The Israeli firm Airpark was contracted by the ministry to build a civilian aircraft manufacturing facility in 2019 near the Israeli Air Force's Ovda base in southern Israel, but later signed an MoU with the Chinese state-owned Commercial Aircraft Corporation of China (Comac) corporation.
Comac was blacklisted by the Trump administration earlier this year for allegedly being tied to the Chinese military. American investors are prohibited from buying securities of companies on the list and will need to divest their holdings by November, according to Bloomberg magazine.
Aviation Industry Corp. of China, a Comac shareholder, which was also on the list, was later targeted by more severe sanctions, including limits on access to American technology which could impact Comac as it relies on American imports for some aircraft parts.
Sources in Israel's Defense Ministry told Haaretz that they were unaware of the signing of the MoU and that the Prime Minister's Office and National Security Council were also not informed about the deal.
The agreement between the Defense Ministry and Airpark allows the company to access the air base and provides assistance and services to set up the civilian facility. The agreement also includes cooperation with the IAF in operations and infrastructure. The MoU with Comac was signed seven months after the agreement with the Defense Ministry was signed.
ACCORDING TO the MoU, in exchange for extensive remuneration, Comac will receive cooperation in the aviation sector and the two companies will share information and advance technological and innovative projects that Israeli firms can offer.
Airpark told the Israeli Securities Authority that the MoU was meant to "promote the shared goals of local and international aviation" and would be valid for five years from the date it was signed, according to Haaretz.
In March 2020, Israel Aerospace Industries joined the civilian facility project and signed an MoU with AES Aviation, the company that owns Airpark, to work together to form a joint company to operate Airpark.
No security check has been carried out on Comac, according to the Haaretz report, despite other Chinese companies which were involved in other public infrastructure projects, like the expansion of the Haifa port and the Tel Aviv light rail, being required to undergo such checks.
The Defense Ministry told the newspaper that "This is a completely civilian project authorized by all the relevant bodies... It should be noted that the project has not yet been launched. The claims raised will be examined."
A security official told Haaretz that, besides the possible security risk posed by Comac's involvement in the civilian facility, their involvement could also damage Israel's ties with the US.
US officials have expressed opposition to Israel's economic ties with Chinese companies in recent years.
The US is asking its allies, including Israel, to sever ties with China in areas with security risks, a US official with knowledge of talks on the matter said in May of last year.
A US official warned last year that “the Israeli government is trying to have it both ways with us. It wants approval for annexation and the continuation of beneficial economic, diplomatic and security ties, while opening the door to China in critical infrastructure projects [such as] 5G and the light rail.”
China is Israel’s third-largest trading partner, and trade between the countries grew by 402% in the past decade, reaching about $14 billion in 2018.
A report by the RAND research institute for the US Department of Defense published last year warned that China has close ties with Iran, and that “the Chinese government might require Chinese companies doing business in Israel to share insights with the Iranian government in order to win friends and influence in Tehran.”China and Iran signed a 25-year cooperation agreement on Saturday.
Lahav Harkov contributed to this report.