Regional Affairs: A third way to resolve the China-US war over Haifa Port?

Questions have been raised about whether Israel can try to make changes to the deal with the Shanghai International Ports Group to address US concerns.

August 8, 2019 20:22
A CRANE unloads a container at the Port of Haifa

A CRANE unloads a container at the Port of Haifa. (photo credit: REUTERS/Ronen Zvulun)

Things are heating up.

On Wednesday, the security cabinet held its second meeting in Jerusalem to discuss ways to oversee Chinese investments in Israel, including the planned takeover in 2021 by a Chinese company of Haifa Port. A decision needs to be made soon to resolve the puzzle of relations between China, Israel and the US.

Questions have been raised about whether Israel can try to make changes to the deal with the Shanghai International Ports Group to address US concerns. While Israeli national security officials have pushed for changes, it’s unlikely that the deal can be canceled.

But is there a third way?

FIRST, IT is important to understand the Chinese perspective.

In a series of off-the-record meetings last week in Beijing between Chinese Foreign Ministry officials and The Jerusalem Post and two other media outlets, the Chinese made it clear that they would view any Israeli withdrawal from the deal as not only a contract violation but also a personal insult.

When the deal was signed in 2015, it was viewed from an economic perspective as among the crown jewels in the positively exploding Israel-China business relationship.

China and Israel were already invested in each other, but the Haifa Port deal was a whole new level of getting the Chinese deeply invested in the heart of Israel’s economy.

The problem was that the Israeli security establishment was not fully consulted on the deal, and Israel’s relationship with the United States, especially regarding the US Navy’s use of the port for its Sixth Fleet, was not fully considered.

China made it clear to The Jerusalem Post that if Israel backtracks or otherwise tries to renegotiate terms, it will understand that the reason it is being done is because of the Trump administration.
The US has threatened to pull US vessels and even certain US deals from Haifa if the Chinese are put in charge.

China would be insulted in a normal circumstance if a country pulled out of a deal because of a third country. However, right now the issue is particularly sensitive due to the extended US-China trade war.

At a press conference last week which the Post was present for as part of the visit, the Chinese Foreign Ministry spokeswoman Hua Chunying said about the US, “When you hear the words and deeds of the US on the status of developing countries in the WTO... they further reveal how capricious, arrogant and selfish the country is.”

Some of the language apparently can be attributed to Chunying’s particular style. She became the new chief spokeswoman only in July, and both in person and on a stage, she has a more dynamic style and employs a tougher tone than your average foreign ministry spokesman, who is likely to bend over backward to avoid making loud headlines.

But overall, the intense language signaled the depth of Chinese anger at the Trump administration over trade issues, and changing the Haifa deal would be pouring gasoline on an open flame.

The Chinese Foreign Ministry did not get into threats about how China would respond to an Israeli withdrawal from the deal. One can imagine a range: from demands for full payment anyway to pulling out of other deals with Israel in ways that could strategically harm the Israeli economy.

WHAT ARE Israeli and US security concerns?

US and Israeli concerns relate to cyber spying, whether direct or indirect.

Concerns that security officials have raised relate to giving China an ability to monitor the comings, goings and statuses of Israeli submarines, other ships and aircraft.

The US concerns focus on similar issues. There are also concerns about additional opportunities for classic human spying, with more Chinese personnel gaining access to sensitive areas, or about backdoor electronic spying from Chinese-networked infrastructure.

The entire idea of what makes China’s involvement so attractive to Israel is exactly what makes security officials so uncomfortable.

From the delegation’s visit of the port, it seems that what is brilliant and unique about what China can offer is that its advanced technology deep sea port in Shanghai is almost completely automated.

It uses an army of networked, automated, guided vehicles, an automated stacking crane system and other automated systems to move over 42 million shipping container units per year with a bare minimum of human intervention for a complex process that once required effectively an army of humans doing physical labor.

It uses an army of networked automated guided vehicles, an automated stacking crane system and other automated systems to move over 42 million shipping container units per year with a bare minimum of human intervention for a complex process which once required effectively an army of humans doing physical labor.

When the Israeli media delegation visited the Shanghai Yangshan Port last week, the Chinese themselves were not exactly sure about the level of automation Israel would use – there were indications that some roles might be less automated.

But overall, the automation and networking of devices and vehicles, which Israel is excited about for saving money and labor costs, are what worry some Israeli defense officials – worries that China might use back doors in the infrastructure for spying.

Top Israeli defense officials have told the Post that the concerns about the Chinese in this regard are real and based on evidence from patterns that have already occurred elsewhere.

China would not respond to the Post on these concerns in detail other than to vehemently deny the allegations.

Beijing could balance these concerns by taking concrete action to help Israeli security concerns in Syria (where China has some increasing physical presence and influence), with Hezbollah in Lebanon, or with Iran (where it has tremendous influence).

If China got any of these countries to make concrete policy changes in favor of Israel’s security concerns in a big game of geopolitical trade-offs, it would create new trust and be a great security benefit that could make opposing the Haifa Port deal close to impossible.

Pressed by the Post about making such a statement, the Chinese demurred. Instead, they indicated their belief that simply the fact of their deep investment in Israeli infrastructure might make certain groups think twice before attacking Israel in a way that might harm Chinese economic interests.

China’s desire to refrain from a more explicit statement on the issue is consistent with its preference to decouple its relations between potentially conflicting countries so that it can do business with everyone.

The Post learned during its visit to Beijing that even the way that China’s Foreign Ministry manages relations with Israel and other Middle East concerns at an organizational level separates some of its dealings that might be viewed as obviously overlapping.

THE ISRAELI government may override the Israeli and US defense officials’ objections or find a third way.

One idea might be to pay China every dollar it is owed by the contract, but altering aspects of the design of the infrastructure and technology that China uses to build the port, cyber issues and human personnel involved in sensitive areas.

This might mean taking some economic hits, with Israel essentially paying the Chinese for certain functions, while actually doing some of those functions itself or reverse-engineering certain functions after the Chinese do them.

How Israeli officials strike this balance and how much they make engineering and other changes to China’s operations will likely depend on which group in Israel triumphs.

Interestingly, even within the Israeli defense and cyber establishment, there are officials who do not see China purely from a national security perspective, but, rather, also from a strategic, diplomatic point of view.

The Israeli government would never trump security objections just because of narrow economic interests. However, many view business with China as a long-term diplomatic strategic interest because of its place as the world’s second power which might eventually become the world’s top power.

For these defense and cyber officials, the debate about Haifa Port is less about this one case, and more about making sure that security concerns are considered systematically and simultaneously with economic concerns in future foreign deals.

The Shin Bet (Israel Security Agency) refused to make an official comment.

Either way, it appears that the Haifa Port deal with China will be going through, but that the questions of in what form and with what security-motivated adjustments are critical.

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