Despite U.S. Pressure, Chinese Firm Closing in on Highly Sensitive Israeli Location

In May 2019, Haaretz reported that the Finance Ministry published a controversial tender to build a new water desalination plant. Dubbed Soreq B, the plant will be built next to the desalination plant already in operation. The new facility will be the biggest of its kind in the world. Early estimates say it will be able to produce 200 million cubic meters of water annually.

The construction costs are expected to total 5.2 billion shekels (about $1.5 billion, according to the current exchange rate). Construction will take three years and require hundreds of workers. Afterward, the company that built the plant will continue to operate it until 2049.

One of the three companies that competed at the interim stage of the bidding process was the Chinese Hutchison Company, based in Hong Kong. This is where a problem cropped up: The head of the Defense Ministry's Security Authority, Nir Ben-Moshe, strongly objected to choosing Hutchison for the project and sent a warning letter to the Finance Ministry and the Energy Ministry against doing business with China that involves sensitive security sites.

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Against the backdrop of American pressure on Israel to halt large infrastructure deals with China, Israel feared that security information might leak out. Soreq B's slated location is a security-sensitive site, adjacent to the Palmachim air base and close to the Soreq Nuclear Research Center.

In August, a committee headed by Energy Ministry Director General Udi Adiri decided that two companies would proceed to the final stage of the bidding process — Hutchison, and an Israeli competitor. It seemed that the Energy Ministry was not impressed by Ben-Moshe's written warnings. China's entry into the energy market isn't perceived as a threat, as several countries already own desalination facilities.

It’s hard to say Ben-Moshe's letter set off all the alarm bells. Despite the American pressure and the four government meetings convened on the matter, Israel has yet to formulate its policy about doing business with China. It also hasn't fulfilled its promise to the Trump administration to establish an organized body to oversee foreign investments in Israel.

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The Energy Ministry and Finance Ministry said in a joint statement that they had issued a reply to the letter sent by the head of Defense Ministry's Security Authority two months ago.

"We explained that Hutchison is an Israeli company indirectly owned by a Hong Kong-based company," the statement read. "In addition, Hutchison is already active in Israel, operating the Soreq A. desalination facility, which is similar in his characteristics and location to Soreq B.

"Therefore, the ministries do not see how Hutchison's participation in the new tender is different from the company’s current activity in the country," the ministries said in the statement. "We were surprised by the fact that a classified letter sent [to the Finance Ministry and the Energy Ministry] was published by the media."