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Chinese investments in Sri Lanka: This article
addresses Chinese projects in Sri Lanka, some of which are within the Belt
and Road Initiative, in order to draw insights to be applied to the Israeli
sphere. Moreover, the article will try to answer whether, and to what extent,
the Chinese Belt and Road Initiative “belongs to the world,” as is written on
its official website, or whether this is an expression of the Chinese drive
for influence that may lead to a new Chinese world order.1 The
article presents the Belt and Road Initiative alongside arguments against it.
It then outlines Chinese-Sri Lankan relations and lists four Chinese projects
on the island. The article then examines Israel-China relations in view of
Chinese involvement in strategic projects in Israel and focuses on the Bay
Port project in Haifa. In conclusion, the article presents insights for
Israel as a direct result of the Belt and Road Initiative, while examining
the likelihood of diplomatic damage, security risks, and the effect on
Israeli politicians as a result of this initiative. Keywords: China, Sri Lanka, Israel, strategy, projects, Chinese
initiative, Belt and Road Initiative |
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Shlomi Yass is an
intern at INSS and a guest writer at the Forum for Regional Thinking. 1
Mark Melton,
“China’s Plan for a New World Order: Review of Maẹães’ Belt and Road,” Providence,
September 12, 2019, https://providencemag.com/2019/09/ chinas-new-world-order-book-review-bruno-macaes-belt-road-initiative. |
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A short time after being chosen as president of China in
2013, Xi Jinping announced what seemed to be the largest economic project in
history—the “Belt and Road Initiative” (BRI). The initiative is the Chinese
president’s grand strategy to renew the ancient continental Silk Road by
building a network of international fast train lines and roads that would
join China with Africa and Europe, as well as by establishing a network of
sea ports to create a maritime trading channel that would extend over a
number of oceans.2 As part of this strategy, China is also
planning to expand existing aerial cargo agreements and to build a variety of
facilities for energy, communications, manufacturing, and other needs.3 Significant
progress in implementing this initiative was achieved in June 2015, when
fifty-seven countries (excluding Japan and the United States) joined as
founding members of a new bank in Beijing—“The Asian Infrastructure
Investment Bank” (AIIB)—which had initial capital of $100 billion.4
As of October 2019, China holds 31 percent of the bank’s total capital, which
gives it 26.6 percent of the voting rights; in other words, it can veto any
decision that requires a special majority (of at least 75 percent of voters).5
Israel also joined the AIIB as a founding country, assuming that this would
help Israeli companies participate in the bank's projects.6 The first forum
of the BRI convened in 2017. The United States took part in the conference,
although with the lower-level participation by the |
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2 Mai Phan, “A
Mixed Reality of The Belt and Road Initiative in Southeast Asia,” Journal
of International Relations, July 22, 2019, http://www.sirjournal.org/op-
ed/2019/7/22/a-mixed-reality-of-the-belt-and-road-initiatives-in-southeast-asia. |
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3 Martin
Hart-Landsberg, “A Critical Look at China’s One Belt, One Road Initiative,” CADTM,
October 10, 2018, http://www.cadtm.org/A-critical-look-at-China-s-One-
Belt-One-Road-initiative. |
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4 “Founding 57
Members of China-led AIIB Investment Bank Sign Up in Great Hall Ceremony,” Deutsche
Welle, June 29, 2015, https://www.dw.com/en/
founding-57-members-of-china-led-aiib-investment-bank-sign-up-in-great-hall-
ceremony/a-18546332. |
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5 Jason Kirk,
“China and the Asian Infrastructure Investment Bank,” Observer Research
Foundation, November 1,2019, https://www.orfonline.org/expert-speak/
china-and-the-asian-infrastructure-investment-bank-55693. |
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6 Hagai Shagrir,
Israel-China Relations: Innovative Comprehensive Partnership, Memorandum
no. 194 (Tel Aviv: INSS, 2019), 21. |
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National Security Council's senior director of Asia
Affairs.7 In April 2019, the initiative's second forum took place,
with thirty-six heads of state and government participating.8 The number of
countries involved in the Chinese strategic initiative is impressive. As of
March 2019, China had signed 173 cooperation agreements with 125 countries and
twenty-nine international organizations. In addition, China had signed
bilateral air traffic agreements with 126 countries and expanded existing air
traffic agreements with various countries (including Israel). In the past
five years, China has opened more than one thousand new international air
routes.9 In April 2019, Italy signed a memorandum of
understandings with China as part of the BRI, and Russia recently joined the
initiative as well, giving a green light to the construction of an
international autostrada with China.10 The World Bank estimates
some $575 billion worth of energy plants, railways, roads, ports, and other
projects have been built or are in the works as part of the Chinese
initiative.11 In this context,
it is worth mentioning other “silk roads” that China is currently building:
The “Digital Silk Road,” which is a network of undersea internet cables; the
“Space Silk Road” (Beidou), which is a Chinese navigation system that is
striving to replace the American GPS satellite network,12 and the
“Polar Silk Road,” which aims to deal with shipping lanes, scientific
research, climate change, and arctic resources.13 |
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7 Matt
Spetalnick and David Brunnstrom, “Trump Asia Expert to Become New Deputy
National Security Adviser: Sources,” Reuters, September 20, 2019,
https:// www.reuters.com/article/us-usa-trump-adviser/trump-asia-expert-to-become-new-
