Israel's blossoming China ties have become a casualty of superpower rivalry
China’s investment ambitions in Israel were dealt a heavy blow last week when an affiliate of Hong Kong billionaire Li Ka-shing’s CK Hutchison Holdings lost a bid for one of the world's largest water desalination plants to be built in Israel.
Hutchison Water International Holdings, the flagship of the Hong Kong-based conglomerate, lost to IDE Technologies, a local company, the bid for the $1.5 billion Sorek B desalinization plant coming up near Israeli military base of Palmachim.
The Israeli authorities’ decision to deny the tender to Hutchison was not unexpected though, as it came amidst the rising frictions between Washington and Beijing and, more significantly, weeks after the US Secretary of State Mike Pompeo’s whirlwind visit to Tel Aviv to warn Israel against the security threat posed by China-based investments.
“We do not want the Chinese Communist Party to have access to Israeli infrastructure, Israeli communication systems, all of the things that put Israeli citizens at risk and in turn put the capacity for America to work alongside Israel on important projects at risk as well,” Pompeo told Israeli media after his meeting with Israeli Prime Minister Netanyahu.
The US Assistant Secretary of State for Near Eastern Affairs David Schenker also urged Israel to be cautious about the Chinese firms “that are desperate for capital and could become targets for predatory investment.”
Although Israel, buckling under US pressure to scrutinize potential investment from China, announced in October 2019 to form a new advisory panel to vet the national security aspects of foreign investment, the US maintains that they still fall short.
Therefore, it’s obvious that Israel’s decision to choose a domestic bidder to build the strategic desalination plant was aimed at placating Trump administration. Having found itself caught in the conflict between Beijing and Washington, Israel was forced to stand by its longtime strategic ally at the expense of its blossoming ties with the new partner.
Earlier, the US had locked horns with Israel over the transfers of Israeli military technology to China and Israeli concession to a Chinese company to operate a terminal in the port of Haifa. But Israel refused to roll back a signed deal with China saying that Washington knew about these deals in advance and did not express a clear objection. However, this time, the US ensured it signaled its objection unmistakably to Israel on time, so that Israel was left with no option.
But the Israeli Finance Ministry and Energy Minister Yuval Steinitz, who was involved in the tender, attributed the choice of IDE to the low-cost of their bid.
Anyhow, the decision is expected to cause a rift in Israel’s growing relations with China which has expanded significantly over the last few years as a result of the former’s persistent efforts to woo the latter’s investment.
Now China plays a major role in several of Israel’s infrastructure projects and is its second-largest commerce partner.
Israel’s imports from China more than doubled over a decade, reaching $10.46 billion by the end of 2018, while the country’s exports to China almost quadrupled reaching $4.79 billion, according to World Bank data.
Chinese investors also enjoy access to several of Israel’s tech companies, with the total financing from 2016 to May 2020 amounting to $1.43 billion according to the IVC Research Center in Tel Aviv. The Chinese acquisitions among startup exits or stake sales were worth $6.2 billion during the same period. The total Chinese financing worth $33.15 billion and the exits worth $73.67 billion testify to the growing role of China in Israel.
In addition, China’s Shanghai International Port Group is about to run a new container terminal in Haifa for 25 years starting in 2021, while Israel enjoys a pivot point in China’s Belt and Road project.
And Chinese companies and investments are not so unpopular in Israel as they are in the US and Europe. As many as 66 percent of Israelis view China favourably, one of the highest ratios in the world and well above the 26 percent in the US, according to a Pew Research survey.
So, although Israel, caught up at the center of an escalating tug of war between two increasingly bitter rivals, decided not to antagonize its long-term ally, it cannot afford to keep China at bay for a long time.
The Jewish state is yet to learn how to balance China’s interests in its technologies and the US sensitivities concerning the communist state.
Muhammed Nafie is a Dubai-based journalist and writer.