The enthusiastic pro-China policy led by Minister of Transport Yisrael Katz during his three ministerial terms, particularly on the inclusion of Chinese government companies in strategic infrastructure, such as Haifa Bay Port, is again putting Israel in a very dubious position vis-à-vis the US.
Israeli media reported this month that following US pressure and threats by the US fleet to refrain from anchoring in Israeli ports, the government was reconsidering the agreement under which the Ministry of Transport granted Chinese government company SIPG a 25-year franchise to operate the new Haifa Bay Port.
We do not know what is going on behind the scenes in our national security policy and how accurate the information is. At the same time, these reports, which have now leaked to important Chinese media, were published there in great detail, and are threatening to provoke a big political, and possibly also economic, headache for Israel.
Writing on the wall
US concern about the developing Israeli-Chinese infrastructure romance should come as no surprise. The writing has been on the wall, at least on our wall, for years. As early as April 2015, "Globes" published a comprehensive review of the growing activity by Chinese companies in transportation and strategic infrastructure in Israel, which including winning Ministry of Transport contracts worth billions of dollars.
We presented the connection between this activity and the Chinese government's One Belt One Road (OBOR) project aimed at building marine and land trade routes from China to Europe, the Middle East, and Africa at an investment of $1 trillion in order to expand China's economic and strategic influence in these regions.
"Globes" recently warned again of US sensitivity to this Israel-China romance in view of the trade war raging between China and the US. There is no doubt that the last word has not been spoken on the matter. We can only quote the US foreign policy approach, which has not changed much since President Theodore Roosevelt advised, "Speak softly and carry a big stick."
It is possible that the stick was shown in recently months, following the widely publicized visit to Israel by the Chinese deputy prime minister, which also included handing over some of the "keys" to the new port to the Chinese. There were also indicative signs in the form of articles, studies, and interviews with former senior Pentagon figures published in recent years by very influential strategic research institutes in the US, especially in Washington.
The Ministry of Transport, however, failed to heed these hints, and the same was apparently true of the Ministry of Foreign Affairs, the Ministry of Defense, and other agencies that should have acted as checks and balances against the minister of transport's global ambitions. On the contrary; expansion of Chinese activity was and remained an explicit strategic goal of the ministry and a source of public pride for it.
For example, a delegation from leading Chinese media outlets visited Israel in May 2017 as part of a journey through key points in the OBOR project. Katz granted the delegation a personal interview, and this is what the Chinese media said following the interview: "Israel is willing to take an active part in the OBOR plan and become one of its crossroads… Katz hopes that China will play a bigger role in the Middle East through the project and promote economic development in the region."
Katz also told the correspondents that he had "actively promoted infrastructure projects between the countries since becoming minister eight years ago. During his visit to China, he signed agreements for infrastructure projects and personally saw to changes in existing regulations in order to enable Chinese companies to enter the Israeli market and compete in tenders."
Katz added, "The new port in Ashdod is now being constructed by Chinese companies, which are also laying the infrastructure for the Tel Aviv light rail. A consortium from Hong Kong obtained a 25-year franchise to operate Haifa Bay Port, a measure of unusual strategic importance for Chinese companies." Given US concerns, this unquestionably shows all the sensitivity of a bull in a china shop.
Phalcon strikes again
Recent developments, if they indeed reflect actual US actions in the matter, could very well indicate that the Ministry of Transport's Chinese romance has dug a deep hole dug for us.
If the US decides to make serious use of the sticks it possesses, and Israel is forced to revise the franchise agreement signed with the Chinese in a way that substantially restricts Chinese freedom of action in the new port, the Chinese are liable to cancel the contract completely. The reports and comments appearing in the Chinese media in recent days are reminiscent of the Phalcon affair, in which delivery of an Israeli surveillance aircraft developed for China by Israel Aerospace Industries Ltd. (IAI) (TASE: ARSP.B1) was called off after unequivocal intervention by the US administration.
This affair caused a trauma in relations between China and Israel, and it appears that the Chinese, at least, have not forgotten it. It ended in 2002 with the Chinese government demanding hundreds of millions of dollars in compensation, far more than the value of the deal itself, a demand partly motivated by a desire to settle scores.
An Israeli reversal on the new Haifa Bay Port, which already plays a strategic role in the Chinese government's future trade plans, is likely to cause far-reaching shock waves and affect many areas of trade and economic cooperation between the two countries, including investments in auto-tech and activities by Israeli companies in China. It could also derail quite a number of the Ministry of Transport's future high-profile transportation projects.
This, however, seems to be the price that small inexperienced players must pay when they try their luck on the major powers' global strategic playing field and get caught between them. Those who fail to learn from history are doomed to repeat it.
Published by Globes, Israel business news - en.globes.co.il - on December 20, 2018
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