Prime Minister Ehud Olmert is expected to hold consultations after Sunday's cabinet meeting with Defense Minister Amir Peretz and top security officials on the purchase of a short-range rocket defense, as sources in Olmert's office denied Saturday night that this issue was a source of tension between him and Peretz. Olmert and Peretz's relationship, badly strained by the war in Lebanon, has worsened in recent weeks amid clear signs that Olmert is interested in replacing Peretz as defense minister. Sources in Olmert's office said there was nothing to certain Friday radio reports, which had indicated that Olmert and Peretz were on a collision course over the rocket defense to defend Israel against Kassam and Katyusha attacks. The sources also said that Peretz had both the right and obligation to choose the system. On Thursday, Peretz chose the system designed by Rafael - Israel's Armament Development Authority - as the one the defense establishment will develop. However, a decision still has to be made on whether it is wise to invest an estimated $300 million in a system whose effectiveness has yet to be determined. Another question that has to be addressed is where the money for the rocket defense will come from. Political opponents of Peretz accused him of deciding on Rafael because thousands of Rafael employees joined Labor in last week's party membership drive, in hopes of garnering support for his re-election bid. Peretz has also tried to save jobs at Rafael by preventing Olmert and Finance Minister Avraham Hirchson from implementing their plans to privatize the Israel Military Industries, including a plan that would merge the two companies. Peretz's associates said that one of the reasons for choosing Rafael was to help create jobs in Israel instead of exporting them to the US. But sources close to both Olmert and Peretz denied that the decision was connected to Labor Party politics. "[The Labor race] was not a factor in any way," a source close to Peretz said. "The decision was made for professional reasons by top IDF officers and it would be ugly to connect it with Labor."