deputy-national-security-adviser-sources-idUSKBN1W523F. |
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8 Shannon
Tiezzi, “Who Is (and Who Isn't) Attending China's 2nd Belt and Road Forum?” The
Diplomat, April 27, 2019, https://thediplomat.com/2019/04/who-is-
and-who-isnt-attending-chinas-2nd-belt-and-road-forum. |
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9 “The Belt and Road Initiative Progress,
Contributions and Prospects,” Belt and |
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10 Alice Scarsi,
“Russia and China Agree 5000-mile ‘Moscow Bypass' Road to Strengthen Economic
Ties,” Express, July 10, 2019, https://www.express.co.uk/
news/world/1151662/russia-news-china-Russia-Western-China-highway-Belt-and-
Road-Initiative-bri. |
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11 “China's Belt
and Road Gets a Reboot to Boost Its Image,” Bloomberg, August 14,
2019, https://www.bloomberg.com/news/articles/2019-08-14/china-s-belt-and-road-
is-getting-a-reboot-here-s-why-quicktake. |
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12 Matthew
Johnson, “China's International Partnerships: Pakistan, CPEC and Central
Asia,” Tibet Digest (Foundation for Non-violent Alternatives) (August
2019), 98. |
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13 Qiyang Niu,
“China's Evolving Arctic Policy: Two Geopolitical Threats,” Tibet Digest
(Foundation for Non-violent Alternatives) (August 2019), 116. |
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Challenges to the Belt and Road
Initiative The effects and the broad global implications of the Belt
and Road Initiative also have drawn criticism and have exposed its
shortcomings and weaknesses. China has promoted a narrative of
“nonintervention,” which states that any intervention in the politics or
policy of the initiative’s partner countries must be seen as if it was
invited by their governments.14 Basically, Chinese projects are
only narrowly open to international participation. As of 2018, out of all
contractors participating in Chinese-funded projects across the Eurasian
supercontinent and tracked by Center for Strategic and International Studies,
89 percent belong to Chinese companies, 7.6 percent belong to local companies
(companies whose head offices are located in the country in which the project
is taking place), and 3.4 percent belong to foreign companies. Among the many
projects included in the BRI are those that began years before the initiative
was launched.15 In the past
year-and-a-half (as of October 2019), the growth in the scope of the
initiative slowed drastically. In 2018, the value of new projects in the
sixty-one countries that are involved in the initiative had decreased by 13
percent compared with 2017; by August 2019, it had dropped another 6.7
percent. In the first eight months of 2019, existing contracts had further
declined by 4.2 percent. A few countries participating in the initiative
lowered planned loans and even cancelled projects, partly for economic or
political reasons.16 At least seven countries, including Pakistan,
Myanmar, the Maldives, Kenya, and Sri Lanka, encountered problems with the
initiative’s projects or asked to reconsider them.17 China's
investment in other countries, especially within the framework of the BRI,
raises issues concerning debt, threats to sovereignty, land grabbing,
uprooting, human rights abuses in |
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14 Nicholas
Crawford, China and Instability in Developing Countries (International
Institute for Strategic Studies, October 28, 2019), 3, https://www.iiss.org/blogs/ research-paper/2019/10/china-and-instability. |
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15 Jonathan E.
Hillman, China s Belt and Road Initiative: Five Years Later (Center
for Strategic and International Studies, January 25, 2018), https://www.csis.org/
analysis/chinas-belt-and-road-initiative-five-years-later-0. |
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16 Cissy Zhou,
“China Slimming Down Belt and Road Initiative as New Project Value Plunges in
Last 18 Months, Report Shows,” South China Morning Post, October 10,
2019, https://www.scmp.com/economy/global-economy/article/3032375/china-
slimming-down-belt-and-road-initiative-new-project. |
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17 “China's Belt
and Road Gets a Reboot to Boost its Image,” Bloomberg, August 14,
2019, https://www.bloomberg.com/news/articles/2019-08-14/china-s-belt-and-road-
is-getting-a-reboot-here-s-why-quicktake. |
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areas of dispute, environmental impacts, concerns over
public health, and breaches of employment conditions.18 Several arguments
have been raised against the initiative. The first argument views it as more
than just an economic initiative and rather as a main tool for promoting
Chinese geopolitical ambitions. Some believe that it is a Chinese reaction
against the refocusing of the United States on Asia (“Pivot to Asia”), which
began in 2011 during the Obama administration, and which many in Beijing view
as an attempt to hinder China's influence by expanding US economic ties in
southeast Asia. The United States and some of its allies have warned that the
Chinese initiative may be really a “Trojan Horse” intended to promote Chinese
regional hegemony and enable Chinese military and institutional expansionism.19
A second argument views the Chinese initiative as a type of “debt-trap
diplomacy” against developing countries. According to this argument, China is
mortgaging the resources and strategic assets of developing countries in
exchange for financing and building infrastructure in those countries, and it
is working toward gaining preferential access to their natural resources. In
this way, China achieves both economic penetration and strategic leverage.20
A third argument views the initiative as causing environmental damage on a
global scale. This is a legitimate concern due to the environmental impact of
the initiative, particularly given the paucity of experience in analyzing the
environmental impact of massive infrastructure development on the scale of
the Chinese initiative.21 In June 2019, the
World Bank published a study that attempted to answer these three arguments.
