Israeli Prime Minister Benjamin Netanyahu (R) shakes hands with US Secretary of State Mike Pompeo following their meeting in Jerusalem in October 2019. Photo: AFP/Sebastian Scheiner/Pool

US Secretary of State Mike Pompeo touched down in Israel on Wednesday to discuss several well-worn issues in the strong US-Israel bilateral relationship, from the peace process to relations with Iran.

But it was one less-reported issue that provided the underlying reason for the trip: China. The US security establishment has long been concerned with the depth and breadth of cooperation between Israel and China.

It is an election year in the US, and one during which the Donald Trump administration has come under major scrutiny for its handling of the Covid-19 pandemic.

In context of the openly rancorous tensions between Beijing and Washington over the origins of Covid-19, the Chinese issue is set to become a contentious thread in the tapestry of US-Israeli relations.

No US veto

Israel is now in negotiations with Beijing to sign a far-reaching free trade agreement. These talks, delayed for more than a year by the lack of a functioning government in Israel, are now back on track.

The prospect of such a treaty with China is “too important to allow the US a veto,” a representative of the Israeli Ministry of Finance told Asia Times on condition of anonymity.

Such an agreement will serve to lessen Israeli reliance on its major trade partner, the European Union, with which it has politically uncomfortable relations.

Key European states are now considering sanctions on Israel, should it proceed with unilateral annexation plans in the occupied West Bank. On Friday, EU leaders will meet in Brussels to discuss possible measures, including the exclusion of Israel from certain trade agreements.

Speaking of the importance of China, the Israeli foreign ministry official noted that “other countries have enjoyed a 15% increase in bilateral trade, significant expanse of trade and even a boost to the macro health of the economy.”

US politics in play

Pompeo’s visit also comes against the backdrop of a massive outbreak of Covid-19 in the US, which will soon tally a million and a half cases with more than 80,000 recorded fatalities.

With general elections coming up in November, an embattled President Trump has sought to blame China, where the virus originated, for US shortcomings in confronting the epidemic.

“This virus should not have spread all over the world. They should have put it out,” the US leader has stated.

This finger-pointing has proven useful, since many of those suffering in the US have been receptive to identifying China as the main culprit to their malaise. In a recent Pew poll, two-thirds of Americans surveyed had an unfavorable view of China.

Israeli Prime Minister Benjamin Netanyahu (R) and US Secretary of State Mike Pompeo visit the Rabbi of the Western Wall Shmuel Rabinovitch (L) at the Western Wall Tunnels in Jerusalem’s Old City, March 21, 2019. Photo: AFP/Abir Sultan

Focusing on anger towards China, the Trump election team aims to frame the elections as a referendum on policy towards the geopolitical rival.

In an attempt to paint Democratic contender Joe Biden as weak on the issue, Trump’s advisors have dubbed his opponent “Beijing Biden.”

One social media ad by the campaign reads, “Unlike Sleepy Joe Biden and the rest of the Crooked Democrats, President Trump keeps his promises, which is why we’re not letting China get away with using America as a scapegoat.”

Electoral interests reinforce existing and genuine American strategic concerns.

Chinese investment

Israel is a particularly technologically advanced country and therefore possess knowledge and resources of great use to China in terms of both their civil and military progress.

These capabilities could be acquired by Beijing through two avenues. First, through voluntary cooperation with Israeli private companies and arms of government. Second, through espionage facilitated by economic and political infiltration into Israel.

US officials have long complained that Israel does not maintain strict enough oversight over foreign investment.

Beijing’s investment in Israeli tech is on the rise, with Chinese companies taking part in six out of the 17 largest funding deals in the Israeli venture market, worth US$325 million in 2018.

In early 2019, Pompeo cautioned that unless new measures for oversight were taken, “intelligence-sharing might have to be reduced, co-location of security facilities might have to be reduced.”

“We want to make sure countries understand this and know the risks,” he said. Israel partially heeded the warning.

The interim Netanyahu government created a task force for vetting foreign investments, with authority over deals in critical infrastructure, where the task force will vet foreign investment, including the financial, communications, infrastructure, transportation and energy sectors.

However, after a request from the Chinese government, the committee decided it would not oversee investment in the crucial hi-tech sector.

Some Israeli officials were also concerned the Trump administration was trying to leverage what they see as overdone security claims in order to force Israel to orient towards the American-made artificial intelligence, cyber and robotics industries.

The Israeli Ministry of Finance warned in December last year that the country, and specifically the technology sector, was overly dependent on US venture capital.

The Trump administration was unhappy about the exception. David Schenker, US Assistant Secretary of Affairs for Near Eastern Affairs, commented: “I think they can do a whole lot better and I think they should.”

On other issues, Israel has not heeded American warnings.

China’s President Xi Jinping and Israel’s Prime Minister Benjamin Netanyahu met in late 2018. Photo: AFP

Beijing beckons

Despite vocal concerns from the Trump administration, an agreement was approved providing a Chinese firm with the rights to manage the Mediterranean port of Haifa.

Some considered this a brazen move in opposition to American security interests, since the US Navy Sixth Fleet docks in the area. This may force the fleet to relocate in order to protect itself against suspected Chinese espionage. Nonetheless, Israel found the deal too good to pass up.

The Chinese firm had demonstrated its ability to automate a port system which will move more than 42 million shipping container units per year with a bare minimum of human labor.

Another important deal finalized despite American objections was the ‘Red-Med’ project, a 300-kilometer rail line linking the Mediterranean city of Ashkelon to the Red Sea port of Eilat commanding a $2 billion Chinese investment.

The decision was made despite warnings from some Israeli security officials that the savings in cost and efficiency did not offset damages to relations with the United States.

American officials have voiced concerns that the rail line could be used as a link in China’s Belt and Road initiative, a Chinese pan-continental initiative that the Trump administration views as a challenge to American hegemony.

These tensions are set to exacerbate.

While the US is increasingly looking inward in the Covid-19 era, Beijing has been using the crisis as an opportunity to expand its involvement abroad. Beijing Genomics Institute, a genome-sequencing firm, was given a contract to provide coronavirus tests to Israel and help set up facilities to conduct them.

Israel is walking a tightrope.

On the one hand, the strategic relationship with the US remains the bedrock of its foreign policy. The US provides it with indispensable military aid and protects it from diverse resolutions in the UN. Nonetheless, Israel cannot ignore the rise of China.

The small Middle Eastern state is now confident enough in its power and sustainability to branch out and establish strong bilateral relations globally.

China is particularly important both due to the economic opportunities it presents and its position as a rising competitor to the United States and possible heir to its hegemonic status.

For these reasons, Israel will continue to try to avoid an open break with the Trump administration over China, but take great pains to deepen its rapport with Beijing.

The bad news for America is, that if it is losing this much influence with its closest ally, it faces far worse obstacles elsewhere.

Asia Times Financial is now live. Linking accurate news, insightful analysis and local knowledge with the ATF China Bond 50 Index, the world's first benchmark cross sector Chinese Bond Indices. Read ATF now.