China just lost a major bid in the Middle East, and it has the United States to thank.

Israel’s Sorek2 water desalination plant will be built by Israeli company IDE Technologies and not by Hong Kong-based Hutchison Water controlled by Chinese billionaire Li Ka-shing, as originally thought. The United States believes that Chinese control of or investment in infrastructure and companies abroad presents a serious security threat. U.S. officials have been hard at work convincing allies to create some level of distance from the Communist regime.

Jonathan Schanzer, senior vice president for research at the Foundation for Defense of Democracies, said that in recent years, voices from Washington have called for Israel to “decouple” from China.

These calls morphed to outright insistence when U.S. Secretary of State Mike Pompeo visited Israel earlier this month. The urgency of his message was crystal-clear since he arrived at a time when both countries were in near-absolute lockdown as a result of the COVID-19 pandemic. He is said to have pressured Israel to reject further Chinese bids to build infrastructure or control businesses.

Last year, Pompeo is said to have cautioned the Jewish state that allowing China more control over Israeli infrastructure could result in a reduction in U.S. intelligence-sharing.

Many U.S. officials think that China’s overseas investments are part of a deliberate strategy to increase its diplomatic influence, and ultimately, its military reach.

China currently has investments in the ports in Haifa and Ashdod, as well as in Israel’s high-tech sector. A Chinese firm owns Tnuva, Israel’s largest dairy producer.

Haifa Port, a part of which Israel has allowed China to develop and control, is an especially sensitive case since the U.S. Navy annually docks its Sixth Fleet there for a short period of time. A Chinese presence there could jeopardize these visits; as such, the United States believes that greater oversight is “absolutely necessary,” according to Schanzer.

The Israel Navy congratulates the Chinese Navy on docking at the Haifa port. On Aug. 13, 2012, the Chinese vessels arrived at Israel in order to celebrate 20 years of cooperation between the Israel Navy and the Chinese Navy. RADM Yang Jun-Fei was welcomed by the Haifa base commander, Brig. Gen. Eli Sharvit, upon his docking. Credit: Wikimedia Commons.

He told JNS that “as China became a central focus of the U.S. national security strategy and national defense strategy under the Trump administration, the overall U.S. posture has shifted significantly and has thereby put Israel under some pressure to shift as well.”

Schanzer noted that for decades, Israel was doing what every other country in the world was doing: to engage in commerce with China.

“It took a while for the China-Israel relationship to develop,” he said, “but it did eventually, due to Israel’s technological prowess.”

For its part, Schanzer said, Israel “warmed to China for its cheap labor when it came to infrastructure projects and generous offers when it came to technology.”

China is currently Israel’s third-largest trade partner in the world. Therefore, stepping away from lucrative deals will prove difficult, particularly for a small country like Israel; so, too, will rejecting such a large economic, political and military power. Whichever direction it chooses, Israel might jeopardize its relationship with either China or America, placing it in a damned-if-you-do, damned-if-you-don’t situation.

Schanzer said the United States is “absolutely justified in expressing concern about Chinese investment in Israel,” but he also emphasized that there would have to be “a process.”

He added that it should “lead by example.”

America is heavily dependent upon China for certain products with the stock market interwoven with Chinese companies.

“These are all things that do not play well with the U.S. making demands,” he said.

According to Schanzer, if the United States wants its allies to follow its lead, it must set a good example, it must have patience, and it must be able to assist them in projects they would have pursued with China.

Israel has already taken steps largely in line with the U.S. vision for decoupling, such as blocking Huawei from a 5G network, as well as setting up a committee to review foreign investments.

“We are at the beginning of a long road,” he said. “The coronavirus outbreak from China has sharpened the focus. The expectation is that there will be increased dialogue and even increased pressure.”

“The Israelis are going to have some tough choices ahead,” he said.

‘China likely to increase its footprint in the Middle East’

Alexander Pevzner, director of the Chinese Media Center (CMC) at the College of Management Academic Studies, and a fellow at the Jerusalem Institute for Strategy and Security, told JNS “distinction should be made between different industries and between Chinese investments.”

“For example,” he said, “I don’t see a problem with a Chinese company operating an extension at the Haifa port. Israel has established a screening committee to deal with incoming investments, so there will be more scrutiny.”

Last October, Israel’s security cabinet announced the establishment of an advisory committee to weigh national security aspects of prospective foreign investments. The move came following a visit to the country by U.S. Treasury Secretary Steven Mnuchin.

Pevzner said there is no doubt the U.S. position “will weigh heavily on Israel’s ties with China.”

“The U.S.-China contest will define the first half of the 21st century,” he predicted. “China will remain important for Israel’s economy and also because China is likely to heavily increase its footprint in the Middle East. This brings with it both challenges and opportunities.”

Pevzner said that “the key to a successful relationship for Israel vis-à-vis both the U.S. and China is to define clearly what are Israel’s interests in its ties with China, and to communicate these interests clearly to the United States.”

“Only this way,” he said, will Israel be able to “avoid surprises from all directions.”

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