The authors do not reject the Chinese initiative out of hand but recommend a
series of profound changes, writing that “China's Belt and Road Initiative
(BRI) could speed up economic development and reduce poverty for dozens of
developing countries—but it must be accompanied by |
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18 GRAIN, The
Belt and Road Initiative: Chinese Agribusiness Going Global (GRAIN,
February 18, 2019), https://www.grain.org/en/article/6133-the-belt-and-road-initiative-
chinese-agribusiness-going-global. |
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19 Andrew Chatzky
and James McBride, “China's Massive Belt and Road Initiative,” Council on
Foreign Relations, May 21, 2019, https://www.cfr.org/backgrounder/ chinas-massive-belt-and-road-initiative. |
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20 Ronak
Gopaldas, “Lessons from Sri Lanka on China's ‘Debt-Trap Diplomacy'” Institute
for Security Studies, February 2, 2018, https://issafrica.org/amp/iss-today/ lessons-from-sri-lanka-on-chinas-debt-trap-diplomacy. |
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21 Hoong Chen Teo
and others, “Environmental Impacts of Infrastructure Development under the
Belt and Road Initiative,” Environments 6, no. 6 (2019): 1. |
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deep policy
reforms that increase transparency, improve debt sustainability, and mitigate
environmental, social, and corruption risks.”22 China-Sri Lanka Relations Vis-à-vis Sri
Lanka's Political System The Chinese interest in Sri Lanka is, to a large extent,
due to its strategic position, having served for many years as a large
maritime trading junction in the Euro-Asian space. Sri Lanka can provide a
convenient and rapid gateway to developing markets in the Indian
subcontinent, meeting Chinese interests.23 China's strategic closeness
to Sri Lanka began with the administration of Sri Lankan president Mahinda
Rajapaksa, who served between 2005 and 2015, during which China became Sri
Lanka's main weapons supplier. While the United States halted direct military
assistance to Sri Lanka in 2007, China increased its assistance to the island
by about $1 billion and became the largest contributor to its economy and
military. China provided sophisticated weapons to Sri Lanka, including six
Chinese F-7 combat planes, and it encouraged Pakistan to sell weapons to Sri
Lanka and train its pilots. China also
assisted Sri Lanka diplomatically and even cast a veto against the UN
Security Council proposal to hold a discussion on Sri Lanka following the
civil war on the island and perhaps to send UN observers there.24
Economic relations between the two countries also strengthened to the point
whereas in 2013, China became the greatest source of direct foreign
investment in Sri Lanka.25 President Rajapaksa relied increasingly
on the Chinese in order |
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22 “Millions Could Be Lifted Out of Poverty,
but Countries Face Significant Risks,” World Bank, June 18, 2019, https://www.worldbank.org/en/news/press-release/2019/06/18/ success-of-chinas-belt-road-initiative-depends-on-deep-policy-reforms-study-finds. |
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23 Marcello
Rossi, “Next Hambantota? Welcome to the Chinese-funded US $1.4 billion Port
City Colombo in Sri Lanka,” South China Morning Post, May 12, 2019,
https:// www.scmp.com/week-asia/geopolitics/article/3009731/next-hambantota-welcome-
chinese-funded-us14-billion-port-city. |
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24 “How Beijing
Won Sri Lanka's Civil War,” The Independent, May 23, 2010, https://www.independent.co.uk/news/world/asia/how-beijing-won-sri-lankas-civil-
war-1980492.html. |
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25 N.P Ravindra
Deyshappriya, “China is Sri Lanka's Biggest Source of FDI, But There Is Room
for More,” London School of Economics, September 12, 2017, https://blogs.lse.ac.uk/southasia/2017/09/12/china-is-sri-lankas-biggest-source-of-
fdi-but-there-is-room-for-more. |
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to build projects following the end of the civil war, and
Sri Lanka borrowed more than $6 billion from China for that purpose.26 Chinese
involvement in Sri Lanka became an important issue during the island's
presidential election campaign in 2015. Mahinda Rajapaksa lost the election
to Maithripala Sirisena, who promised to establish “equal relations” with
India, China, Pakistan, and Japan, and to completely change the island's
foreign relations. Sirisena wanted to distance himself from China—the ally of
his predecessor Rajapaksa—and to draw closer to India and the West, while
re-examining the Chinese projects.27 Basically, his government was
mainly concerned with reducing the damage done by previous governments. Until 2015, about
95 percent of the Sri Lankan government's revenue was diverted to paying off
the debt to China, which led it to conduct debt negotiations with China.28
The debt to China in 2016 totaled $8 billion (close to 10 percent of Sri
Lanka's GDP) and is mainly due to loans for building projects, most of which
were approved during the Rajapaksa government.29 The Sri Lankan
government under Sirisena approved in that year to continue the projects, but
they were subject to changes.30 In 2017, it was reported that
China had become the largest lender for building infrastructure projects in
Sri Lanka (21.5 percent of total loans that Sri Lanka took out for building
infrastructure projects), followed by Japan, the World Bank, and the Asian
Development Bank (ADB).31 In May 2019, President Sirisena met with |
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26 “Moving Away from China, Sri Lanka Puts
Chinese ‘Mega-Projects' on Hold,” AsiaNews/Agencies, January 20, 2015,
http://www.asianews.it/news-en/Moving-
away-from-China,-Sri-Lanka-puts-Chinese-mega-projects-on-hold-33240.html. |
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27 Heather
Timmons, “Sri Lanka's Election Upset just Destroyed a Linchpin of China's
Foreign Policy,” Quartz Daily Brief, January 9, 2015, https://qz.com/323718/how-
sri-lankas-surprising-election-results-could-destroy-a-lynchpin-of-chinas-foreign-
policy. |
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28 Jonathan E. Hillman, “Game of Loans: How
China Bought Hambantota,” Center for Strategic and International Studies,
April 2, 2018, https://www.csis.org/analysis/ game-loans-how-china-bought-hambantota. |
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29 Karthik
Sivaram, “‘Locked-In' to China: The Colombo Port City Project,” Freeman
Spogli Institute for International Studies, Stanford University, https://fsi.stanford.
