Israel has dropped out of a multi-billion dollar joint venture with Swedish defense firm Saab to develop new fighter jets for India because of US pressure.

Israel Aerospace Industries was planning to develop a new model of the Swedish-made Gripen fighter jet with its manufacturer, Saab, to compete in a tender to sell the planes to India's armed forces, the Jerusalem Post said.

But the state-owned firm backed out on the orders of the Israeli defence ministry "after the Pentagon expressed concern that American technology, used by Israel, would be integrated into the Gripen," the newspaper said.

It said Washington had likely pressured its close ally because two major US aircraft manufacturers -- Boeing and Lockheed Martin -- are also participating in the tender for more than 120 aircraft estimated at 12 billion dollars (8.5 billion euros).

"This is not the first time that the defence ministry forced a local company out of a deal due to concerns that competition with American companies would cause friction with the United States," it said.

In 2008, the defence ministry ordered Israel Military Industries not to submit a bid for a 500 million-dollar deal for the manufacture of a new tank for Turkey because it would have been in competition with US firms, it said.

Israel replaced France in 2007 as India's second-largest arms supplier after Russia and could grab the number one slot through a vast array of defence agreements already signed with New Delhi.

In May, India took delivery of its first Airborne Warning and Control System (AWACS) plane as part of a deal with Israel worth more than one billion dollars.

However, Saab Gripen’s spokeswoman Anna Lindh finds it doubtful that any pressure would have been laid upon the Israeli company from the American defense ministry.

“This was just one of several companies that we’ve had discussions with. We’ve never had any collaboration with the Israeli company”, she said to The Swedish Wire.

In March Saab announced that Italian Selex Galileo was awarded the contract to develop the active electronically scanned array (AESA) radar for its Gripen Next Generation (NG) aircraft.