Israel Awards Desalination Plant Construction to Domestic Firm Over China

Israel announced this week that it is awarding a $1.5 billion bid to build the world’s largest desalination plant to Israel’s IDE Technologies. Reports indicate that IDE Technologies offered to complete the project at an attractively low price, highlighting that it is possible for business and security considerations to align.

The announcement comes in the wake of Secretary of State Mike Pompeo’s visit to Israel, where he reportedly called upon the Israeli government to block the bid of Chinese-owned Hutchinson from the Soreq B desalination plant project. The U.S. position reflects a growing sentiment inside the Beltway that China’s economic influence must be countered, including Beijing’s Belt and Road Initiative.

Trump administration officials have discussed their concerns about Chinese investment with Israeli officials since the publication of the December 2017 National Security Strategy, if not before. Israel has responded by establishing a foreign investment screening body, a decision that the United States welcomed as a good first step. In addition, Israel took the significant step of blocking Huawei from its 5G network. More recently, Israel abruptly halted and renegotiated a deal with Beijing Genomics Institute to set up a COVID-19 testing lab.

Israel’s foreign investment screening mechanism is still a work in progress. It benefits from strong interagency collaboration, with senior representatives from the Ministry of Finance, the Ministry of Defense, and the National Security Council. The committee also includes representatives from the Ministry of Economy, the National Economic Council, and the Ministry of Foreign Affairs. Yet the mechanism does not automatically conduct a review of private sector companies that accepted foreign investment. It also lacks a mechanism to retroactively review potentially problematic business deals.

The broader challenge of decoupling from China, which increasingly appears to be U.S. policy, will not be an easy one for Israel. China accounts for roughly 10 to 15 percent of the Israeli economy. However, recent legislative initiatives in the United States may help the two countries collaborate on technological innovations at earlier stages to address respective national security concerns and prevent future misunderstandings. Washington can also support Israel by identifying alternative bilateral investment opportunities to supplant China, and by inviting Israel to participate in a regular bilateral dialogue.

By awarding the Soreq B tender to a local company, Israel simultaneously protected its critical infrastructure and addressed U.S. concerns. With additional challenges undoubtedly lying ahead, the Soreq B case study demonstrates that Israel is taking seriously Washington’s concerns about Chinese investment, and that business and security interests can align.

Julia Schulman is senior director of special projects at the Foundation for Defense of Democracies (FDD). For more analysis from Julia and FDD, please subscribe HERE. Follow FDD on Twitter @FDD. FDD is a Washington, DC-based, nonpartisan research institute focusing on national security and foreign policy.