SIGNAL Note 55: U.S.-China Relations: Israel in the Crossfire?


Introduction
Perceptions can have a decisive influence on geopolitics.

For much of the past half-century, the United States viewed China’s economic growth as benign, contributing to global economic well-being. The resulting accumulation of wealth was considered the initial phase of a process leading to a democratization of the world’s most populous nation. In recent years, those perceptions came into question, leading to American distrust of China. Western understanding of China’s words and actions both at home and abroad reaffirmed the fear that China was becoming a threat to international stability.1 While Beijing promotes its Belt and Road Initiative as a means to bring nations closer together through mutual cooperation, some Americans have come to view it as a form of economic colonialism as more and more BRI projects led to crippling debt.2 Closer to home, Americans are distressed that the “Made in China 2025” policy is a state-backed plan to commandeer the advanced technology sector thereby debilitating the U.S. economy in the decades to come. These perceptions are firmly informing American discourse.

By contrast, the Chinese perception is that the United States intends on impeding the rise of China as a major economy and interfering in its internal affairs. They view America’s increased military presence in the Asia Pacific as part of this containment strategy and believe U.S. ‘Freedom of Navigation Operations’ to be provocative as they infringe upon China’s sovereignty and territorial integrity.3 Unlike many in the U.S. who see China’s economic growth as a zero-sum game, China sees its development leading to win-win outcomes for both China and the world.

America’s current perception of China can be summed up in the 2017 National Security Assessment that labeled China a “strategic competitor,” and “revisionist” power that aims to “shape a world antithetical to U.S. values and interests.” 4

China and America now find themselves in the midst of a shift in the fabric of their relationship; one that is seeing the emergence of complex forms of confrontation and cooperation. As tensions escalate between the world’s two largest economies, countries like Israel are compelled to seek a way to effectively navigate through the crosshairs.

The dynamics of the Israel-China-U.S. triangle
Unlike many other Asian countries that depend on America militarily and politically -but on China economically – Israel is deeply integrated with the U.S. on all three fronts. At the same time, Israel views China as a significant economic partner.

It is well known that for Israel relations with America are paramount. The U.S. is Israel’s largest business partner, with total goods and services traded in 2016 reaching upwards of $47bn (which when combined with Europe accounts for 60% of Israel’s bilateral trade).5 Furthermore, U.S. political support of Israel is nonpareil, and the two nations have one of the most robust military cooperation frameworks in the world. Under the Trump administration, relations have drawn even closer as evidenced by the decision to move the American embassy to Jerusalem. 6

China’s rising prominence as a power on the global stage has encompassed a growth in the strength and scope of its relations with Israel. Since the establishment of formal diplomatic ties in 1992, the areas of mutual foreign policy interest between Israel and China have multiplied, particularly in the spheres of economics, academia, science and technology, and people-to-people exchange. Chinese interest in Israel’s ground-breaking innovation and technology sector has made China an important trading partner and source of foreign direct investment for Israel. In 2017, Israel-China relations were upgraded with the joint announcement by Prime Minister Benjamin Netanyahu and President Xi Jinping of a comprehensive innovation partnership.7 While Israel does not sell military technology to China, trade relations continue to grow robustly in the commercial sector – China won a number of infrastructure development tenders such as the Tel Aviv light rail, Carmel Tunnel, construction of a new port in Ashdod, and management of the new port terminal in Haifa.

Rising tensions between U.S.-China has sparked debate in Israel
Washington’s concerns have led to questions about Chinese acquisitions of critical infrastructure in Israel as well as Chinese interest in Israeli technology that supports “Made in China 2025” which includes increased civil-military integration. To manage U.S. and China interests, Israel needs to be aware of the misperceptions and misunderstandings caused by the differing mental frameworks that define their policies towards the Jewish State. 8 On the one side is China’s mental framework, imbued with a hierarchical, top-down approach embedded in the culture since the days of Confucius, is designed to coordinate its parts in the pursuit of China’s interests as defined by the ruling party. On the other side is a mental framework formed from the grass-roots culture of American individualism. These contrasting mental frameworks are at the heart of the different ways China and the U.S. manage their international affairs. In the face of this challenge, Israel’s goal is to find a balance between cooperation and national security in the midst of an ambiguous state of current affairs.

The ambivalence being felt in response to increasing tensions between the two great powers sparked a debate in Israel regarding the nature of its ties with China and its impact on relations with the U.S. The issues were articulated in an article in the Hebrew-language national newspaper, Haaretz by Amos Harel. The article outlined rising concerns by members of the Israeli and American think tank communities regarding the Chinese company SIPG holding the tender to operate the Haifa port.9 The article fails to mention that SIPG will only be operating 800m of 8.2km, or that Israel will continue to operate the rest. It thus seemed to imply that the Chinese were in line to take full control.

