The Prime Minister’s Office declined comment Monday on whether Ambassador to Washington Michael Oren was called to Jerusalem last weekend to discuss US anger that Israel is blocking a former intelligence official from testifying in a US court case against a Chinese bank suspected of money laundering to Palestinian terror groups.

“We are not commenting,” one official in the Prime Minister’s Office said.

Yediot Aharonot reported on Monday that Oren was called back to take part in an “emergency” meeting stemming from US anger that Jerusalem allegedly backed out of an agreement to allow an intelligence official be deposed in a case against the Bank of China brought – at Israel’s behest in 2008 – by the parents of Daniel Wultz, whom an Islamic Jihad terrorist had killed in Tel Aviv two years earlier.

According to the suit, the Chinese bank funneled money from Iran to Islamic terrorists in a money-laundering scheme.

An extensive piece in The Wall Street Journal three weeks ago said that the intelligence officer’s testimony was crucial, because he was expected to testify that he was present at 2005 meetings when Israel officials told Beijing that Bank of China accounts were being used to fund terrorist organizations. This testimony is needed, the report said, to show the Bank of China was culpable for refusing to act to close the accounts.

The paper said that the court case put Prime Minister Binyamin Netanyahu in a bind between nurturing a growing relationship with China, and fighting terrorism.

Yediot reported that Beijing threatened to cancel Netanyahu’s trip there in May if the former intelligence official was allowed to testify.

Netanyahu, who has built a reputation over the years as uncompromising in his battle against terrorism, has also recently characterized developing a closer economic relationship with China as one of the country’s main strategic priorities.

Complicating matters even more, the Journal wrote, is that if Israel prevents the testimony, Netanyahu would risk alienating two key congressional allies, Rep. Ileana Ros-Lehtinen (R-Florida), a member of the House Foreign Affairs Committee who has urged the prime minister to allow the testimony, and House Majority leader Eric Cantor (R-Virginia), who is the first cousin of Wultz’s mother.

Netanyahu’s dilemma carries faint echoes of 2000 when Israel – under heavy US pressure – backed out of multi-billion dollar deal to sell Phalcon airborne early warning and control systems (AWACS) to China. Israel had to pay China a $300 million compensation package for scuttling that deal.

While the Prime Minister’s Office had no comment on the matter, International Relations Minister Yuval Steinitz told Israel Radio that he was convinced Netanyahu was “working for the benefit of Israel’s interests.”

Israel’s interests, he said, were “certainly complex” and include an uncompromising fight against terrorism, the best possible relationship with the US, and relations with China – which he characterized as strategically and economically important.

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