edu/publication/locked-china-colombo-port-city-project. |
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30 Shihar Aneez
and Ranga Sirilal, “Sri Lanka to Allow Chinese Port City Project After
Delay,” Reuters, January 12, 2016, https://www.reuters.com/article/sri-lanka-china-
portcity-idUSL3N14w42G20160112. |
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31 Nilanthi
Samaranayake, “China's Engagement with Smaller South Asian Countries,” United
States Institute of Peace, April 2019. |
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Chinese president Xi Jinping and Chinese premier Li
Keqiang during an international conference.32 In November 2019, an additional round of presidential
elections was held in Sri Lanka. Outgoing president Sirisena did not stand
for re-election, and Gotabaya Rajapaksa—the younger brother of former
president Rajapaksa and who had served as defense minister in his brother's
government from 2005 to 2015—was elected president. The spokesperson of the
Chinese Foreign Ministry was quick to congratulate him, adding that “We are
prepared . . . to work with the new government and leadership to cooperate at
high levels surrounding the Chinese initiative, together with greater
progress in bilateral relations, in order to bring about more tangible and
other profits for both countries and their people.”33 Even during
the election campaign, Gotabaya's associates announced that he planned to
“restore relations” with Chinese president Xi Jinping.34 Moreover,
upon his election as president, Gotabaya Rajapaksa was quick to appoint his
brother, former president Mahinda Rajapaksa, as the new prime minister and minister
of finance.35 These steps may indicate a new strategic closeness
between Sri Lanka and China, even if it may develop more cautiously than in
the past. China-Sri Lanka: Four Main Projects As stated, most of the Chinese loans in the Sri Lankan
projects were given during the term of President Mahinda Rajapaksa. The four
main projects in the country that were carried out with Chinese financing are
the Hambantota Port; the international cricket stadium; the international
airport at Hambantota; and the Port City of Colombo. All these projects are
based on Chinese financing and were built by Chinese contractors. At least
two of them have |
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32 “Li Keqiang
Meets with President Maithripala Sirisena of Sri Lanka,” Ministry of
Foreign Affairs of the People’s Republic of China, May 19, 2019, https://www.
fmprc.gov.cn/mfa_eng/zxxx_662805/t1664297.shtml. |
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33 “China Ready to
Work with New Sri Lankan President,” Ada Derana, November 18, 2019, http://www.adaderana.lk/news_intensedebate.php?nid=59134. |
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34 Shihar Aneez
and Ranga Sirilal, “Record Number of Candidates to Contest Sri Lanka's
Presidential Election,” Reuters, October 7, 2019, https://www.reuters.com/
article/us-sri-lanka-elections/record-number-of-candidates-to-contest-sri-lankas-
presidential-election-idUSKBN1WM1FB. |
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35 “Sri Lanka
President Pledges Election at ‘Earliest Opportunity,'” Al Jazeera, November
22, 2019, https://www.aljazeera.com/news/2019/11/sri-lanka-president-
pledges-election-earliest-opportunity-191122084348262.html. |
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long-term
strategic implications for Sri Lanka (the Hambantota Port and the Port City
of Colombo). The Hambantota Port The Hambantota Port is an example of Chinese “debt-trap
diplomacy.” The port, which sits along one of the most crowded strategic
shipping lanes in the world, was built with a Chinese loan of about $1.3
billion—one of the largest initiatives built with Chinese government
financing—and opened in 2010. However, despite that a large part of East-West
trade passes through shipping lanes in the Indian Ocean, most ships bypass
the Hambantota Port to anchor at the Colombo Port.36 It quickly
became clear that the new port was not profitable. Just thirty-four ships
passed through it in 2012. Sri Lanka, which could not meet payments on the
loan it received from China to build the port, asked for leniency in the
terms of the loan but was turned down. In December 2017, the prolonged
negotiations and the heavy financial pressure led the Sri Lankan government
to accede to transfer the port to Chinese ownership and to agree to lease the
sixty square kilometers of the project's land to China for ninety-nine years.
The lease enabled China to take over territory that is just a few hundred
kilometers away from its rival India, giving China a strategic foothold along
a commercial and military sea lane of decisive importance.37 The international
cricket stadium In 2011, an international cricket stadium named after
Mahinda Rajapaksa was opened near the town of Hambantota. It was built in
order to host the Cricket World Cup, which took place that year in Sri Lanka.
It is the second-largest stadium in Sri Lanka, holding 32,000 seats, and the
cost of construction reached about $3.8 billion. Not long after it opened,
criticism was leveled against it, firstly, the high cost of its maintenance,
followed by the fact that since its construction, only a few international
competitions have |
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36 Lu-Hai Liang, “Sri
Lanka Hands Over Port to China to Pay Off Debt,” The National, December
14, 2017, https://www.thenational.ae/world/asia/sri-lanka-hands-over-
port-to-china-to-pay-off-debt-1.684606. |
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37 Maria
Abi-Habib, “How China Got Sri Lanka to Cough Up a Port,” New York Times, June
25, 2018, https://www.nytimes.com/2018/06/25/world/asia/china-sri-lanka-port. html. |
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been held there.38 Since then, the stadium has
become a “white elephant,” housing birds and migratory animals, and reports
say that it also hosts private events, including weddings.39 It
should be noted, however, that the international cricket stadium is not a
Chinese geopolitical interest, compared to the Chinese investment in the
Hambantota Port, which gives China clear geopolitical advantages. The Hambantota
International Airport In 2013, the Mahinda Rajapaksa International Airport in
the town of Hambantota opened to commercial air traffic. The cost of
constructing the airport was $209 million, of which $190 million was borrowed
from China. The congestion at the Bandaranaike International Airport in
Colombo and the desire to narrow the gaps with other areas in Sri Lanka were
the main motivating factors in building another international airport on the
island. However, Hambantota lacks significant population and the industrial
infrastructure needed to attract foreigners. It was not long before the new
airport became known as “the world's emptiest international airport.”40
It also became clear that the airport was causing damage to the environment,
since it is located in the heart of a nature reserve. In one instance it was
reported that hundreds of soldiers, police officers, and volunteers were
working to move the animals out of the airport area, and an official source
even confirmed that the animals were interfering with flights. Moreover,
during the first ever landing at the new airport, a plane's window was
smashed when a bird hit it. Like the cricket
stadium, the Hambantota International Airport has become a “white elephant.”
