By Paul Eckert
WASHINGTON (Reuters) - The Obama administration will tell Congress on Friday it plans to upgrade Taiwan's existing fleet of F-16 fighter jets, said sources involved in a deal likely to anger China while disappointing a Taiwan government that was seeking more advanced aircraft.
U.S.-Taiwan Business Council President Rupert Hammond-Chambers, whose group lobbied for the sale of more advanced F-16 planes, said announcement of the upgrade was "imminent." Congressional sources said consultations with senior lawmakers' staff were expected on Friday.
U.S. arms sales to Taipei are a major point of friction with China, which claims sovereignty over the self-ruled island and has never renounced the use of force to bring Taiwan under its control, especially if Taiwan formally seeks independence.
U.S. President Barack Obama's apparent compromise angered Taiwan's backers.
"It's a bad decision. It undermines Taiwan's ability to modernize its fighter fleet," said Hammond-Chambers.
Taiwan had requested to buy 66 late-model F-16 fighter planes built by Lockheed Martin Corp. Taiwan wants the newer F-16s to bolster its early-model F-16 A/Bs sold by President George H. W. Bush in 1992.
The F-16 decision has loomed over U.S.-China relations throughout this year as Washington and Beijing have sought to stabilize ties before both enter political seasons in 2012, when President Barack Obama faces re-election and China's Communist Party leadership changes hands.
A spat over arms sales would add to heated disputes over human rights, Internet censorship, China's exchange rate policies and huge trade surplus with the United States, and counterfeiting. China, which holds more than a $1 trillion in U.S. government debt, complains about U.S. fiscal management.
China is almost certain to complain loudly about Obama's action, which will result in upgraded radar and other improvements to Taiwan's fleet of 150 F-16 A/Bs. Whether it will retaliate is another question.
The Obama administration's authorization of the sale of $6.4 billion in arms to Taiwan in January 2010 prompted China's military to suspend all meetings with their Pentagon counterparts and to threaten sanctions against U.S. firms.
Since 2006, the United States has balked at providing the more advanced F-16 C/D models, potentially valued at more than $8 billion, apparently for fear of angering Beijing
Friday's decision "appeases China on U.S. arms sales to Taiwan and ignores Congress's view on this matter," said Hammond-Chambers.
A Senate Republican aide said the administration was to brief the staff of congressional leaders and key foreign policy lawmakers on Friday. Official notification of Congress on the arms package, which the Washington Times newspaper put at $4.2 billion, was not expected until next week, the aide said.
"CAPITULATION TO COMMUNIST CHINA"
Senator John Cornyn of Texas, home to an F-16 assembly line that without new orders could close and shed thousands of jobs, reacted angrily to the decision that followed months of his tough lobbying for sales.
"Today's capitulation to Communist China by the Obama Administration marks a sad day in American foreign policy, and it represents a slap in the face to a strong ally and long time friend," he said in a statement.
"This sale would have been a win-win, bolstering the national security of two democratic nations and supporting jobs for an American workforce that desperately needs them," said Cornyn, who this week introduced legislation to require the Obama administration to sell 66 new F-16C/D jets to Taiwan.
The United States is committed under the 1979 Taiwan Relations Act (TRA) to supply Taiwan with the weapons it needs to maintain a "sufficient self-defense capability."
Tommy Vietor, spokesman for the White House National Security Council, said the U.S. government does not comment on foreign military sales "unless formal congressional notification has taken place."
He added: "Meeting Taiwan's defense needs is a deep and enduring commitment of the United States and this administration is committed to doing so under the terms of the
TRA."
The Pentagon's annual report on China's military power, published this month, noted that Taiwan was falling behind in the face of "ambitious military developments on the mainland" -- including China's deployment of between 1,000 and 1,200 ballistic missiles opposite the island.
Chinese analysts expect a vehement reaction to the announcement because of the sense among China's public that it is growing more powerful as the United States stumbles, and should push back against perceived U.S. insults.
Earlier on Friday, the Chinese Foreign Ministry repeated its opposition to U.S. arms sales to Taiwan. Washington should "avoid any unnecessary disturbance and damage to bilateral ties," the ministry spokeswoman Jiang Yu told reporters.
(Additional reporting by Matt Spetalnick, Jim Wolf and Susan Cornwell in Washington, and Chris Buckley in Beijing; Editing by Vicki Allen)