Analysis

Amid Trump Pressure, Israel Mulls Cooling Burgeoning China Ties

American concerns of Chinese technology in Israel a central focus of Bolton's Jerusalem meetings, as defense officials worry that Beijing might use products to collect intelligence

China's Vice President Wang Qishan, right, laughs as Israeli Prime Minister Benjamin Netanyahu makes a face as they tour the Israeli Innovation Summit in Jerusalem, Wednesday, October 24, 2018.
AP Photo/Ariel Schalit, Pool

America’s concerns about the strengthening of Israel’s trade and technology ties with China are a central focus of the talks that U.S. National Security Adviser John Bolton is holding in Israel.

A senior member of Bolton’s entourage, who briefed the reporters who accompanied him on his flight Saturday, told them Bolton would discuss the introduction of Chinese technology to Israel, specifically the entry of communications companies Huawei and ZTE. Kan News reported that America’s reservations about the increasing influence of China in Haifa, where the Shanghai International Port Group is building the city’s northern port, will also be discussed.

These reports echo a series of articles in Haaretz last year. Former senior officials at the Pentagon and Joint Chiefs of Staff have warned during visits to Israel that China’s involvement in building the port and other Israeli infrastructure projects will make it difficult to continue cooperation with the U.S. Navy, which docks in Israel regularly.

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In recent months there have been additional warnings, including in conversations between U.S. cabinet secretaries and their Israeli counterparts when the latter visited Washington. “They blew up at us,” said senior Israeli officials in November, after a meeting at which Chinese involvement in Israeli infrastructure projects was discussed. The message conveyed during those talks was, “Either you make order with regard to trade with China, or we’ll have to.”

The American reactions reflect an increasing tendency of senior Trump administration officials to see China as not just a trade rival, but a strategic threat to the United States, as the Asia giant gets economically stronger and increases its global influence. This approach dovetails with President Donald Trump’s own sharp rhetoric, in his tweets and sometimes in his speeches. The Americans are pressuring Israel to “choose sides” and reminding it that a large part of Israel’s defense research and development relies on close cooperation with American companies, not to mention America’s generous defense aid ($3.8 billion a year) to Israel.

Meanwhile, Israel has increased trade with China in the last several years. At the start of the cabinet meeting on Sunday, only a few hours before meeting Bolton, Prime Minister Benjamin Netanyahu boasted that exports to China had gone up 56 percent. Netanyahu often says he thinks the Chinese market provides an excellent opportunity for Israel, and in 2014 he got a cabinet resolution passed to strengthen trade with China.

U.S. National Security Adviser John Bolton and Prime Minister Netanyahu meeting in Jerusalem, January 6, 2019.
Matty Stern/U.S. Embassy Jerusalem

The Americans aren’t trying to block all Israeli trade with China, but their opposition to it supplying technology to China that could have intelligence and military ramifications is being expressed publicly. There is also gloomy historical background here: the veto that the United States cast on an Israeli deal to sell Phalcon reconnaissance jets to China in 2000. Israel had to cancel the deal after America threatened to reduce its military aid, and Israel had to pay China $350 million in compensation. The crisis cast a pall over Chinese-Israeli relations for years, while U.S. administrations were reluctant to deal with any senior defense officials who were involved. “The rift was so great that to this day Israel wouldn’t dare sell China a kitchen knife with an [army symbol] engraved on it,” says a senior official close to the issue.

Over the past few years the West has become increasingly aware of the possibility that China could exploit the civilian technology in the products made there, like cell phones and computer components, to collect economic or military intelligence. Some large Western countries are taking precautions and avoid using Chinese products in their defense systems. 

Israel’s defense establishment has also taken such steps. Most of Israel’s defense companies recommend or sometimes even forbid their employees to buy Chinese-made cell phones. The Israel Defense Forces made sure that requests for bids to supply cell phones to officers at the rank of colonel or higher be restricted solely to iphones. Moreover, during the past two years, the Defense Ministry, at the request of the IDF’s cyber defense unit, has imposed various restrictions on procuring computerized equipment for the IDF. 

In the United States, federal and state legislatures have been imposing new supervisory restrictions on foreign investment. These moves are aimed mainly at China. In Israel, Insurance Supervisor Dorit Salinger twice blocked huge deals by Chinese firms to buy Israeli insurance companies Phoenix and Clal, due to fears of excessive influence on the pensions of Israeli workers.

Spurred by the increasing U.S. complaints, the security cabinet held a special session at the end of November on the significance of Chinese companies taking on large infrastructure projects in Israel. The government has also begun discussing possible legislative moves to tighten supervision over foreign investment.

Yesh Atid MK Ofer Shelah has already submitted a bill that would establish a committee, chaired by the head of the National Security Council, that would have to weigh in on foreign investments. The committee would include representatives of the finance and foreign ministries, Shin Bet security service, National Cyber Directorate and National Economic Council. Shelah proposes that for every large purchase offer and every infrastructure project costing more than NIS 1 billion ($268.8 million), the relevant regulator will have to consult with the professionals on the committee. The committee would not have veto power, but it would be able to outline the security considerations arising from the transaction.