At one stage, it was being used to store rice.41 The situation
changed in 2018, when India announced that it would operate the airport under
a lease agreement for forty years and would invest $225 |
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38 Nirmala
Kannangara, “Hambantota White Projects Eat Up Economy,” Sunday Leader,
June 28, 2015, http://www.thesundayleader.lk/2015/06/28/hambantota-
white-projects-eat-up-economy. |
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39 Hafsa Sabry,
“Attempts To Revive Another ‘White Elephant'” Sunday Leader, October
16, 2016, http://www.thesundayleader.lk/2016/10/16/attempts-to-revive-
another-white-elephant. |
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40 Wade Shepard,
“The Story Behind The World's Emptiest International Airport,” Forbes,
May 28, 2016, https://www.forbes.com/sites/wadeshepard/2016/05/28/
the-story-behind-the-worlds-emptiest-international-airport-sri-lankas-mattala-
rajapaksa/#3e385ee67cea. |
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41 “Troops Clear
Wild Animals from Sri Lanka's White-Elephant Airport,” Phuket News,
March 27, 2016, https://www.thephuketnews.com/troops-clear-wild-animals-
from-sri-lanka-white-elephant-airport-56780.php#fiXboQ2cffE7AXhv.97. |
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million to
renovate it. The investment amounted to 70 percent of the cost of the
renovation, with Sri Lanka covering the remaining amount.42 The Port City of
Colombo The foundations for the construction of the artificial
port in Colombo were poured in 2014, and it was supposed to be built by
pumping coastal sand from nearby beaches. The new port is expected to cover
an area of 2.69 square kilometers alongside the Sri Lankan capital's main
port.43 The port represents the largest foreign direct investment
in Sri Lankan history, which included a loan of $1.4 billion from the Chinese
government-owned construction giant CCCC. The project is expected to include
residential towers, luxury hotels, prestigious shopping malls, spacious
parks, and 80,000 apartments, as well as providing daily employment for about
a quarter million Sri Lankans once the project is completed.44 Since this is an
additional strategic port being built under the Chinese initiative, there is
a real concern that it too, like the Hambantota Port, will fall under Chinese
influence. The statement by the Sri Lankan minister in charge of the project
that the area from which the Chinese are pumping the sand will not threaten
Sri Lanka's sovereignty and will not undermine India's interests,45
did not calm the situation, particularly since Chinese warships and
submarines have been anchored at the Colombo Port as early as 2014, despite
Indian objections. Moreover, hundreds of warships from various countries
anchor at the Colombo Port for refueling and refreshing. But the frequency of
Chinese visits and the fact that Chinese submarines anchored at a port on the
Indian Ocean as part of a Chinese military operation against pirates in |
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42 Meera
Srinivasan, “‘Mattala Project with India Is on,’” The Hindu, August 3,
2018, https://www.thehindu.com/news/international/mattala-project-with-india-is-on/ article24595483.ece. |
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43 “Feature:
Hearts Bound Together, City Built Together—China, Sri Lanka CoDevelop
Colombo Port City,” Xinhua, May 15, 2018, http://www.portcitycolombo. lk/press/2018/05/23/hearts-bound-together-city-built-together-China-sri-lanka-co-
develop-colombo-port-city.html. |
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44 Rossi, “Next Hambantota? Welcome to the
Chinese-Funded US$1.4 billion Port City.” |
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45 “Chinese Firm
Completes US$1.4 Billion Land Reclamation Works for Sri Lanka’s Colombo Port
City Project,” South China Morning Post, January 17, 2019, https:// www.scmp.com/news/asia/south-asia/article/2182461/chinese-firm-completes-14-
billion-land-reclamation-works-sri. |
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the Gulf of Aden are not routine occurrences.46
If that is not sufficient, the construction of the Port City of Colombo has
brought with it environmental damage. The pumping of sand in order to build
the artificial port has caused erosion and has interfered with the maritime
ecological system, which, in turn, have damaged the fishing industry in the
area.47 Israel-China Relations: Economic
Interests Although Israel was the first country in the Middle East
to recognize the People's Republic of China in January 1950, diplomatic
relations between the two countries were only established in January 1992.
Since then, cooperation has developed in a variety of areas, reaching new
peaks in recent years. Israeli representatives in China are promoting
Israel's image as a technologically innovative country, and the two countries
are engaging in joint projects in research, scientific, academic,
agricultural, and healthcare innovation.48 In 2014, the main
intergovernmental mechanism between Israel and China— the innovation
conference—was established. This is an intergovernmental (G2G) platform
established by Israel's Prime Minister Benjamin Netanyahu and China's
Vice-Premier Liu Yandong during her visit to Israel that year. The conference
convenes every other year alternating between Beijing and Jerusalem and is
led by thirteen government ministries and agencies in Israel, alongside
ministers from the Chinese government. The conference promotes cooperative
ventures between governments in both countries, joint projects involving the
private sector, joint scientific and industrial research, provides grants for
students from both countries, and more.49 |
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46 Shihar Aneez
and Ranga Sirilal, “Chinese Submarine Docks in Sri Lanka Despite Indian
Concerns,” Reuters, November 2, 2014, https://www.reuters.com/article/
sri-lanka-china-submarine/chinese-submarine-docks-in-sri-lanka-despite-indian-
concerns-idINKBN0IM0LU20141102. |
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47 Rossi, “Next
Hambantota? Welcome to the Chinese-Funded US$1.4 billion Port City.” |
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48 “25 Years of Diplomatic Relations between
Israel and China,” Ministry of Foreign Affairs, January 23, 2017, https://mfa.gov.il/MFAHEB/PressRoom/Spokesman/2017/ Pages/25-years-Israel-China-diplomatic-relations-230117.aspx
[Hebrew]. |
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49 “Visit by the
Chinese Vice-President—The Fourth Meeting of the Israel-China Innovation
Committee,”Ministry ofForeignAffairs, October 18, 2018. https://mfa.
