Outgoing Defense Secretary James Mattis rejected a request from Israeli Prime Minister Benjamin Netanyahu to soften the United States' conditions for a $500 million arms deal between Israel and Croatia for the sale of 12 F-16 fighter jets, an Israeli official told me.

Why it matters: Mattis' position practically killed the deal, according to the Israeli official, who is involved in the negotiations. In order to give a green light to the deal, the U.S. demanded that Israel remove the Israeli systems installed in the F-16s and return the jets to their original condition before transferring them to Croatia. The Croatians responded that they would cancel the deal if they couldn't get the "upgraded" Israeli version of the F-16s.

The Israeli official told me Netanyahu called Mattis two weeks ago — before the latter's resignation — and asked him to soften the U.S. terms for the deal. Mattis told Netanyahu he had gone a long way for Israel on several issues but couldn't show any flexibility regarding this deal.

Netanyahu considered calling Marilyn Hewson, the president and CEO of Lockheed Martin, which manufactures the jets, to ask for help in getting the deal approved but ultimately decided it was a lost cause, according to the Israeli official.

What they're saying: The Israeli official told me, "For reasons we don't fully understand, the Americans hardened their conditions and, apparently, we misread their position on the deal. Practically, the F-16 deal with Croatia is dead and we don't think it is possible to get an agreement that will reconcile the U.S. conditions and the Croatian demands in the tender."

The official added that Israel will have no other choice but "to apologize to Croatia for the deal falling apart and move on."

Netanyahu's office didn't comment. The Pentagon and the State Department also didn't respond to emails with requests for comment.

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