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How Close to China Is Too Close for Israel?

Anshel Pfeffer
Anshel Pfeffer
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Chinese Vice President Wang Qishan at the Zhongnanhai Leadership Compound in Beijing, China, August 27, 2018.
Chinese Vice President Wang Qishan at the Zhongnanhai Leadership Compound in Beijing, China, August 27, 2018.Credit: Pool / Reuters
Anshel Pfeffer
Anshel Pfeffer

There’s no denying that Monday’s arrival in Israel of Chinese Vice President Wang Qishan, the man often dubbed “the second-most powerful in China,” is a coup for Benjamin Netanyahu. When Netanyahu returned to the Prime Minister’s Office in 2009, the relationship with Beijing was still damaged by the Phalcon crisis of a decade ago (in which Israel, under U.S. pressure, canceled the sale of surveillance planes to China), and a subsequent clash with the Chinese over the sale and maintenance of military drones. In the last nine years, Netanyahu has achieved a turnaround in the ties, by opening Israel up to every sort of business with China, not just arms sales, and Qishan’s arrival for a three-day “Innovation Summit” is one of the crowning achievements.

A large trade delegation will be accompanying Qishan, reflecting the fact that Chinese companies invested $16 billion in the local economy last year, particularly in high-tech, and China is now Israel’s second-largest trading partner, eclipsed only by the United States. But it’s not just tech. Israel has issued 20,000 work visas for Chinese construction workers and they’re not building only neighborhoods, as they are now around the world; Chinese companies are also bidding on, and winning, major infrastructure projects.

Chinese companies are building and will be operating the new ports at Haifa and Ashdod. If they win the planned tender to build the new rail line to Eilat, it will give China a stake in all three of Israel’s main sea outlets. Not everyone in Israel is overjoyed about this development. Currently serving officials are careful not to go on record, but some of Israel’s most senior former civil servants are speaking out.

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Shaul Horev, former chairman of the Atomic Energy Commission, said in August that Israel is not weighing the security and diplomatic implications of allowing China to control its ports. He quoted American officials who told him that this would mean that the U.S. Sixth Fleet would no longer consider Haifa one of its home ports.

Former Mossad Chief Efraim Halevy is even blunter. “Israel’s strategic allies are in the West, the United States and the European NATO members. China is a strategic ally of the Iranians and has sold them nuclear technology,” he says. “We are much too eager to do business with them.”

Halevy warns that should China have to choose between Israel and Iran, or any other Middle Eastern enemy of Israel, the choice will be clear. Some eager Israeli businesspeople talk up Israel’s prospects of being part of China’s global “Belt and Road” investment plan. But Israel is not part of the “new Silk Road.” It isn’t on any of the routes and more savvy Israeli entrepreneurs are aware of a darker side of the Chinese investments.

Israel has learned the lesson of the Phalcon and drones crises. It won’t enter any new arms deals with China, only to have the U.S. administration force them to cancel them. But there are plenty of other Israeli products that China is interested in and some of them can be used for military and intelligence purposes. “The government closely regulates anything which is military-related and there are also lists of dual-use technologies which we need to run by the Defense Ministry before selling them to the Chinese,” explains one Israeli venture capitalist working with Chinese investors. “But technology evolves at such a rate that the ministry can’t keep up.”

Sources in the Israeli tech community blame the government for not being vigilant enough on the export to China of various cyber and artificial intelligence technologies. “Ultimately, it’s up to us in the private sector to be responsible and self-regulate,” says one tech boss. “Since a lot of our people are anyway originally from the security establishment and we want to continue working with the American market, which is very suspicious right now of the Chinese, we know how and when to say no to Chinese money. But the government should get of its backside and be more involved.”

So is Israel too open for business? That very much depends from whose perspective you are looking. A former senior security official says that “Netanyahu is overdoing it. He’s thrown caution to the wind in his attempt to attract Chinese investment. We’ll have another Phalcon crisis at this rate.”

A senior trade official adds, “It’s the prime minister’s job to balance security and economic considerations, and in this case it’s clear that Israel needs to realize more of the potential in its ties with China. I can understand the concerns of the security people, but they are looking at this from a very narrow perspective.”

A veteran Israeli diplomat who has served as an ambassador in the East Asia highlights another reason Netanyahu enjoys dealing with the Chinese so much. “Asian leaders never bother him about the Palestinians. If they bring the issue up at all, it’s just for protocol. They just want to talk business and that’s what he likes.”

But while Israel is scrupulous now not to anger the Americans by selling the Chinese any military hardware, the intensifying relationship may cause a different problem with the Trump administration, which is escalating its trade war with China, forcing Netanyahu to choose between Washington and Beijing.

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