gov.il/MFAHEB/PressRoom/Spokesman/2018/Pages/Visit_of_Vice_President_of_
China_181018.aspx [Hebrew]. |
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China has bought
Israeli companies, such as Tnuva, Adama, and Ahava, and has invested in
Israeli startups and venture capital funds.50 In addition, China
was involved in construction of the Carmel Tunnels, the Akko-Karmiel train
line, the Tel Aviv Light Rail, the privatization of the Ashdod and Haifa
ports, the Tel Aviv-Jerusalem train line, and the planned train line between
Tel Aviv and Eilat.51 Relations between
Israel and China were furthered when Prime Minister Netanyahu visited China
in 2017, as well as by Chinese president Xi Jinping's rebranding of
cooperation between the two countries as an “Innovative Comprehensive
Partnership.”52 The upgrading in relations was partly the result
of the strengthening of the connection and dialogue between government
entities as well as due to interests such as the desire to gain access to
Israeli civilian technologies and the Israeli drive to access the Chinese
market. This is in addition to strengthening academic and research contacts
and encouraging the movement of people from both countries.53 The trade ties
that Israel currently has with China are among the largest and most important
for Israel out of all other countries. In the past decade, the two countries
have experienced a sharp increase in the volume of trade (although in an
inequal manner). China is the largest source of imports to Israel, and the
third largest destination for exports (if the European Union is considered a
single entity). This is reflected in an increase in both exports and imports.
In 2018, the volume of trade between Israel and China was about $15.7 billion
(an increase of about 30 percent compared with 2017). In 2018, exports to
China totaled $4.7 billion (a jump of about 50 percent compared with 2017),
while imports from China totaled about $11 billion (an increase of about 20
percent compared with 2017). The dominance of |
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50 Dan Catarivas,
“Israel-China Relations: Ideal and Reality” in Israel-China Relations:
Opportunities and Challenges, ed. Assaf Orion and Galia Lavi, Memorandum
no. 194 (Tel Aviv: INSS, 2019), 30. |
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51 Yossi Melman,
“Cause for Concern? Chinese Investment and Israel's National Security,” Jerusalem
Post, April 7, 2018, https://www.jpost.com/Jerusalem-Report/ Chinese-TAKEAWAY-546692. |
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52 “Strengthening
Israel-China Cooperation in Innovation and Technology,” Ministry of Economy
and Industry, August 19, 2018. https://www.gov.il/he/departments/ news/a-billion-chinese-are-not-mistaken [Hebrew]. |
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53 Shagrir, Israel-China
Relations: Innovative Comprehensive Partnership, 14. |
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imports from China
in the balance of trade between the two countries means that Israel has a
continuing trade deficit with China.54 Haifa Port In 2004, Israel began the process of privatizing its
three commercial ports— Ashdod, Eilat, and Haifa. At the end of the process,
the Israel Ports Authority had been replaced by four government companies,
with the aim of separating the ports' management and future development from
their day-to-day operations. It was decided that the Israel Ports Company
would provide the infrastructure and be responsible for its development,
while the private companies would provide cargo shipping services, using
their own facilities and equipment.55 In 2014, the SIPG company (a subsidiary of “China
Harbor,” itself a subsidiary of CCCC, which, as stated, is owned by the
Chinese government) won the tender to build a new port in Ashdod over a
seven-year duration at a cost of NIS 3.6 billion. In 2015, the SIPG Group
also won a tender to operate the future port in Haifa for twenty-five years,
in exchange for ongoing usage fees that it would pay to the State of Israel.
The cost of building the port was estimated at $2 billion, and it is expected
to begin operating in 2021.56 The Israel Ports Company says that
the international operators will plan, finance, and build the operational
areas, including completion of various infrastructure systems.57 The new port in Haifa is an example of Chinese
strategic-security involvement in Israeli infrastructure. This is one of the
crown jewels in the pro-Chinese trend being led by Yisrael Katz, the former
minister of transportation and road safety. As part of this trend, a Chinese
news crew came to Israel in May 2017, and Minister Katz gave them a personal
interview. The Chinese media also published a story that Katz took an active
role, ever since |
|
54 “Israel-China:
A Review of Economic Trade,” Israel Export Institute—Economic Unit, 2018. https://www.export.gov.il/economicreviews/article/israelchinacom2018 [Hebrew]. |
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55 Oded Eran,
“China Has Laid Anchor in Israel's Ports,” Strategic Assessment 19,
no. 1 (April 2016): 56. |
|
56 “Haifa
Container Terminal Deal with China's SIPG Under Review,” PortSEurope, December
23, 2018, https://www.portseurope.com/haifa-container-terminal-deal-
with-chinas-sipg-under-review. |
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57 Lior Gutman,
“The Chinese SIPG Company Won the Tender to Operate the New Port in Haifa,” Calcalist,
April 23, 2015. https://www.calcalist.co.il/local/ articles/0,7340,L-3655245,00.html [Hebrew]. |
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being appointed to the position, in infrastructure
projects between the two countries, and that he was given more exposure due
to Chinese involvement in the construction of the new port at Ashdod and the
operation of the new port in Haifa Bay. As reported, Minister Katz referred
to this involvement as “a strategically important step for Chinese
companies.”58 In June 2019, the
Municipality of Haifa filed an administrative appeal with the Haifa District
Court to prevent continued construction of the new port in the city, arguing
that the municipal airport would be harmed and that construction of the port
would prevent the extension of its runway. Haifa's mayor, Einat
Kalisch-Rotem, complained that no in-depth research had been done to
understand the ramifications of the unilateral moves on the advancement of
shipping and aviation in the city.59 In August 2019, Kalisch-Rotem
tweeted that she had reached agreements with the Ministry of Transportation
to extend the runway at the Haifa airport to 2,100 meters, withdraw the
appeals against the Haifa Port, and fix the coastal erosion.60 The new Haifa
Port, with its military and civilian infrastructure, is a strategic asset for
Israel. Therefore, Chinese involvement in its construction and operation
