Israel will soon have to choose between China and the US – CNBC


Israeli PM Benjamin Netanyahu speaks with US President Donald Trump at Ben Gurion International Airport on May 23, 2017 in Jerusalem, Israel.

Kobi Gideon | GPO | Getty Images

“Make new friends, but keep the old; Those are silver, these are gold.”

That’s the line about friendship that some of us were taught as kids.

It may also hold true for foreign policy, at least that’s what some top bureaucrats in Israel are hoping to prove.

In this case, Israel’s “golden old friend” is the U.S. and its “silver new friend” is China.

Now, Israel is increasingly being asked to choose one over the other. The Trump administration has made repeated warnings to Israel over the past year and a half that the Jewish state must distance itself and even cancel a number of economic deals it’s made with Beijing.

The two biggest warnings came in January, when Secretary of State Mike Pompeo said that unless Israel reduces cooperation with China, the U.S. might reduce “intelligence sharing and co-location of security facilities.” Earlier in the year, U.S. national security advisor John Bolton encouraged Israeli officials to take a tougher stance against Chinese electronics manufacturers ZTE and Huawei.

Not only is the U.S. clearly Israel’s most important and strongest ally, but it should be noted that Pompeo and Bolton are also two of Israel’s strongest supporters in Washington.

So what makes this a tough decision for Israel?

First, you have to consider the nation’s culture of survival. In a country filled with Holocaust survivors and their children, most of the population is brought up learning that all the great relationships between Jews and non-Jewish nations in the past have eventually gone sour. While the U.S.-Israeli relationship is special, it’s a time-tested conviction for the country to avoid putting all of its allegiance eggs in one basket.

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Israel has done just that since it first became a state in 1948. It would probably surprise many people who think the U.S. has always been Israel’s No. 1 defense source to learn that France was Israel’s top foreign source for arms for most of its first 20 years of existence. In more recent years, Israel has vastly deepened and improved its relationship with once hostile countries like India, Russia and – most importantly – Saudi Arabia, Bahrain and Oman.

But the Chinese issue seems to have convinced at least Israel’s diplomatic corps that it’s time to rethink that philosophy. Prime Minister Benjamin Netanyahu’s own Foreign Ministry has issued a widely reported assessment to the security cabinet that Israel will probably not be able to enjoy the fruits of Chinese infrastructure investments without losing a significant degree of American support.

Netanyahu didn’t sit on that report, he immediately postponed a vote on a new monitoring plan for Chinese investments in Israel in order to beef up its restrictions on the high-tech projects that make the Trump administration the most uneasy.

Major infrastructure projects at risk

This isn’t just a debate over future investments or theoretical policy; two major projects inside of Israel are in question.

The first is control of Israel’s crucial Haifa port, which Israel is still slated to give to the Shanghai International Port Group and SIPG has already put $2 billion into the project. Second is the China Railway Tunnel Group has also won a tender to dig the tunnels and operate the electronic systems for a new Tel Aviv commuter rail line in deals worth nearly $1.4 billion. But there are several more.

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But while this all makes creating new distance with China a tough choice, it’s also a decision that can be made with a good amount of confidence thanks to yet another historic guide and some recent news.

First the history: in the early years of the state of Israel, the Jewish state tried to cultivate good ties with the USSR. The first Israeli ambassador to the Soviet Union was even Golda Meir, who was already a very key player in the Israeli government 20 years before she would become prime minister.

But any problems Israel may have had with deciding which side to choose in the Cold War were quickly erased as the Soviets became major military backers of all of Israel’s most dangerous enemies in the Middle East.

The USSR even played a major role in the cultivation of anti-Israel terror groups over the years. That and the Soviet Union’s continued persecution of Jews inside its own borders made any idea to play both sides in the U.S.-USSR conflict impossible for Israel.

As it turned out, Israel’s obvious choice turned out better for it and the U.S. by the time the Soviet Union dissolved in 1991.

China isn’t the kind of direct supporter of Israel’s enemies the way the Soviet Union was for so many decades. But its continued economic support for Iran, Israel’s one true existential threat, should be a big red flag. China continues to buy Iranian oil, defying U.S. sanctions.

These are purchases that Beijing must know aid Iran’s international terror infrastructure that threatens Israel. No it’s not quite the same as the jets, tanks and missiles the Soviet Union supplied Egypt, Syria and Iraq, but it’s problematic just the same. Ignoring this arrangement would be like forgetting the history lesson Israel learned the hard way once the Cold War began in earnest in the 1950s.

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Current events are also a strong guide. The U.S. decision to yank the F-35 Joint Strike Fighter program from Turkey because of Ankara’s decision to buy Russia’s S-400 missile system should make it clear that Washington isn’t kidding about mixing and matching American military tech with that of its potential foes.

In addition to the blanket warnings from Pompeo and Bolton, the U.S. has already warned that it may not be able to continue joint naval exercises with Israel in the same fashion as long as it moves ahead with the Chinese Haifa port management project.

Finally, Israel’s growing list of new trade partners and strategic allies should also soften the blow of a relative disengagement with China. Saying goodbye to a few tantalizing infrastructure projects won’t be easy, but choices like this never come without drawbacks.

Many pundits are trying to frame this as the Trump administration demanding Israeli loyalty to its every whim. But given the serious concerns any country needs to have about Chinese military and industrial espionage, Israel’s choice really isn’t about making President Donald Trump happy. For a nation that has always valued its security over everything else, Israel really can’t go any other way.

Jake Novak is a political and economic analyst at Jake Novak News and former CNBC TV producer. You can follow him on Twitter @jakejakeny.





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