Israel employs Chinese cos operating in Iran

Donald Trump, Benjamin Netanyahu  photo: Kobi Gidon, Laam
Donald Trump, Benjamin Netanyahu photo: Kobi Gidon, Laam

Israel calls on European countries to join the US sanctions on Iran but turns a blind eye to Chinese companies working in Israel that ignore the sanctions.

"Anyone doing business with Iran will not be doing business with the US," US President Donald Trump tweeted on August 7. Israel's leaders of course welcomed Trump's statement. Prime Minister Benjamin Netanyahu did not confine himself to congratulations; he declared, "I call upon the countries of Europe, which talk about stopping Iran, to join this measure. The time has come to stop talking and to take action, and that is exactly what the US has done and what Europe should do."

Other politicians followed in Netanyahu's footsteps. Minister of Defense Avigdor Liberman said, "The renewal of sanctions on Iran is a necessary step, particularly from those who are fighting terrorism. The (nuclear) agreement brought billions of dollars to the regime (in Iran), which used that money not for the benefit of its citizens, but for terrorism and subversion all across the Middle East. This is not assistance to the Iranian economy, it is not assistance to the Iranian people, it is aid to the Iranian regime that is spreading terror on European soil, including recently. Therefore, we very much support US President Donald Trump's decision [to sanction Iran]." Opposition MK Yair Lapid (Yesh Atid) said, "The continuation of the American sanctions on Iran is another courageous step led by President Donald Trump. Until the Iranian people succeed in shaking off the tyrannical regime, the ayatollahs will have to choose: a nuclear program and support for terror, or a weak economy and harm to their own people."

Wait a minute, though. Before we tell the Europeans what to do and complain about their hypocrisy and greed, what about us, the Israelis? Is Israel meeting the standard set by Trump according to which everyone doing business with Iran will not do business in Israel? Shouldn't we also stop talking and start doing?

An investigation by "Globes" found that extensive business activity in Iran is not a factor in the attitude towards the activity of foreign corporations in Israel. Foreign corporations, mainly Chinese companies, that ignore the Trump administration's sanctions are blithely winning infrastructure tenders while apparently violating the provisions of a forgotten law enacted only six years ago in order to prevent this.

Economic reality is stronger

It is important to first make it clear that Israeli companies do not trade with Iran and are not active on the Islamic Republic's territory. This state of affairs has nothing to do with Trump or the nuclear program; it is a result of the long-term security situation between the countries and laws from the pre-state British Mandate period and the Trading with the Enemy Ordinance dating to WWII.

What, however, about foreign companies with activity in Iran? Does business activity there create any restriction or difficulty whatsoever in doing business in Israel, as Trump ordered or as the Arab boycott was used against Western countries operating in Israel? The answer is no.

In 2016, after the nuclear agreement was signed and the UN Security Council's sanctions against the ayatollahs' regime were removed, international companies from all over the world began doing business in Iran. These included quite a few Western companies, such as US companies GE, Honeywell, and Baker Hughes; German companies Siemens and Daimler; Italian company Ansaldo STS; and French companies Peugot and Renault. US company Boeing signed a $20 billion deal to supply airliners to an Iranian airline in an attempt to make up the gap between it and its main competitor, European company Airbus, which had already begun delivering planes. Most of these companies have already announced the liquidation of their business in Iran in response to the Trump administration's declaration of renewed sanctions and after the US president rejected the European Union's request to exempt European companies from the sanctions.

This week, for example, French energy giant Total SA announced that it was closing down its offices in Iran and canceling a huge investment in development of a natural gas field in Iran on the eve of the planned extension of sanctions to energy sectors in November.

Not everyone, however, is abandoning their activity. Chinese, Russian, and Indian companies have not yet announced that they are leaving Iran; they are probably less exposed to the effect of US sanctions. Russian and Indian companies have little infrastructure and energy activity in Israel, but Chinese companies should be of special interest to the Israeli public.

