The United States for 20 months financed the expenses of the 202-member Israeli arms purchasing mission in New York in a unique arrangement approved by Pentagon officials. But the financing has now been terminated by Israel rather than risk disclosure of details of the expenses.

According to Lt. Gen. Howard M. Fish, director of the Defense Security Assistance Agency and the Pentagon's top arms salesman, the United States provided about $2.8 millionin foreign military credits to pay the Israeli mission's expenses from December, 1975, until cancellation of the arrangement earlier this month.

A breakdown provided by Fish showed that during the first 16 months the U.S. financing went for such items as telephone, telegraph and teletype charges ($550,000); consultation fees for marketing research, engineering and quality control ($500,000); U.S. legal fees (260,000); computer services ($200,000) and U.S. travel by the Israeli purchasing officials ($70,000).

Responding to a Freedom of Information Act request from The Washington Post, the Pentagon refused to make available the invoices which had been submitted by the Israeli arms mission to back up requests for payments.

Charles W. Hinkle, director of the Pentagon's freedom of information staff, said the Israeli mission had requested that the invoices be withheld on grounds that disclosure of this detailed information would be "prejudicial to the security interests" of the mission.

The possibility that details of the expenses might be disclosed apparently lies behind Israel's decision to discontinue the U.S. financing, according to Pentagon officials. The Israeli decision was made known in a letter to the Pentagon Aug. 9 from Josie Ciechanover, director of the New York mission.

The Israeli arms purchasing mission, which employs almost twice as many Israelis and Americans as the Israeli embassy in Washington, is unique in both its size and sophistication. It is also the only such foreign organization in the world financed by U.S. funds.

Fish, who approved the financing plan two days after a request from Israel on Dec. 19, 1975, defended it in an interview as "a perfectly legitimate arrangement" which is legal and proper under the Foreign Military Sales Act. He said the administrative expenses of the Israeli purchasing mission have been classified as a "defense service" which can be financed under U.S. law.

The legislators most directly involved in the financing of Israeli arms, Sen. Hubert H. Humphrey (D-Minn.), chairman of the Senate Foreign Relations Subcommittee on Foreign Assistance, and Rep. Lee Hamilton (D-Ind.), chairman or the House International Relations Subcommittee on Europe and the Middle East, said they knew nothing of the financing arrangement.

Hamilton has sent a letter to the Defense Department asking for details.

For the past several years the United States has provided Israel, as part of a $2.2 billion annual aid package, with $1 billion annually in foreign military sales credits, $500 million a gift and $500 million a loan.

The arms mission expenses must come out of the loan portion, according to the Pentagon ruling. Such loans to other countries must be paid back with interest in 7 to 12 years but Israel, under a special provision of law, is permitted to make its repayments over more than 20 years with a grace period of 10 years on repayment of principal.

"I don't view this as taxpayers' dollars [going to the Israeli arms mission]. This is credit financing which Israel has to pay back with interest," said Fish.

The purchasing mission in New York, which is a branch of the Israeli Ministry of Defense, make about 30 per cent of its purchase through the Pentagon and the rest directly from private firms. Pentagon officials have described it as highly effective in obtaining the best prices and delivery schedules for Israeli purchases.

The mission's direct link with U.S. arm manufacturers is also an important source of information and expertise, according to defense officials. "They've come in and asked for things that were still so secret I wasn't even cleared to know about them," an official said.

In addition to being the largest recipient of U.S. arms aid, Israel is now a major arms producer and exporter that competes with U.S. manufacturers and on some occasions has elashed with U.S. arms sales restrictions. Israeli defense officials have said the U.S. financed operations in NEW YUork do not involve Israeli arms sales, but only purchases. Fish said he has no indication" that the U.S. financing has contributed to the Israeli sales effort.

According to Fish, no entertainment expenses of the Israeli mission were financed by the U.S. payments. The United States made clear from the beginning that, unlike administrative expenses, the salaries of the Israeli of American personnel in the mission could not be charged to the U.S. credit program.

U.S. officials said the Israeli mission operates under extremely heavy security because of concern about potential terrorist attacks. A Pentagon official who visited the New York office said electronic scanning devices inspect every visitor individually, calling it "tightest security I have ever see."