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"I am convinced the crisis in U.S.-Israel relations was predicated on mistaken information they had," Defense Ministry director general Amos Yaron told Haaretz on Wednesday on the eve of his retirement later this month.

"The entire affair is a misunderstanding, as far as I'm concerned, and nothing more," Yaron said. "I believe that in the normal course of things, it should have been resolved in a half-day meeting between me and my Pentagon counterpart, not the way the Americans handled it."

In his first public remarks on the affair, which tainted defense relations with the U.S. during the past year, Yaron said the Pentagon suspected Israel was conducting huge covert arms deals with China. "They thought we were doing terrible things, continuing the Phalcon project, selling unmanned aerial vehicles, as well as whole slew of other things. It took them a whole year and a thousand questions to understand that everything I said was true."

The Pentagon shunned Yaron for the year - the crisis year - and refused to renew relations with him even after Defense Minister Shaul Mofaz and U.S. Secretary of Defense Donald Rumsfeld reached a written understanding that would end the dispute. "I didn't deceive the Americans, I didn't cheat them, I didn't break any American law or regulation, didn't breach any agreement or understanding, I didn't hurt anything even related to the U.S.," Yaron said.

Five years ago, the U.S. forced Israel to halt the sale of its Phalcon drone to China. Yaron said that he knew then "there was a deep-seated change on the U.S. side toward China, and we would have to navigate policy accordingly, which I did."

The contract to sell China Harpy RPVs, which ignited the crisis, was signed before Yaron took office. "Nothing happened on that project the Americans didn't know about. They knew we sold the RPVs and they knew we didn't do any upgrading. We had a contractual obligation to repair parts, and I didn't consider that something cardinal that I had to deal with. But the moment the whole thing broke open, and the U.S. expressed its concern, we froze the matter until it was clarified with them."

The problem, Yaron says, was that the Americans thought "that they had some information that we had done something above and beyond repair parts of drones."

Were you disappointed with how the Americans treated you?

"I was very disappointed. I invested years in cementing ties, and I really like and venerate the U.S. which has done so much for Israel in the political and defense arenas [Yaron served as military attache to Washington in the 1980s - A.B.] I am convinced the whole thing hinged on misinformation, and am convinced that in time, it will all take on different proportions."

Yaron has no complaints about the support he received from Mofaz and Prime Minister Ariel Sharon. He asked to leave the office a year ago, but when the crisis with the U.S. broke out, he decided to stay until the matter was resolved. The agreement signed two weeks ago anchors previous oral agreements in writing. In addition, Israel promised to regulate exports of dual-purpose technology (with military and civilian applications).

Yaron leaves the ministry after six years, feeling satisfied. Defense exports increased; during his tenure $18 billion in contracts were signed, as opposed to the $12 billion in the preceding six years. The Defense Ministry under his management filled a vital role in the withdrawal from Lebanon, in the strategic agreement with the U.S. that accompanied the Camp David agreement (which was never signed), in the construction of the separation fence and in the disengagement plan.

Yaron was one of the first to advocate a fence and he promises its construction will be completed by the end of the year, except for the areas still facing legal appeals.

Yaron was liked by workers, had good working relations with the Israel Defense Forces and the Finance Ministry, and was considered a darling of the prime minister. Now he plans to return to the business sector. He has no interest in going into politics.