In recent years, the Chinese have become a dominant force in infrastructure. It began with the Carmel Tunnels, the first big project built by a Chinese company, and continued with the Acco-to-Karmiel railway project and construction of the future port in Ashdod. A Chinese company won a tender to operate a future port in Haifa, and the biggest of all was the Greater Tel Aviv metropolitan light rail project. The Red Line, the first light railway line, will be constructed almost exclusively by Chinese companies, which won all of the main tenders. Tender-winning Chinese companies such as CRTG, CRC, and CCECC are part of groups of Chinese government companies responsible for construction of light rails and subway railway lines in Mashhad, Iran's second largest city (the CRRC Changchun group) and construction of the high-speed railway line between Tehran and Mashhad (the Chinese Railway Engineering Corporation).

The Chinese are now eying construction of the next railway lines in Tel Aviv, as well as the Green Line and Red Line extension tenders for the Jerusalem light railway. The Western competitors of the Chinese in these tenders admit that they are unable to compete with the prices being offered by the Chinese, and that the state's decision to make the price component the decisive consideration in the selection of the winning bid is therefore actually ensuring that the Chinese will win the tenders for all of the next lines. However, is price everything?

Up until now, the tenders committee that examined the Chinese groups' bids have addressed legal matters pertaining to violations of the rules against excessive concentration, antitrust restrictions, and double representation. The subject of activity in Iran was not brought up at all in the discussion.

Other than the Chinese, other European companies also continue to operate in both Israel and Iran. Swiss company SGS, an international company that supervises and oversees cargoes, goods, and products in order to determine their quantities, has no fewer than 18 branches throughout Iran. According to the company's website, the SGS Group's representative in Israel is Gesco, registered on Allenby Street in Tel Aviv. Gesco provide service to oil enterprises, fuel companies, oil refineries, gas companies, phosphate companies, and others.

Another company is German company Krohne, which according to its website has offices in Tehran and provides advanced solutions and devices for measuring rate of flow and height. The company is represented in Israel by Modotec and is a partner in various projects in Israel.

Drug company Sanofi also operates in Iran. It has a subsidiary in Israel, Sanofi Israel, a leading international health services company that engages in research and development, production, and marketing of a range of medical solutions focusing on patients' needs. Danish pharmaceutical company Leo Pharma also operates in Iran and works in Israel, and even recently opened an innovation laboratory in Israel.

Turning a blind eye to China

The Combating the Iranian Nuclear Program Law was enacted in 2012. As stated in the opening section, the purpose of the law is "joining the international campaign and restricting Israeli investments in corporations having a substantial business connection with Iran that makes a direct or indirect contribution to Iran." A special section of the law is devoted to "corporations having a business connection with Iran;" it orders the establishment of a sanctions staff in the Ministry of Finance for composing a list of foreign corporations having business activity in Iran. The law imposes a series of restrictions and sanctions on corporations appearing on the list. Among other things, it states that they will not receive a license or franchise from the state, and any license or franchise that they possess will not be renewed. The law also states that an Israeli investing in such a corporation is committing a criminal offense for which the penalty is one year in prison. This law, however, was shelved shortly after it was approved, If the sanctions staff exists, it has made no decision to this day, as far as is known.

After neglecting the subject of sanctions, Israel has adopted an especially cautious policy on China. "The government's policy on China is to accept the good and close its eyes to the bad," says Dr. Galia Lavi, a researcher in the Israel China program at the Institute for National Security Studies. "The bad means, for example, China's votes against us at the UN and the supply of weapons and equipment, which also harms us. As of now, at least, Israel is turning a blind eye and saying that China is just an economy, which is business. In the same way, when the prime minister signs a large weapons agreement with the Indians, the Chinese protested, and the answer was, 'You also work with the Iranians.' Israel's policy is 'What's good for the goose is good for the gander,' exactly the same as China's policy."

Sources in the Prime Minister's Office answered a question from "Globes" by saying, "Israel completely supports the US policy and is expressing great appreciation for the Trump administration's imposition of sanctions. At this stage there is a braking distance and international companies are accepting that they will be unable to evade the sanctions. Afterwards, every case will be judged on its merits."

No response was available from the Ministry of Finance.

Published by Globes [online], Israel business news - - on August 21, 2018

© Copyright of Globes Publisher Itonut (1983) Ltd. 2018

Donald Trump, Benjamin Netanyahu  photo: Kobi Gidon, Laam
Donald Trump, Benjamin Netanyahu photo: Kobi Gidon, Laam
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