could in the future affect the continuous traffic of goods to and from the
port and serve as a tool of influence on Israel.61 However, when
examining Chinese involvement in the Haifa Port versus the Hambantota Port in
Sri Lanka, significant difference between the two cases can be discerned. In
the case of Israel, the expansion and operation of the Haifa Port is not
dependent on a Chinese loan, while in the case of Sri Lanka, the construction
of the Hambantota Port was based on a large Chinese loan with all that that
entailed. |
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58 Dubi
Ben-Gedalyahu, “Israeli Minister’s Chinese Romance Provokes US,” Globes, December
20, 2018, https://en.globes.co.il/en/article-israeli-ministers-chinese-
romance-provokes-us-1001265841. |
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59 Michal
Raz-Haimovitch and Daniel Shmil, “The Municipality of Haifa Opposes Continued
Construction of the Port: ‘It Will Destroy Aviation in the City,’” Globes,
June 16, 2019. https://www.globes.co.il/news/article.aspx?did=1001289748 [Hebrew]. |
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60 Einat
Kalisch-Rotem, Twitter, August 14, 2019. https://twitter.com/EINATkalisch/ status/1161648831894872064?ref_src=twsrc%5Etfw [Hebrew]. |
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61 Galia Lavi and
Rotem Nusem, “The Rising Tension between China and Australia: Lessons for
Israel,” in Israel-China Relations: Opportunities and Challenges, ed.
Assaf Orion and Galia Lavi, Memorandum no. 194 (Tel Aviv: INSS, 2019), 36-37. |
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Senior officials in the Israeli government estimate that
Israel is the only country in which Chinese companies have invested in or
gained access to projects worth about $15 billion.62 One of the
reasons is Israeli regulation, which is decentralized in terms of foreign
investment and purchases in civilian areas, with each government entity or
ministry independently operating its own regulator.63 Member of
Knesset Ofer Shelah said in this regard that an “inclusive policy” was
necessary, particularly regarding China; otherwise, each government ministry
would “determine policy on its own.”64 The former head of Israel's
National Security Council, Jacob Nagel, proposed establishing an
inter-ministerial regulatory committee with the participation of all involved
parties, which would “have authority, and not just [be] something to provide
recommendations.”65 Israel's cabinet
recently decided to establish an advisory committee led by the Ministry of
Finance to examine national security aspects of the process to approve
foreign investments in Israel, as is customary in countries such as the
United States, Canada, the United Kingdom, Germany, Australia, and others.66
However, as opposed to committees working in those countries, the committee
in Israel will be established on a voluntary basis and not as part of
legislation dealing with foreign investments. It will consult with
regulators, but not with senior political officials, and reporting to it will
be voluntary and not obligatory. In addition, various technologies, which are
a hot topic between the United States and Israel, will not require the
committee's supervision.67 |
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62 Yossi Melman,
“Over U.S. Objections, Chinese Firms Step Up Their Involvement in Israel,” Jerusalem
Post, July 13, 2019, https://www.jpost.com/Jerusalem-Report/ Over-US-objections-Chinese-firms-step-up-their-involvement-in-Israel-595325. |
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63 Doron Ella,
“Regulation of Foreign Investments and Acquisitions: China as a Case Study,”
in Israel-China Relations: Opportunities and Challenges, ed. Assaf
Orion and Galia Lavi, Memorandum no. 194 (Tel Aviv: INSS, 2019), 61. |
|
64 Melman, “Cause
for Concern? Chinese Investment and Israel's National Security.” |
|
65 Jacob Nagel, “Ex-National Security Advisor
to ‘Post': Israel Needs to Review China Deals,” Jerusalem Post,
January 10, 2019, https://www.jpost.com/Opinion/
Ex-national-security-advisor-to-Post-Israel-needs-to-review-China-deals-576891. |
|
66 “Announcement
by the Ministerial Committee on National Security,” Prime Minister's Office,
October 30, 2019. https://www.gov.il/he/departments/news/ spoke_national_security301019. |
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67 Doron Ella, “A
Regulatory Mechanism to Oversee Foreign Investment in Israel: Security
Ramifications,” INSS Insight no. 1229, November 19, 2019, https://www.
inss.org.il/publication/a-regulatory-mechanism-to-oversee-foreign-investment-in-
israel-security-ramifications. |
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These disadvantages may be an opening for diplomatic
damage, security risks, and influence on Israeli politicians. Potential
diplomatic damage as a result of Chinese involvement in strategic projects in
Israel may also result from conflicts of interests between the United States
and China, with Israel caught in the middle. The potential for harm to
Israel's close relations with the United States due to Chinese involvement in
Israel is reflected in a study by the Center for a New American Security
(CNAS), which states that construction of the Haifa Port may pose
geopolitical risks. In addition, John Bolton, former US national security
advisor, expressed concern over future Chinese control of operations at
Israeli ports, particularly emphasizing the fact that the Haifa Port hosts
military maneuvers between Israel and the United States on a regular basis
and also serves as an anchorage for the American Sixth Fleet, which operates
in the Mediterranean.68 In addition, US Deputy Energy Secretary
Dan Brouillette sounded explicit warnings, saying that “if Israel deepens
this cooperation, we may not share intelligence information with it.”69 Most of the
security risks from close cooperation with China are due to Chinese
investment in strategic Israeli infrastructure and Chinese penetration of
that infrastructure and of various Israeli technology companies. In this
context, Head of the Israel Security Agency Nadav Argaman warned that
“Israeli law lags behind security needs in terms of supervision of
investments by foreign countries,” and even warned that “Chinese influence in
Israel is dangerous, particularly in regard to strategic infrastructure and
large corporations.”70 Former head of the Mossad Efraim Halevy
also spoke in this regard, saying that despite the fact that he does not
oppose commercial relations with China, he is opposed “to any action that
would lead to Chinese control over a main strategic transport artery in
Israel.” Halevy also warned |
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68 Daniel Kliman,
Rush Doshi, Kristine Lee, and Zack Cooper, Grading China s Belt and Road,
(Center for a New American Security, April 8, 2019), 14, https://www.
