an industry trade journal.

"It's sort of an ironic twist, since the J-10 is controversial because it incorporates technology from the Israelis," noted Mulvenon. (No one has alleged Israel broke any laws or secrecy rules and there are varying theories as to why Israel might have shared its plans.)

Meanwhile, China is bulking up its own military, as well as its arm sales. China announced in March that it would increase its military budget by 17.8% in 2007 to $45 billion. But according to some Western analysts, that number doesn't include major weapons purchases and is vastly understated. The Heritage Foundation, a hawkish think tank in Washington, D.C., estimates China's actual military spending may exceed $400 billion a year.