By Jim Wolf and Jonathan Standing
WASHINGTON/TAIPEI (Reuters) - The Obama administration formally notified the U.S. Congress on Wednesday of a potential $5.3 billion upgrade of Taiwan's aging fleet of U.S.-built F-16 fighter jets despite China's opposition to such arms deals.
The retrofit of 145 Lockheed Martin Corp F-16 A/B aircraft will give them essentially the same capabilities as late-model F-16 C/Ds that Taiwan sought to deter any attack, U.S. officials told reporters ahead of the notification.
In Taipei, Taiwan's defense ministry said the upgrade of its F-16s will contribute to regional peace by improving its defense capability in the face of what it called a continued threat from China.
Taiwan would continue to press for 66 new F-16s to replace its F-5 fighters that are more than 30 years old, the ministry said in a statement.
Beijing deems Taiwan a renegade province and sees U.S. arms sales to the self-ruled island as the top obstacle to improved ties between the United States and China, now the world's two biggest economies.
In the U.S. Congress, 47 of the 100 U.S. senators and 181 of the 435 members of the House of Representatives have written to President Barack Obama since May to urge him to sell Taiwan at least 66 late-model F-16 C/D planes.
The Pentagon's Defense Security Cooperation Agency said in its notice that Taiwan had requested 176 state-of-the-art Active Electronically Scanned Array, or AESA, radar sets, in addition to a long list of advanced air-to-air missiles, laser- and GPS-guided bombs and other weapons systems for the F-16s sold by the United States in 1992.
AESA radar "offers a significant capability that would be able to maintain Taiwan's qualitative advantage" over currently deployed Chinese fighters, said Mark Stokes, a former Pentagon China desk chief who heads the Project 2049 Institute, an Asia security research group.
Raytheon Co and Northrop Grumman Corp (NOC.N) are expected to compete to supply the AESA radar sets.
The Pentagon notice to Congress said Taiwan is seeking in the package 140 of the latest version of heat-seeking Raytheon AIM-9X Sidewinder missiles and 128 Joint Helmet-Mounted Cueing systems, which let pilots fire on targets from multiple angles without turning their heads or the plane.
U.S. "BAMBOOZLING" CHINA
There was no immediate reaction to the U.S. announcement from Beijing.
But in comments posted earlier on Wednesday on the website of the People's Daily, the official newspaper of China's ruling Communist Party, a People's Liberation Army major general said the United States had withheld from selling new F-16 jets "because it foresaw a strong reaction from mainland China."
"It was wise for President Obama not to approve selling F-16 C/Ds to Taiwan, but approving the upgrades of the F-16s was totally in error," Major General Luo Yuan said.
"The United States is trying to swindle and bamboozle the Chinese people by using a new guise for old tricks in selling weapons to Taiwan, and China should copy Russia in implementing smart retaliation," Luo was reported as saying.
China has shown no sign of ending an arms build-up that is focused on Taiwan. Previous U.S. arms sales to Taipei have riled Beijing, which has never renounced the use of force to bring the island under its control.
Taiwan's military supply options are limited to the United States, with other countries refusing to sell it weapons, fearing an angry Chinese response.
The Obama administration is required by law to notify Congress of any proposed major arms sale. The sale may go ahead after 30 days unless Congress enacts a joint resolution blocking the sale in the allotted time.
It was unclear whether any lawmaker would try to block the deal. Senator John Cornyn has proposed mandating the sale of at least 66 new F-16C/D fighters to Taiwan as an amendment to legislation now being considered on the Senate floor.
Cornyn is a Republican from Texas, where Lockheed Martin manufactures the F-16. He has emphasized the jobs that building new planes would bring along with the Taiwan Relations Act of 1979, which requires the U.S. government to provide Taiwan sufficient arms for its defense.
Senate aides said Wednesday it was uncertain whether Cornyn's amendment would be voted on. He also has said he may attach it to the 2012 Defense Authorization bill expected to be considered on the Senate floor in October or November.
(Additional reporting by Christine Lu in Taipei; Ben Blanchard and Christopher Buckley in Beijing, and Susan Cornwell in Washington; Editing by Anthony Boadle)