Vettel admitted on Thursday in Austria that he was "surprised" when Binotto phoned and told him that his contract would not be extended beyond the 2020 season, having previously understood that he would be kept on.
The team subsequently announced that it had signed Carlos Sainz from McLaren.
Binotto reiterated on Friday that over the winter Vettel was indeed the team's first choice, but the crisis and the rule changes that came with it triggered a change of plan.
"Certainly we have always said to him during the winter time privately and publicly that he would have been our first choice, which I confirm," Binotto said.
"It's normal that during the winter time many drivers ask us if there are any opportunities to drive for Ferrari, so we have certainly been contacted. That didn't change our position, so Seb was our first choice.
"What happened since then? I think the virus and pandemic situation, which changed the entire world, not only our motorsport, our F1. The budget cap has been changed by quite a lot, and is a lot more strict, the regulations have been postponed from '21 to '22, which somehow was something important for us.
"Cars which have been frozen, or almost frozen, for 2020 and '21. So let's say the entire situation has changed.
"And on top of that the season has not started, so there has been no opportunity even for Seb to be back on track to prove how much he was really motivated to drive for Ferrari, which has been somehow unfortunate for him.
"So during the shutdown as Ferrari we had to eventually reconsider our position. We took a decision, so certainly that was our decision, that is our responsibility, and we communicated to him.
"I heard that he was surprised – I remember that he was surprised, yes certainly, I understand it, it's pretty normal to be surprised. While he accepted our decision I would say even today he's not fully happy with it, which again I would say is something which is normal and obvious."
Despite the obvious tensions in the camp given the impending split, Binotto was keen to praise Vettel and the contribution he has made over the years.
"I think it has been a great period, five years so far, six with the current season. He's a great champion, but he's as well a great person. I think that everybody in Ferrari, our fans, the people working internally, really love the time with him.
"I think that's something we fully respect. I personally respect him a lot, him as a professional and as person, and I think that is fully unchanged compared to our decision."