cnas.org/publications/reports/beltandroad. |
|
69 Army Radio,
Twitter, January 15, 2019. https://twitter.com/glzradio/ status/1085404578122776576. |
|
70 “Shin Bet
Chief Said to Warn Chinese Investment in Israel Poses Security Threat,” Times
of Israel, January 10, 2019, https://www.timesofisrael.com/shin-bet-chief-
said-to-warn-chinese-investment-in-israel-poses-security-threat. |
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that if China takes over the Ashdod-Eilat train line, it
will gain control over a “point of political and economic control” within
Israel.71 In addition to those
who have reservations, others believe that the main risk of increasing
Chinese investments in Israel is not due to the implications of investment in
strategic infrastructure but from investment in Israeli technology companies.
According to this argument, investment in such companies may allow China to
develop technologies in the future that are based in Israel, damaging
Israel's relations with the United States and impairing Israel's
international economic competitiveness.72 Another risk due
to increasing investment is the potential influence on politicians. Such
influence may take place, for instance, as a result of unregulated Chinese
(or other) involvement. Even though the Parties Financing Law from 1973 and
the Parties Law from 1992 prohibit Israeli parties from receiving
contributions from entities that do not have the right to vote for the
Knesset, there is nothing to prevent such contributions from being made
directly to politicians.73 In this regard, a
CNAS study determined that China has bribed politicians and bureaucrats in
the kleptocratic countries where it has invested its projects.74
For instance, in 2016, the Sri Lankan minister of finance accused the
Rajapaksa government of inflating the true cost of building the stadium in
Hambantota and publishing a cost at the time that was four times the actual
cost.75 This was despite the stadium not having any strategic
value to China. It was also reported that Chinese companies bribed the family
of former Sri Lankan president Rajapaksa. Agreements were also reportedly
signed in Malaysia with Chinese companies for inflated values, and some of
the money was reportedly passed on to politicians. Bangladesh blacklisted |
|
71 “Former Mossad
Chief Efraim Halevy Warns Against China’s Role in Israeli Rail,” Economic
Times, October 5, 2013, https://economictimes.indiatimes.com/
former-mossad-chief-efraim-halevy-warns-against-chinas-role-in-israeli-rail/
articleshow/23579256.cms. |
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72 Yoram Evron,
“Chinese Investments in Israel: Opportunity or National Threat?,” INSS
Insight no. 538, April 8, 2014, https://www.inss.org.il/publication/chinese-
investments-in-israel-opportunity-or-national-threat. |
|
73 Lavi and Nusem,
“The Rising Tension between China and Australia: Lessons for Israel,” 39. |
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74 Kliman, Doshi, Lee, and Cooper, Grading
China s Belt and Road, 6. |
|
75 “Ravi K Says Actual Cost of Hambantota
Cricket Stadium Is Rs. 852 Million, And Not Rs. 4.5 Billion As Claimed By
Rajapaksa,” Colombo Telegraph, July 23, 2016, https://www.colombotelegraph.com/index.php/ravi-k-says-actual-cost-of-hambantota-
cricket-stadium-is-rs-852-million-and-not-rs-4-5-billion-as-claimed-by-rajapaksa. |
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the China Harbor company due to attempted bribery of a
senior government politician. It was also reported that Chinese companies
paid the son of the president of Equatorial Guinea and its vice president
millions of dollars. Pakistan stopped projects of the Chinese Belt and Road
Initiative out of concern for corruption, and the former vice president of
Ecuador was under investigation due to reportedly having received bribes from
China. The Chinese
willingness to pay politicians to make it easier to carry out projects and
the latter's readiness to receive bribes harm democratic institutions and
conflict with the public interest.76 It arouses suspicion,
particularly when the terms of transactions of these projects being carried
out as part of the Chinese initiative are immersed in secrecy, which arouses
concern that local politicians will profit from them more than their citizens
do.77 This situation
may take place not only in kleptocratic democracies. It turns out that
politicians in Australia also received contributions from Chinese
businesspeople in exchange for support of Chinese policy.78 Under
the foregoing circumstances, we should not discount the possibility of future
Chinese (and other) influence on Israeli politicians and bureaucrats who are
involved in setting policy and decision making in the State of Israel. |
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76 Kliman, Doshi, Lee, and Cooper, Grading
China s Belt and Road, 6-7. |
|
77 “China’s
Belt-And-Road Plans Are to Be Welcomed—and Worried About,” Economist, July
26, 2018, https://www.economist.com/leaders/2018/07/26/chinas-belt-and-
road-plans-are-to-be-welcomed-and-worried-about. |
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78 A. Odysseus
Patrick, “This Chinese Mogul Made Powerful Friends in Australia. Now He’s a
Case Study on Worries over Beijing’s Influence,” Washington Post, October
7, 2019, https://www.washingtonpost.com/world/asia_pacific/this-chinese-
mogul-made-powerful-friends-in-australia-now-hes-a-case-study-on-worries-over-
beijings-influence/2019/10/05/c5f7f1e6-dea9-11e9-be7f-4cc85017c36f_story.html. |
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