Israel May Be Turning Away from Chinese Investment

Last week, a joint venture between an Indian and an Israeli company won a bid for the rights to manage Haifa’s seaport. The nearby container port, by contrast, will still be managed by a China-based firm. Yet the new deal may suggest a move away from large-scale Chinese economic entanglement in the Jewish state, which has been a matter of concern for the U.S. for some time—not without reason. Sarah Zheng and Coco Liu report on other evidence that something has changed:

Before 2018, China had been positioning itself as an important international partner for the Israeli tech industry, which sought capital and access to one of the world’s biggest markets. Chinese investors were far from its most vital sources of capital—they invested $424 million in Israeli startups in 2018, about 5 precent of the total investment into the sector—but their connections to Israel were deepening.

In retrospect, that may have been the high-water mark. Last year, Chinese capital accounted for only 1 precent of investment in Israeli startups, data from the IVC Research Center show. This could be a strategic disadvantage for Beijing, which has been grappling with growing hostility from the West.

Companies in Israel that once welcomed Chinese financiers, particularly in sensitive deep-tech sectors, are now hesitant to do business with them because of the potential political consequences in other markets. Under pressure from its U.S. and European backers, one supplier of electric-vehicle components this year abandoned plans to take Chinese capital in exchange for access to the world’s biggest EV market, according to a person with knowledge of the matter.

In part, Israeli startups may be getting pickier because they find it easier to attract investors than they have in the past, says Ehud Levy, a general partner at Canaan Partners Israel and also a partner at China’s Lenovo Capital. And even if it hasn’t yet succeeded in getting Israel to adopt its entire policy agenda, the U.S. has convinced many Israeli entrepreneurs of the need to choose sides.

Read more at Bloomberg

More about: China, Israel-China relations, Israel-India relations, Israeli technology

Why Hizballah Is Threatening Cyprus

In a speech last Wednesday, Hizballah’s secretary general Hassan Nasrallah not only declared that “nowhere will be safe” in Israel in the event of an all-out war, but also that his forces would attack the island nation of Cyprus. Hanin Ghaddar, Farzin Nadimi, and David Schenker observe that this is no idle threat, but one the Iran-backed terrorist group has “a range of options” for carrying out. They explain: 

Nasrallah’s threat to Cyprus was not random—the republic has long maintained close ties with Israel, much to Hizballah’s irritation. In recent years, the island has hosted multiple joint air-defense drills and annual special-forces exercises with Israel focused on potential threats from Hizballah and Iran.

Nasrallah’s threat should also be viewed in the context of wartime statements by Iran and its proxies about disrupting vital shipping lanes to Israel through the East Mediterranean.

This scenario should be particularly troubling to Washington given the large allied military presence in Cyprus, which includes a few thousand British troops, more than a hundred U.S. Air Force personnel, and a detachment of U-2 surveillance aircraft from the 1st Expeditionary Reconnaissance Squadron.

Yoni Ben Menachem suggests there is an additional aspect to Nasrallah’s designs on Cyprus, involving a plan

to neutralize the Israeli air force through two primary actions: a surprise attack with precision missiles and UAVs on Israeli air-force bases and against radar and air-defense facilities, including paralyzing Ben-Gurion Airport.

Nasrallah’s goal is to ground Israeli aircraft to prevent them from conducting missions in Lebanon against mid- and long-range missile launchers. Nasrallah fears that Israel might preempt his planned attack by deploying its air force to Cypriot bases, a scenario the Israeli air force practiced with Cyprus during military exercises over the past year.

Read more at Washington Institute for Near East Policy

More about: Cyprus, Hizballah, U.S. Security