Israel in trade balancing act between US and China

Torn between China and the United States, which have been in a trade war for the past year, Israel is performing a tough balancing act between its two main economic partners.

Washington has raised concerns over China's increased role in infrastructure and sensitive sectors such as technology of its close ally Israel, with which it shares close intelligence and military cooperation.

These have reportedly been aired during visits to Jerusalem since January by both US Assistant Secretary of Energy Dan Brouillette and National Security Advisor John Bolton.

The latter's talks focused on the northern Israeli commercial and naval port of Haifa, according to Israeli media.

Hong Kong-based Shanghai International Port Group won a tender four years ago to manage a new wharf at the port complex where US warships regularly dock.

Former Israeli ambassador to China Matan Vilnai has said it was "madness" to entrust China with the management of such a "national security asset".

Nadav Argaman, head of Shin Bet, the domestic Israeli security service responsible for counterintelligence, has reportedly warned against Chinese investments that could facilitate espionage activities.

A former chief of the Mossad spy agency, Ephraim Halevy, has delivered similar warnings.

- Espionage -

Danny Catarivas, a foreign trade expert at the Manufacturers Association of Israel, says Washington is putting pressure on Israel for tighter controls.

"The United States is now pushing and insisting that Israel follow its example and create a foreign strategic investment control agency," he told AFP.

He said Israel's security cabinet has decided to set up a committee -- including representatives of the intelligence services -- to oversee any foreign investment considered "strategic".

Asked by AFP, several official spokespersons refused to comment, with one saying that relations with China were "hyper-sensitive".

A transport ministry official, speaking on condition of anonymity, said the Haifa contract was awarded to the Chinese group "on purely professional criteria".

Uzi Rabi, a Middle East expert at Tel Aviv University, told AFP that Israel must examine contracts with China "not only from an economic point of view, but also diplomatically and geo-strategically".

Chinese companies are making spectacular advances in Israel.

They have won contracts for the construction of a new port in the southern city of Ashdod and tunnels for new light railway lines in Tel Aviv.

According to experts, the Chinese make a third of their Israeli investments in the key hi-tech sector.

Chinese firms are also interested in building a fast railway connecting Tel Aviv to the Red Sea resort of Eilat and constructing a desalination plant, according to economic media reports.

China has become Israel's leading partner for infrastructure, roads, tunnels and ports.

- Chinese breakthrough -

Trade between China and Israel exceeded $12 billion in 2018, nearly 200 times the level in 1992 when the two countries established diplomatic relations, data from Israel's Central Bureau of Statistics shows.

China has become Israel's second largest trading partner overall after the United States, and Prime Minister Benjamin Netanyahu in October proposed a free trade agreement between the two countries.

Trade expert Catarivas, however, said: "Transparency is not the strong point of Chinese investment.

"You never know if the money comes from private companies and persons, or from the state and the Communist Party."

He said Israel could not cut off China, "a market in full expansion", but the priority was to avoid damaging relations with the US.

Israeli companies active in China or under the partial or total control of Chinese investors may one day be excluded from the US market if relations between the two superpowers deteriorate further, he said.

In the key defence sector, US pressure has already had an impact on Israel, which receives nearly $4 billion in annual US military aid.

The Jewish state has pledged not to sell weapons or dual-use civilian and military technologies to China.

Israel had its fingers burned in 2000 when the US vetoed the sale to China of an airborne command and control system equipped in part with US components.

Israel was obliged as a result to pay several hundred millions of dollars in compensation to China for breach of contract.

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