In a November essay in a U.S.-based online Jewish publication, Mosaic, Arthur Herman of the Hudson Institute, implied that Israel’s cooperation with China risks undermining its alliance with the United States. Herman called into question “whether and how the relationship with China could become a dependency.”10 This view reflects a mental framework shaped by a culture inclined to choose between black and white, leading to the conclusion that there is a zero-sum game in great power relations. The Chinese, on the other hand, see mainly shades of grey where conflicting ideas can live side by side.

In October 2018, Israel’s Channel 2 News reported that during the visit of Vice President Wang Qishan to Israel, the Trump Administration contacted PM Netanyahu to express concerns over the growth of Israel’s relations with China.11 This begs the question, is there cause for concern by the U.S.? Or for that matter, is there reason for Israel to be concerned? Perhaps a better understanding can be gained by looking at those relations within the broader context of the shifting geopolitical reality.

Broader Geopolitical Context
Israel’s relations with China are part of “a major realignment of Israel’s foreign policy on a broad scale”.12 PM Netanyahu saw an opportunity to expand Israel’s economic reach eastward. Unlike America, Israel’s pivot towards Asia, according to PM Netanyahu, is motivated by economics and a desire to diversify its markets. 13

China-Israel cooperation has remained firmly in the sphere of infrastructure development and civilian technologies such as water management, healthcare, agriculture, and environmental technology. China is Israel’s biggest trading partner in Asia, with bilateral trade today exceeding $13bn. While there has been much hype in the media regarding China’s direct investment in Israeli startups, according to the IVC research group, Chinese investment represents on average 12% of the total capital raised by all Israeli startups last year.14 In the field of M&A’s of Israeli tech companies Chinese firms still lag far behind America, Europe, and even Japan. The only exception being the acquisition of Playtika by China’s Giant interactive for $4.4bn in 2016 which accounted for 44% of Israeli M&A activity that year. The year before and after, China accounted for less than 8% and 1.1% respectively of all acquisitions in Israel. Thus the ”world’s most populous country and second largest economy, in fact, remains a relatively minor player,”15 suggesting that Israel is far from being economically dependent on China, as Herman’s Mosaic article seems to imply.

In any case, China is just one of the Asian countries developing relations with Israel. Not only is Jerusalem negotiating a free trade agreement with China, but it is also doing so with South Korea, Vietnam, and India. Ties are strengthening with Singapore, the Philippines, and Japan. Moreover, PM Netanyahu has taken measures to improve relations with Gulf states such as Saudi Arabia, Oman, and the United Arab Emirates. 16 17 Israel is now able to expand trade with countries such as Indonesia and Malaysia in spite of the absence of formal ties. They do so by trading with Israel through countries like Singapore and Australia. Asia [excluding China] has consequently become the biggest market for Israeli defense exports reaching a total of almost 60% of arms sales in 2017, the largest buyer being India. 18 19

Divergent and convergent perceptions
While Israel-China relations have progressed significantly since the establishment of diplomatic ties, the relationship has a glass ceiling defined by national security. There is a limit to Israel’s ability to advance relations with China while Iran remains a recipient of Chinese support. This divergence of strategic perceptions will contain relations within the areas of economics, academia, and culture.

Iran, Israel’s primary enemy, has openly called for the destruction of the Jewish state. 20 Israelis view Iran as a destabilizing force in the region who arm Shia entities such as the Houthis in Yemen,21 Hezbollah in Lebanon, and others to fight proxy wars and spread its sphere of influence in the region. As such, when Iran encroaches on Israel in Syria, and attempts to develop nuclear warheads understood to be destined for Tel Aviv, Israel naturally views this as an existential threat. China, however, remains one of Iran’s principal trade partners.22 Beijing’s strategic assessment of Iran is tinted by the friendly nature of their relationship. Israel is aware that according to Beijing, if Iran had nuclear capabilities it would not pose an existential threat to China.

At the recent third annual conference on Israel’s China policy, hosted each year by SIGNAL, with the support of China’s Embassy in Israel, Efraim Halevy, former head of Israel’s intelligence agency, Mossad, raised the issue of North Korea. Halevy explained that “North Korea has supplied missiles to entities in the Middle-East,” and “that 11 years ago Israeli intelligence discovered that the DPRK was building a nuclear power plant in Syria.” He added, “What is important to us, is the potential leverage China has over North Korea” and whether they could, in future, play a role in applying pressure on the DPRK to prevent such developments from happening. Again, while China does not perceive the DPRK to be an existential threat, it certainly is in the eyes of Israel and America.

There is also the matter of China consistently voting against Israel at the United Nations. Israelis understand that this is likely to appease the Arab and Muslim states. This voting pattern continues even as Gulf States draw closer to Israel.

The above mentioned barriers stand firmly in the way of Israel’s and China’s prospects of upgrading their relationship to a strategic partnership.

