A consortium including two Chinese companies was last week disqualified from bidding to construct two new lines on the Tel Aviv light rail, in another sign that the Biden administration has no intention of easing up the pressure on Israel to keep Chinese companies at arm’s length.
“People were waiting to see what would happen under Joe Biden, that maybe it would become less of an issue [than under Donald Trump]. We now understand that’s not the situation – quite the opposite,” says Gedaliah Afterman, head of the Israel-Asia Policy Program at Reichman University’s Abba Eban Institute of International Diplomacy.
“The Biden administration uses a different language and is less emotional, but it’s more systematic and perhaps more effective,” Afterman adds.
The consortium, which included China Railway Construction Corp. and CRRC Corp., as well as the Israeli companies Housing & Construction Ltd. and Egged, submitted a bid that was some 1 billion shekels ($310 million) less than other bidders to build the Green and Purple lines that traverse the Greater Tel Aviv region. But it lost out to groups comprising European and Israeli firms.
Officially, NTA, the state-owned company awarding the contract, rejected the low bid as being priced in an “illogical” way. But last June, the U.S. put China Railway Construction on a blacklist of Chinese companies believed to have links with the Chinese military or intelligence. (CRRC had been on an earlier list but dropped.)
Media reports said Prime Minister Naftali Bennett was pressed in an August meeting with CIA Director William J. Burns about limiting Chinese involvement in infrastructure projects, the two light rail lines in particular.
The light rail tender doesn’t mark the first time Israel has spurned Chinese investment or contract bids. Six years ago, it rejected offers by Chinese firms to buy two Israeli insurance companies. And two years ago, Hong Kong-based Hutchison gave up plans to buy control of the cellular operator Partner Communications, while its Hutchison Water unit lost out to the Israeli company IDE to build Soreq B – projected to be the world’s largest desalination plant when completed.
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Leaf on a tree
American pressure on Israel first began building as the Trump administration entered into a trade war with China in 2018. Washington was concerned that Israeli technology would be exploited by China’s military or give China an edge in the unfolding global tech war. The U.S. was also anxious that China would take advantage of its role in infrastructure projects to engage in espionage.
Then-Prime Minister Benjamin Netanyahu sought as much as possible to resist U.S. demands. While Israel did agree to form a government committee to vet foreign investments in 2019 – a move widely seen as directed against China – it declined to reconsider contracts it had already awarded to Chinese companies to build and operate ports in Haifa and Ashdod.
Afterman says the Bennett government is showing itself to be more responsive to Washington’s demands, especially as it has become clear that the global U.S.-Chinese rivalry is only growing more intense under Biden.
“There’s an understanding that Israel needs to make sure the Americans see Israel is aware of their concerns,” he says. “Under Netanyahu, there was a stronger willingness to not give in to the Americans all the time. That doesn’t mean the current government will do everything America says, but there’s an understanding that Israel has to be more attentive. That said, Israel also views its relationship with China as important, as it is seeking to maintain and even develop it in less sensitive areas.”
Among other things, the foreign investment review committee will be upgraded to some degree and become more national security-focused than it has been, Afterman says.
But the panel still needs to clarify its rules and make its decisions more transparent. While that would give Israel less wiggle room, it might make both Washington and Beijing more comfortable.
Carice Witte is executive director of Sino-Israel Global Network & Academic Leadership (SIGNAL), an Israeli policy organization specializing in China-Israel relations. She says Israel has made itself vulnerable to pressure from both sides by failing to develop an appropriate policymaking infrastructure and knowledge base.
“Israel is being blown like a leaf falling from a tree. When the U.S. blows hard, it goes in one direction; when China blows hard, it goes in another,” she says.
“The question is why Israel is getting knocked around like this. My answer is that it doesn’t have the necessary expertise and knowledge of China as it has in the United States, Europe and Russia. It’s assumed that business and policy discussions can be carried out in the same way as with these other countries. That’s a mistake. China has its own history, methods of doing work and cultural protocols that require very different understanding and concomitant approach.”
One way the Bennett government is acting to keep itself as much as possible beneath the U.S.-China crossfire is by acting quietly when it does take measures that might upset Beijing, thereby avoiding antagonizing the Chinese on sensitive political issues.
For instance, at a meeting between the American and Israeli national security advisers that reportedly took place in December – the first wide-ranging bilateral discussion on China issues – Israel agreed to take U.S. concerns more seriously. But Israeli officials made a point of not publicizing the meeting.
Israel also pointedly chose not to join an American diplomatic boycott of the Winter Olympics now underway in Beijing. A senior Israeli official told Haaretz that the U.S. boycott of the Games was “bizarre.”
Ma Xiaolin, a senior professor and dean at Zhejiang International Studies University’s Institute for Studies of the Mediterranean, says Beijing appreciates the balancing act Israel is engaged in, and is willing to let Jerusalem tilt to a degree toward the Americans.
“We understand the pressure Israel feels, because Israel shares so many contacts with America – it is the closest ally of the U.S.A. I think China can live with that,” he says.
“Even if Israel is one of the closest allies of the Americans, it is very friendly toward China. We have witnessed the Israeli government trying its best to keep its independence and preserve its diplomacy with China, and how it has refused to follow up every demand made by Washington,” Ma adds.
Still, Israel and China haven’t always succeeded in avoiding friction on sensitive diplomatic issues.
Tensions peaked last May when China severely criticized Israeli actions during the Gaza war, both in the United Nations and over official media. Israel labeled one broadcast “blatant antisemitism.” A month later, Israel voted in favor of a resolution in the UN Human Rights Council urging China to allow independent observers to visit the Xinjiang region, where Beijing is accused of a brutal crackdown on its Uyghur Muslim minority.
Experts said Beijing’s tough words on Gaza were more aimed at Washington than Jerusalem – an attempt to cast an unflattering light on U.S. hypocrisy vis-à-vis Muslims by contrasting America’s support for Uyghurs with its apparent disregard for Gazans. But many in Israel were concerned that relations were headed for trouble.
Last October, Israel refrained from signing on to a joint statement at the UN expressing concern over the Uyghurs.
More recently, China has signaled that all is well. Last month, Chinese leader Xi Jinping spoke with Israeli President Isaac Herzog to mark the 30th anniversary of diplomatic relations. Meanwhile, China dispatched Vice President Wang Qishan, an especially high-ranking official, to the annual conference of the China-Israel Joint Committee on Innovation Cooperation.
Lurking in the background are Israeli concerns of China lashing out for crossing one of its red lines – as it has in the recent past against Australia (for calling for a probe into the origins of the coronavirus); Lithuania (allowing Taiwan to open an embassy in Vilnius); and Canada (detaining Huawei executive Meng Wanzhou at Washington’s request). Beijing retaliated with an unofficial ban on Australian and Lithuanian exports to China, and arresting two Canadians on espionage charges.
Afterman, for one, doesn’t see that occurring in Israel’s case. “It’s a different relationship. If China punished Israel, it would be different – not necessarily through trade, but maybe through the UN. But I don’t see it happening at the moment,” he says.
However, as China entrenches itself deeper into the Middle East and begins to assume a security role on top of its business interests, the risks of friction will only grow, experts warn.