Time to Reassess The China-Israel Economic Relationship: Former Israeli National Security Head

July 30, 2020 Updated: July 30, 2020

While China and Iran are reportedly close to concluding a long-term agreement on economic cooperation, Israel should examine the potential threat that deal may pose to it and “reassess its policy” on China, Jacob Nagel, and Mark Dubowitz, experts at the Foundation for Defense of Democracies (FDD), said in an article on the FDD website.

“This deal between an economic partner and a mortal enemy should be an alarming wake-up call,” Nagel and Dubowitz said.

Nagel is a retired brigadier general and a professor at The Technion—Israel Institute of Technology. He served before as an acting national security advisor to the Israeli prime minister, and acting head of the National Security Council. Dubowitz is a former venture capitalist and high-tech executive.

Although the details of the China-Iran deal have not been publicized, there is speculation that China will allegedly invest $400 billion over 25 years in the Iranian banking, telecommunications, energy, and infrastructure sectors in exchange for heavily discounted Iranian oil, wrote Nagel and Dubowitz.

The negotiations of the Sino-Iran agreement started in 2016 after Chinese leader Xi Jinping visited Iran and both countries signed a joint statement on strategic partnership.

Epoch Times Photo
This photo released Thursday, July 2, 2020, by the Atomic Energy Organization of Iran shows a building after it was damaged by a fire at the Natanz uranium enrichment facility, some 200 miles (322 kilometers) south of the capital Tehran, Iran. (Atomic Energy Organization of Iran via AP, File)

This deal, if signed, will weaken the Trump administration’s “maximum pressure policy” on Iran and will help Iran to circumvent U.S. sanctions imposed on it after the U.S. withdrawal from the Iran nuclear deal—the Joint Comprehensive Plan of Action (JCPOA)—in 2018, according to the European Council on Foreign Relations (ECFR).

China will obtain access to strategic infrastructure such as railways and ports in Iran which are located at the crossroads of the Middle East and Central Asia, through its Belt and Road initiative, according to ECFR.

Iran “seeks to lean on China for its high-tech, authoritarian surveillance state model,” which will allow the Iranian regime to tighten oppression on its people and increase the regime’s chances to remain in power, Nagel and Dubowitz wrote.

Considering that Iranian leaders have repeatedly threatened to destroy the state of Israel, Iran’s development of nuclear weapons makes this threat more real; Nagel and Dubowitz see a need for Israel to decouple from China.

Chinese investments in Israel pose a risk to it and its allies because they will give the Chinese regime access to strategic technologies such as “artificial intelligence, edge computing, autonomous vehicles, robotics, and big data,” that can be used by the Chinese military. In addition, “the Chinese Communist Party (CCP) is also the most dangerous adversary of the United States—Israel’s most valuable ally,” Nagel and Dubowitz wrote.

Chinese investments in Israeli infrastructure of strategic importance such as the new port of Haifa, “the port of Ashdod, underground tunnels, and control systems in the northern Carmel mountains, and Tel Aviv’s subway system,” are being constructed by the Chinese as a part of the Belt and Road initiative.

The new port of Haifa, after coming online in 2021, will be handed over to a Chinese company that will operate it for a period of 25 years. An Israeli naval base is located adjacent to the port of Haifa. The port itself is often visited by the Sixth Fleet of the U.S. Navy which conducts military exercises there and uses the port to support Israel in the event of war, according to NPR. The proximity of the Chinese port to U.S. naval assets is a problem.

The handover decision raised security concerns from the United States as its Sixth Fleet may be spied on by Chinese intelligence. Nagel said he has repeatedly voiced this concern for over a year.

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The U.S. Navy’s Wasp-class amphibious assault ship USS Iwo Jima (LHD 7) is anchored in the northern Israeli port of Haifa on March 15, 2018. (Jack Guez/AFP/Getty Images)

Nagel told The Epoch Times that he started to advocate more than a year ago that Israel should reassess its decisions about some of China’s investments. Disruptions in the material supply to factories due to the outbreak of the coronavirus in China, national security issues related to Israeli technological ties with China, and the Israeli strategic relationship with the United States were the reasons for this reassessment, Nagel said.

Recognizing Israel as the “Start-up Nation,” Chinese investors make significant investments in Israeli start-ups, and use these investments “as an essential source of technology to build next-generation weapons,” Nagel wrote (pdf), adding that “Israeli startups raised $325 million from Chinese investors in the first three quarters of 2018, up from $76 million in 2013.”

Chinese investments account for roughly 10–15 percent of Israel’s economy, Nagel said. It can be lowered but no Chinese investment should go to highly sophisticated technologies, he added.

I do not know of Chinese who would buy any Israeli food chain, or invest in our Coca-Cola system, Nagel told The Epoch Times. We do not want them however to invest in infrastructure, banks, insurance, or in the tunnel under Tel-Aviv, transportation system, trains, dissemination of water, energy, or electricity, he added.

Also “Chinese companies are not allowed to compete in Israeli 5G” networks, Nagel said. This rule also applies to all Israeli high technology.

These technologies are however critical to modernizing the U.S. defense and often are civilian and military dual-use, Nagel said, adding that decoupling from China will stop a flow of capital to the Israeli high-tech sector which will stifle its development.

Nagel believes that decoupling from China cannot be achieved by enacting more laws that would “suffocate the private sector.” Israel wants to play by free-market rules and attract capital from its allies such as India, Japan, Australia, Canada, and other Indo-Pacific allies, as well as Gulf countries, to replace Chinese investments so it can continue the development of its high-tech sector, Nagel wrote.

Decoupling from China will also be an opportunity for the United States to allocate some investment funds to replace Chinese capital in Israeli high-tech start-ups and it will expand “technology, military, intelligence, and political cooperation,” with the United States, Nagel wrote.

“American and Israeli free-market ingenuity will outpace anything that China’s state-run authoritarian model can produce,” Nagel concluded.

Potential Misuse of Israeli Forensic Devices Sold to Hong Kong

Hong Kong democracy activist Joshua Wong, who led the pro-democracy party in Hong Kong, posted on his Facebook page a letter from Israeli human rights activists to the Israeli government a request to halt the export of Cellebrite forensic devices and software that have allegedly enabled Hong Kong police to break into the cell phones of 4,000 pro-democracy activists and arrest them.

Cellebrite provides forensic tools to be used by police or law enforcement around the world to fight crime and terrorism and should not serve tyrannical regimes, the letter says.

The Cellebrite products have been used by the Hong Kong police for years but with the advent of the new national security law in Hong Kong and the demise of the “one-country, two-systems” rule, the technology can potentially be misused.

Wong revealed that his cell phone and the cell phones of other pro-democracy protesters were hacked by the police using the Cellebrite system, according to legal documents.

Wong urged the Israeli Defense Ministry to immediately “stop the export of the Cellebrite system, which is used for infringement on privacy, deprivation of liberty and freedom of expression, and political incrimination of Hong Kong citizens under the new National Security Law, which does not meet standards of international law.”

The new national security law was imposed on Hong Kong by the Chinese regime’s rubber-stamp legislature and took effect on June 30.

The new law bans secession, subversion, and terrorism, as well as activities related to foreign interference. Moreover, it allows the communist regime’s security agencies to set up operations in Hong Kong.

Cellebrite/Israel is a subsidiary of Japan’s Sun Corporation.