Is China intruding in Israel's defense industry?

Ephraim Halevy, the former head of Mossad, Israel’s secret service agency, has voiced concerns over the risks that China’s growing presence in Israel pose to national security.

China Israel flags (photo credit: INGIMAGE)
China Israel flags
(photo credit: INGIMAGE)
 As China seeks to implement its “Belt and Road” projects in the Mediterranean, some Israeli analysts are raising alarm over what they see as a Chinese intrusion into sensitive areas of Israeli defense and key commercial industries.
On the defense front, the Shanghai International Port Group (SIPG), a Chinese company, is set to take over the management of a new privately constructed seaport in Haifa bay in 2021. After helping expand the port in the last few years, the company will be granted a 25-year contract to run it.
Haifa’s harbor is also a strategic port of call for US Navy ships in the region. When SIPG takes over a commercial section of the harbor, this means that Chinese personnel will be in close proximity to US naval ships and installations, raising questions about security risks, including the potential for Chinese espionage and the stealing of vital industrial and defense secrets. In this respect, the Chinese takeover of even one part of the harbor could cause a significant rift with Israel’s long-time and most vital ally—the US
What’s more worrisome from Israel’s perspective is that the seaport in question is not far from an Israeli navy base, where the country purportedly maintains a fleet of submarines that have nuclear-weapon capabilities. Critics say that China’s shipping operations in close proximity to the fleet amount to an unacceptable security risk.
Ephraim Halevy, the former head of Mossad, Israel’s secret service agency, has voiced concerns over the risks that China’s growing presence in Israel pose to national security. “If Haifa becomes a port—the civilian part of it—which is directly controlled by the Chinese in a civilian mode, not a military one, nevertheless it is more than just a symbolic foot on the ground for the Chinese in a very strategic area of Israel,” Halevy told The Media Line.
“That, of course, raises a lot of questions because of the policies of China with emphasis on its growing and spreading relations with Iran,” Halevy added. Turning to Israeli relations with the US over the matter, Halevy said: “I cannot recall there is any other place in the world where such a combination would exist. The US has a series of ports in various key areas around the world, but I have not seen yet any particular evidence of there being a port which is jointly shepherded by China and the US.”
China’s Belt and Road initiative is a massive infrastructure-building plan to boost the economies of countries in China’s vicinity as well as others further afield. The “belt” refers to land routes that China has already constructed, or is planning to, which connect the country to markets in Russia, Turkey, Indonesia, Bangladesh and Pakistan. The idea, first proposed by Chinese President Xi Jinping in 2013, pays homage to the old Silk Road, a network of overland trading routes that linked Europe to Chinese civilization thousands of years ago.
The “road” aspect paradoxically refers to sea routes linking China to central Europe via the Indian Ocean, the Suez Canal and the Mediterranean. To facilitate transportation along these routes, China aims to invest in and build maritime ports in several countries.
Beijing is expected to invest as much as $8 trillion in the plan. And given President Xi’s desire to remain in power indefinitely—the Communist Party has already removed his two-term limit, effectively granting Xi the presidency for life—the Belt and Road could be a mainstay of global politics and economic affairs for many years to come.
On the issue of the US presence in Haifa’s port, ex-chief of US naval operations Adm. Gary Roughead recently told Newsweek magazine that a Chinese-run seaport in the bay could force the US Navy to dock its warships elsewhere.“The Chinese port operators will be able to monitor closely US ship movements, be aware of maintenance activity and could have access to equipment moving to and from repair sites and interact freely with our crews over protracted periods,” Roughead remarked during a conference last month at the University of Haifa, as quoted by Newsweek.
“Significantly, the information systems and new infrastructure integral to the ports and the likelihood of information and electronic surveillance systems jeopardize US information and cybersecurity,” he added.
Observers are also concerned that SIPG, despite being listed as a public company, is under the direct control of the government of Shanghai, which holds most of its shares. Chinese companies like SIPG have played a significant role in the construction of various infrastructure projects throughout Israel, including Tel Aviv’s light rail system and the Tel Aviv-Jerusalem railway.
In 2014, a Chinese company purchased the majority of shares in Tnuva, Israel’s biggest dairy producer. For some, China’s increasing hand in infrastructure projects as well as in the food industry means that large chunks of Israel’s economy could lie outside of Israeli control. EU countries, as well as Canada and Australia, have already passed laws enabling governments to block foreign companies from gaining more than a 25 percent stake in sensitive sectors, including defense, cyber-security, energy production and transportation. Halevy has urged Israel to pass similar laws.
But given that the contract between Israel and SIPG has already been signed,Halevy is skeptical that laws will be passed. He explained that formulating and passing such legislation would not fit into the political calculus of the politicians in power as it is “a prolonged and tiring process.”
“And I don’t think that this can be done in a haphazard and hasty fashion,” Halevy concluded.
Alexander Pevzner, the founding director of the Chinese Media Center in Israel, told The Media Line that “while any investment in strategic areas in Israel requires scrutiny, the concerns over Chinese investment in the country have been largely overblown.”
For one, he explained, the Chinese economy has grown so fast, and its investment overseas is ubiquitous. This means that “both China and the world are going through a learning curve of how to deal with one another.
“Naturally, in Israel, like in any country, there are sectors that must be ‘off limits’ to foreign investors, but Chinese investment in the country is still in its early days.” Because China’s investment in Israel is relatively new, he explained, anything China-related catches a lot of headlines.
“But consider this—the accumulated Chinese investment in Israel in the past seven years is estimated at about $15 billion. While a significant amount for Israel, compared with a total of $120 billion that China has invested in other countries last year alone, it’s evident that Israel is not a major destination for Chinese funds yet.
“Naturally, in certain sectors—relating to security and ports—there should be more scrutiny, but it shouldn’t be directed solely at Chinese investors.”
Oded Eran, an expert on China-Israel relations and a senior research fellow at the Institute for National Security Studies in Tel Aviv, told The Media Line that not enough attention was paid to strategic and security issues when the contract was signed with SIPG.
But, echoing Pevzner, he sees that many of the fears expressed lately have been overblown. In the cases of the new seaports in Haifa and Ashdod, “Chinese companies will subcontract Israeli companies to do most of the job,” Eran said.
He added that “US Navy ships port in Haifa once in a while. So, there is a lot of hype around this issue that is far from reality.” Nevertheless, he stressed, “any time that strategic assets are partly given a concession over this must be looked into and analyzed fully. And it is not because of China. There is a need for better regulation when it comes to national assets and interests.”