At the same time, there are many areas in which China’s and Israel’s views converge. As the Belt & Road Initiative plans to connect Asia to Europe by land through the Middle East, stability in the region is a critical factor for ensuring its success. Israel, too, wishes for stability in its region. Warming ties with the Gulf States, as well as already long-established cooperation in water management, energy, agriculture, and even intelligence sharing with Egypt and Jordan, reflect this goal of stabilizing the Middle East. 23 24 Immense opportunities exist within the framework of the BRI to bring stability and security to the region – a development that the U.S. seeks. For example, as the former deputy director for foreign policy and international affairs at the National Security Council in the Israeli Prime Minister’s Office, Eran Lehrman, explains “It is very much in the interest of both Israel and the U.S. that China continue to be a long-term strategic investor in Egypt’s growth and stability. This is not a zero-sum game. It is a geostrategic win-win.” Additionally, Israel and China also share another common interest: eradicating the threat of global terrorism.

Conclusion
Two countries with vastly different historical realities, cultures, political structure, and value systems see the world through contrasting and sometimes conflicting mental frameworks. Thus, it will be difficult for the world’s two largest economies to find a modus vivendi. Israel deeply values its relationship with China while understanding that there are areas where strategic perceptions diverge. At the same time, no other country has ever supported Israel to the extent America does. Israel has so far ensured that it engages solely in civilian cooperation with China. The task of growing closer to China, without upsetting its privileged ties with the U.S., will require Israel to conduct an ever-more nuanced balancing act. Jerusalem will need to maintain open lines of communication with both Washington and Beijing. Furthermore, Israel, China, and the U.S. would benefit significantly by engaging in track II annual dialogue mechanisms such as that established by SIGNAL in 2017 with Renmin University’s School of International Studies, with U.S. representation in 2018 by the World Jewish Congress. Such a forum provides a space for the three nations to bring their assessments and concerns to the fore of trilateral discourse to better understand how each views the world, and to coordinate their policies accordingly. Halevy stated that “We [Israel] should use the time we have to create a meaningful relationship that goes beyond economic goodies but also include issues of more serious importance.” For this to happen would require that Israel, China, and likely the U.S. as well, align their strategic perceptions. Perhaps cooperating on convergent perceptions such as counterterrorism and bringing stability to the Middle East is a good place to start.

There is an old Swahili proverb that states: “When two elephants fight, the grass is flattened. When two elephants make love, the grass is flattened.” For Israel, as for most countries in a similar position of the world, the ideal is to see the two behemoths and avoid thinking in binary terms.

  1. Tiezzi, Shannon, Beijing’s China Threat Theory. June, 2014. The Diplomat Retrieved from: http://thediplomat.com/2014/06/beijings-china-threat-theory/
  2. https://www.economist.com/asia/2018/09/06/the-perils-of-chinas-debt-trap-diplomacy
  3. https://www.eastwest.ngo/sites/default/files/AlternativeStrategicPerceptions.pdf
  4. https://www.whitehouse.gov/wp-content/uploads/2017/12/NSS-Final-12-18-2017-0905.pdf
  5. https://ustr.gov/countries-regions/europe-middle-east/middle-east/north-africa/israel
  6. https://www.timesofisrael.com/no-future-president-will-reverse-jerusalem-embassy-move-us-envoy-says/
  7. https://www.tv7israelnews.com/israel-china-to-launch-a-comprehensive-innovation-partnership/
  8. Kausikan, Bilahari. Dealing with an ambiguous world. 2017.
  9. https://www.haaretz.com/us-news/.premium-israel-is-giving-china-the-keys-to-its-largest-port-and-the-u-s-navy-may-abandon-israel-1.6470527
  10. https://mosaicmagazine.com/essay/2018/11/israel-and-china-take-a-leap-forward/
  11. http://www.israelnationalnews.com/News/News.aspx/253612
  12. https://www.worldpoliticsreview.com/articles/19067/israel-deepens-asia-ties-in-gradual-realignment-of-foreign-policy
  13. https://www.jpost.com/Israel-News/Politics-And-Diplomacy/PM-Israels-pivot-to-Asia-is-economic-not-political-482245
  14. http://www.ivc-online.com/High-Tech-Insights/News-PR/News-Archive/nid/a4c22133-2e12-e811-80e4-00155d0b832c
  15. Ibid 14
  16. http://www.israelnationalnews.com/News/News.aspx/255875
  17. https://www.timesofisrael.com/top-uae-trade-official-visited-israel-in-august-report/
  18. https://www.jpost.com/Special-Content/Flourishing-in-the-new-era-China-Israel-economic-and-trade-cooperation-569909
  19. https://www.timesofisrael.com/israeli-arms-sales-skyrocket-increasing-41-5-in-one-year/
  20. https://www.timesofisrael.com/iran-supreme-leader-touts-9-point-plan-to-destroy-israel/
  21. https://www.haaretz.com/middle-east-news/.premium-backed-by-iran-yemen-s-houthi-fighters-flout-saudi-arabia-s-might-1.6340292
  22. https://www.rand.org/pubs/occasional_papers/OP351.html
  23. https://mepc.org/jordanian-israeli-relationship-reality-cooperation
  24. https://www.washingtoninstitute.org/uploads/Documents/pubs/PolicyNote49-Hassanein3.pdf
Published: 23-12-2018