Officials on both sides of the failed transaction confirmed the deal was dead following a meeting between officials in Zagreb. Israeli Director-General of the Ministry of Defense Udi Adam blamed the deal's breakdown on "problems that could not have been expected and are not under the control of the countries," according to a statement carried by the Jerusalem Post.
"Israel has officially informed us that it cannot get an approval from the United States for delivery of the planes to Croatia," Croatian Defense Minister Damir Krsticevic told reporters Thursday.
Problems arose over "who will pay for the conversion, because the US and its contractors Lockheed Martin have to do the work because they're the ones who own the technology and intellectual property… I'm not involved in the negotiations, and I don't think they [Israel and Croatia] have a choice, because this is intellectual property of Lockheed Martin, and they need to get [Lockheed Martin's] approval to do the transfer," US Ambassador to Croatia Robert Kohorst said in December.
Croatian media reports said US defense companies complained the aircraft had received Israeli upgrades, thus stripping Lockheed of the opportunity to modernize the planes and perform maintenance on them, according to Reuters.
The US State Department has contract rights and can prevent third-party transfers of the aircraft without its sanction. It's not clear if the State Department was responsible for telling the Israelis the deal is off or some other US government conduit.
Just last month, US Secretary of State Mike Pompeo pinned the deal's potential breakdown on ex-Defense Secretary James Mattis, saying, "I'm in favor, but Defense Secretary Mattis is against [the sale] — it's him who is blocking it." But Mattis is no longer a member of the Cabinet. He resigned following Trump's announcement that the US would be withdrawing troops from Syria and has been replaced by Acting Secretary of Defense Patrick Shanahan.
Croatia, a NATO member, has sought replacement aircraft for its MiG-21s, which entered service in 1959, according to Israeli media reports. The arms deal, agreed to in January 2018, would have been worth approximately $500 million. It would have been Croatia's biggest arms purchase since becoming a separate nation following the breakup of Yugoslavia.
US officials have privately complained that Israel would unfairly profit from the sale, Israeli officials have said on the country's Channel 10 TV network.