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VOA - Economy

WASHINGTON - The Trump administration appears to have scored a victory in its campaign to dissuade key allies from expanding their high-tech trade relations with China. 

An Israeli contract to build what will be the world’s largest water desalination plant had been widely expected to go to Hong Kong-based Hutchison Water. But following a high-profile visit to Israel by U.S. Secretary of State Mike Pompeo, the contract was awarded last week to an Israel company instead.  

Filing documents describe the contract as encompassing the design, construction and operation of a seawater desalination facility located in Sorek, south of Tel Aviv. The facility’s construction is described as part of Israel’s long-term strategy to sustain the country through any long-term drought caused by climate change.  

The project was green-lighted in 2018 by the Israeli cabinet, and Hutchison emerged as a leading bidder in spite of security concerns. In April 2019, the newspaper  Haaretz pointed out the plant’s proximity to a nuclear research center, an air force base and a weapons testing ground. The paper said a 50-meter-high smokestack called for by the proposal “could be used as an observation point over all of the sensitive sites.”  

Nevertheless, Hutchison was considered a strong contender for the contract. It was already a 49% partner in an existing desalination plant at Sorek — part of an Israeli-Chinese economic relationship that has been growing since Prime Minister Benjamin Netanyahu visited Beijing in 2013.

Israeli Prime Minister Benjamin Netanyahu, left, and Chinese President Xi Jinping pose for photographers ahead of their talks at Diaoyutai State Guesthouse, March 21, 2017 in Beijing.

Netanyahu was back in Beijing for talks with President Xi Jinping in March 2017, when the sides announced an innovative comprehensive partnership between their countries. That followed high-level meetings in 2015 and 2016 aimed at boosting collaboration in high-tech and innovation. 

“Israel has, for at least a decade now, actively courted Chinese investment as part of its global branding as an innovation hub and startup nation,” Ilan Berman, senior vice president at the American Foreign Policy Council, told VOA. “Chinese investments run the gamut, from construction to dairy production/manufacturing.”

Berman continued, “A significant amount is concentrated in the Israeli high-tech sector, where Chinese firms have been very active buying up software startups and investing in technology that could legitimately be considered dual use”  — meaning it has both military and civilian applications. 

Some U.S. officials estimate that Beijing now "directly controls or has influence over as much as one-quarter of Israel’s multibillion-dollar tech industry, including defense contractors working on sensitive projects jointly being developed with the United States," Berman warned in a recently published policy paper. 

Patrick Cronin, a senior fellow and chair for Asia-Pacific Security at the Hudson Institute, said China’s rise has led Israel and other U.S. allies to differentiate between their economic and security interests. 

“In general, as China became their largest trading partner, America remained their chief security partner,” said Cronin. 

The United States has been slow to object to the burgeoning Israeli-Chinese relationship, according to Douglas Feith, a U.S. undersecretary of defense for policy in the George W. Bush administration. 

Feith, now a senior fellow at Hudson Institute, argued in a Wall Street Journal opinion piece that the laissez-faire U.S. approach to Israeli-Chinese relations could be seen as an extension of America’s own “engagement” policy toward China dating from former President Richard Nixon’s historic visit to China in 1972.  

A picture taken on July 7, 2019 shows a partial view of the port of Haifa in northern Israel.

Meanwhile, American companies have shown less interest than their Chinese counterparts in investing in Israel, a difference that was highlighted when a Shanghai-based company won a contract in 2015, as the only bidder at the time, to rebuild the strategic port of Haifa, sparking controversy. 

A former U.S. ambassador to Israel, Daniel Shapiro, says he was approached by the Israeli transportation minister at that time and told that no U.S. companies appeared to be interested in bidding on the Haifa contract. But “no one in the U.S. government called me and said, ‘Hey, we have a problem,’ ” Shapiro told The Times of Israel. 

But as the Trump administration steps up its trade and rhetorical wars with China, especially since the coronavirus outbreak, the issue appears to be getting more attention in Washington. 

U.S. Secretary of State Mike Pompeo, left, meets Israeli Blue and White party leader Benny Gantz in Jerusalem, May 13, 2020.

On May 13, even while much of the United States remained on lockdown because of the pandemic, Pompeo made a day trip to Israel, on the eve of the formation of a new unity government led by Netanyahu and Deputy Prime Minister Benny Gantz. 

The agenda for Pompeo’s talks with the two men included the obvious issues — Iran and a proposed declaration of sovereignty over parts of the West Bank. But in an interview with Israeli public television, Pompeo also raised U.S. concerns about Chinese investments in Israel. 

"We want the Chinese people to be successful," Pompeo said, but "we do not want the Chinese Communist Party to have access to Israeli infrastructure, Israeli communication systems." Saying this would make it harder for the U.S. and Israel to collaborate on important projects, Pompeo added: “We want to make sure that our friendly partners all around the world understand that risk.”   

“The Trump administration is very pro-Israel, but these investments have caused growing concern in the White House,” Berman told VOA. “If they continue to grow, they will invariably impact sensitive collaborative defense-industrial projects that are part of the U.S.-Israeli strategic relationship.”