Israeli arms dealers have negotiated and sold military equipment to a number of countries defined by Israeli law as enemy states in recent years with the full acknowledgment and approval of the Defense Ministry, Haaretz has learned.

The ministry has okayed negotiations and sales between Israeli dealers and several Arab states including Iraq, Libya and Yemen, say the sources.

Attorney General Menachem Mazuz recently approved the Tel Aviv District State Prosecutor's Office decision to close an investigation against dual Israel-U.S. citizen Shlomi Michaels, whose company, the Kurdistan Development Organization (KODO), was suspected of illegal arms deals with Iraq.

A police spokesman confirmed they had opened an investigation into Michaels dealings in 2006. Michael's company Kodo used to be partly owned by former MK Dani Yatom, who is also a former head of the Mossad secret service. The police spokesman stressed that at no point in the …