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Israel Balancing US-China Relations: Geostrategic Context

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Trans-Pacific View

Israel Balancing US-China Relations: Geostrategic Context

Insights from Shira Efron.

Israel Balancing US-China Relations: Geostrategic Context
Credit: RAND Corporation

Trans-Pacific View author Mercy Kuo regularly engages subject-matter experts, policy practitioners, and strategic thinkers across the globe for their diverse insights into U.S. Asia policy. This conversation with Dr. Shira Efron, Policy Researcher and Senior Advisor on Israel at RAND Corporation, is the 184th in “The Trans-Pacific View Insight Series.”

What were the top three findings of RAND’s 2019 report on China-Israel relations?

First, both sides stand to benefit from advancing bilateral ties. Israel seeks to expand its diplomatic and economic relations with the world’s fastest growing major economy and, for economic and diplomatic reasons, diversify its export markets and sources of investments from its traditional partners, the United States and Europe. In terms of construction of infrastructure, Chinese companies have a good track record of project completion in Israel at a lower cost and in short time frames, and as foreign entities help efforts to weaken strong labor unions.

China on its end views Israel as a country that can help them spur innovation, research, and development. There is a geopolitical dimension as well: Israel is an important player within China’s overall Middle East policy, where China seeks to maintain good relations with all regional countries. Within this context may lie an effort on the part of China to make inroads with a key U.S. ally to undermine global U.S. alliance and partner networks. Further, Israel can serve as a useful node in the Belt and Road Initiative, China’s vision for linking Eurasia and Africa by land and sea. In addition, working in Israel lets China demonstrate that it can responsibly operate, build, and invest in advanced economies.

Despite shared interests, these relations are associated with challenges, which brings us to the second finding. Chinese construction and operation of key infrastructure projects, including commercial ports and rail adjacent to Israeli bases, as well as investment in Israeli tech companies, raise political and security concerns.

Finally, the relationship with China could cause Israel’s interests to diverge from those of the United States, Israel’s most important strategic partner.

Why is the U.S. concerned about growing cooperation between Israel and China on investment, technology and infrastructure?

The United States is primarily concerned with the transfer of U.S. defense-related technology to China and other technologies and capabilities that could strengthen China’s military edge. Chinese companies operating in Israel that have ties to military intelligence or to Chinese operations in the South China Sea would be particularly concerning to Washington.

Explain the security and defense implications of Chinese investment in Israeli dual-use technology innovation as well as ownership of the Port of Haifa and construction of the Port of Ashdod, both of which are located near naval bases.

Chinese investment and construction activities present distinct concerns, although one general issue underlies both types of worries  ̶  the nature of ties between Chinese companies operating in Israel and the Chinese government, armed forces, or military entities. Any large Chinese company likely has links to the government and is expected to cooperate with its security and intelligence apparatus. The primary concern regarding investment relates to Chinese ownership of companies that might possess sensitive technology or data, while concerns over construction center on the use of infrastructure projects to further Chinese foreign policy goals. Chinese investment and construction activity in Israel could lead to transfers of military or dual-use technologies to China, threats to Israeli intellectual property and potentially to the competitive advantage of Israel’s tech companies, and surveillance opportunities and threats to consumer data privacy.

Involvement in infrastructure projects such as ports and rail that are adjacent to important military bases could present risks of cybersecurity, data privacy, and espionage, especially if Chinese companies install and have access to cameras, radio, fiber-optics, and cellular networks. Both construction and investment activity raise concerns of Chinese social and political influence. An example of such influence was demonstrated in 2013 when the Chinese government conditioned Prime Minister Benjamin Netanyahu’s visit [to China] on Israel ending a federal court trial in New York against the state-owned Bank of China, which was accused of laundering Iranian money for terror activity by Hamas and Palestinian Islamic Jihad. Netanyahu agreed and what had been described as “the most significant and contentious terrorism financing case ever filed in New York” was dismissed.

Explain the Israel’s challenges and opportunities in engaging with China’s Belt and Road Initiative (BRI), considering one of the BRI corridors ends in Tehran.   

Israel sees its connection with the BRI as an opportunity to improve its ties with China more generally, as well as to open economic opportunities for Israeli companies. BRI routes require not only sea ports, but also railways, logistic centers, warehouses, airports, and transport system hardware and software. Israeli companies could contribute to BRI projects by developing and integrating transportation and logistics technologies and related systems for trains, aircraft, and marine engineering, for example.

At the same time however, Israel’s role in the BRI is likely to be limited by its small size and limited transportation connectivity with countries in its region. In addition, Chinese involvement in certain key infrastructure in Israel — especially in the Ashdod and Haifa ports (the latter is a frequent port of call for the U.S. Sixth Fleet and serves as the base for Israel’s submarines) and the light rail in Tel Aviv, which runs by the Kirya, the base of IDF headquarters in Tel Aviv — could have security implications for Israel, including on the U.S. military’s willingness to operate in these areas.

Provide key policy recommendations to Washington on how best to engage Jerusalem strategically in managing China’s rising presence in the Middle East.

The United States can work with Israel to de-conflict, shape, and advance a mutually agreed-upon agenda on China and help Israel build its knowledge base and understanding of China.

Engagement between Washington and Jerusalem should include China as a regular item in discussions and policy decisions. Israel and the United States also should ensure regular information-sharing and joint monitoring of the nature and extent of Chinese investments and economic activities in Israel and in the broader Middle East. This is especially important as growing voices in Israel call for developing a process to scrutinize Chinese economic practices more closely.

Finally, despite rapidly evolving relations with China, Israeli understanding of the country and its foreign and economic policies is limited. Washington can help Israel develop its China expertise, learning from its own experience starting in the 1970s.