Israeli government at odds over inspecting Chinese ventures

Security cabinet scheduled to discuss the issue on Wednesday

July 14, 2019 23:06
3 minute read.
Chinese President Xi Jinping and Israeli Prime Minister Benjamin Netanyahu shake hands

Chinese President Xi Jinping and Israeli Prime Minister Benjamin Netanyahu shake hands ahead of their talks at Diaoyutai State Guesthouse in Beijing, China March 21, 2017. (photo credit: ETIENNE OLIVEAU/POOL/REUTERS)

Israel is still debating whether a new mechanism to vet foreign investments should be “strict” or “lenient,” a debate expected to be discussed at a security cabinet meeting on Wednesday, The Jerusalem Post has learned.

Deliberations on creating a way to oversee infrastructure investment – especially from China – have been ongoing for months, and have been held intermittently in the security cabinet for more than a year. This issue is one of the few points of friction between Jerusalem and Washington these days.

There are currently two schools of thought inside the Prime Minister’s Office. National Security Council head Meir Ben-Shabbat – who has been on the receiving end of conversations with senior US officials warning of consequences if Israel does not take steps to oversee Chinese investment – favors a strict mechanism to placate the US, according to government officials.

On the other hand, Avi Simhon, head of the prime minister’s National Economic Council, wants to see a more lenient mechanism in order not to scare off potential investors, not only from China but from other countries as well.

The issue of the infrastructure investment also comes against the backdrop of the protracted US-China trade war. The US has informed Israel in clear terms that it views Chinese investment and management of infrastructure projects in Israel, such as the Haifa and Ashdod ports, as a security concern for the US, since the Sixth Fleet docks there.

For instance, in June, a major spending bill in the Senate – the National Defense Authorization Act – included language warning Israel against Chinese investments in sensitive infrastructure projects.

“The United States has an interest in the future forward presence of United States naval vessels at the Port of Haifa in Israel, but has serious security concerns with respect to the leasing arrangements of the Port of Haifa as of the date of the enactment of this Act; and should urge the Government of Israel to consider the security implications of foreign investment in Israel,” the bill read.

The issue was raised by US President Donald Trump directly with Prime Minister Benjamin Netanyahu during their meeting in the White House in March, and has been the subject of a number of conversations between Ben-Shabbat and his US counterpart, John Bolton.

US Secretary of State Mike Pompeo addressed Washington’s concerns in an interview with Channel 13 during his visit to Israel in May.

Asked whether the US seeks an Israeli policy shift toward China, Pompeo said, “I want to make sure that every country is wide-eyed and awake with respect to the threats that are posed by China, and then make sure they understand as well America will have to make decisions too. If certain systems go in certain places, then America’s efforts to work alongside you will be more difficult, and in some cases, we won’t be able to do so.”

Pompeo added that “when China behaves using debt as a trap, when China bribes, when China engages in spying through its commercial state-owned enterprises, and presents risk through its technology systems – companies like Huawei, which present real risk to the people of Israel – when those things happen, we want to make sure that countries know about it, know the risks, and then countries will make their own sovereign decisions.”

US officials are also concerned that Chinese telecom companies are being used by China for intelligence-gathering. Simhon, who has been working on this issue for some three years, told Knesset members last July that a plan to vet foreign investment was under discussion and had been raised in the security cabinet.

China has become a major investor in Israel over the last 10 years, both by buying huge companies such as Tnuva, and by building and managing major infrastructure contracts. The Chinese have also increasingly become a major investor in Israeli hi-tech companies.

Among the infrastructure projects that Chinese companies have been involved in are building the Carmel tunnels, the Acre-Karmiel railway project, port construction in Haifa and Ashdod, and building the light rail Red Line in Tel Aviv. These firms are part of Chinese government companies that are also involved in railway construction projects in Iran, another bone of contention with the Americans.

In January, Shin Bet head Nadav Argaman warned that massive Chinese investment in Israel could pose a danger to national security.

“Chinese influence in Israel is particularly dangerous in terms of strategic infrastructure and investments in larger companies,” he said in a closed-door speech.

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