China, Israel, and the Geopolitics of Seaports

At the port of Haifa on Israel’s northern coast, a visitor standing at the dock where the Sixth Fleet of the U.S. Navy anchors can look ahead under the shining Mediterranean sun and the first thing he or she would see would be a berth for oil-carrying vessels. For more careful eyes, however, large sand piles would be visible right beyond the tankers and pipes. These sand piles are located on a sizable reclamation area where major construction work is currently in progress. This is the section of the port of Haifa where a new terminal is being built on an area of 830,000 square meters. A Chinese company, Shanghai International Port Group (SIPG), is undertaking the project, and it will also have the operation rights for the terminal for 25 years after the facilities enter into service in 2021. As the visitor would soon realize, this new terminal is only about 1 kilometer away from the docks where the American warships anchor when they make a port call to Haifa.

Israeli officials like to assert that it is “not a Chinese company, but an Israeli company with Chinese shareholders” that is undertaking the project, which is technically correct. The company in question, SIPG Bayport Terminal Co. Ltd., is a venture registered in Israel, albeit with Chinese capital. In the meantime, such efforts to downplay the company’s Chinese-ness are understandable too, as Israel’s decision to award the tender to a Chinese company has drawn significant criticism from the United States due to the latter’s security concerns. U.S. navy ships will be anchoring literally next to Chinese operated facilities, which would make  them easy prey for China’s intelligence gathering activities. The National Defense Authorization Act for the Fiscal Year 2020, which is in the U.S. Senate as of this writing, makes an explicit mention of such American concerns, referring to an “interest in the future forward presence of United States naval vessels at the Port of Haifa in Israel” and “serious security concerns with respect to the leasing arrangements of the Port of Haifa.” The draft bill “urge[s] the Government of Israel to consider the security implications of foreign investment in Israel.”

Haifa is a case of a seaport becoming subject to geopolitical contestation. The port has already become a new front in the competition between the Untied States and China. In this picture, Israel finds itself between a rock and a hard place, as it does not want to alienate either its ally the United States, or one of its largest economic partners that offers significant investment and infrastructure building potential — namely China. Israel can afford to lose neither and has to maintain a delicate balance, which is increasingly difficult. On one hand, construction has already started in the port of Haifa, with banners and signs bearing Chinese characters scattered all over the reclamation area. On the other hand, Americans are getting more vocal about their objections and considering withdrawing the Sixth Fleet form Haifa.

This is certainly a hot issue, but the U.S.-China competition at the global level is not the only geopolitical dynamic in play with regard to Haifa. The question of the regional impact of an expanded port of Haifa is no less important. How is the complicated web of relations in the Middle East going to be affected when more trade begins to flow into the region through the Israeli port, expanded and operated by the Chinese?

A larger and more effective port of Haifa can certainly be expected to lead to increasing trade volumes and revenues as well as higher economic value added for Israel, thus increasing this country’s power capabilities and shifting the geopolitical balance in the region to its advantage. This is, however, only one thing. Seaports do not merely help their home countries to develop in isolation; they also facilitate greater connectivity between trading partners, thus creating and increasing interdependencies, which can be expected to have a positive, peace-inducing impact on the geopolitics of the region. As the liberal paradigm of the international relations discipline suggests, improving trade and investment connections make parties more dependent on each other, which increases the cost of conflict, thus leading the way to a sort of commercial peace.

This is why Israeli officials talk about the M.A.G.I.C. that the expanded port of Haifa can create; a term with positive connotation, at the same time an abbreviation for “Mediterranean-Arabia-Gulf International Corridor.” Increased capacity at the port will make it possible to serve markets beyond Israel’s borders, by connecting Israel with Jordan and the Gulf countries. Such a regional transportation system, it is argued, can help to enhance trade relations and contribute to the promotion peaceful coexistence in a region marred by conflict.

The problem is that at the moment such a system does not exist. A railway link connects Haifa to Bet She’an near the Israeli-Jordanian border, terminating a few kilometers before the border crossing. On the other side, the Saudi network connects Jordan to Riyadh and Dammam, although certain segments of this line are yet to be completed, while a Saudi-backed project aims to connect the Jordanian Red Sea port of Aqaba to Ma’an in Jordan’s south. The missing piece in this picture is between Jordan’s north, where the railway link coming from Haifa would enter, and its south, where the existing lines coming from Saudi Arabia terminate.

Israel’s Ministry of Transportation has made efforts to find backing for this project. However, as Israeli officials suggest, although the idea was hailed by many in the West, including in the United States, as a step in the right direction, only Chinese companies have shown a concrete interest, coming up with a number of plans within the framework of the Belt and Road Initiative.

The government of Jordan has been planning to contract a Chinese company to deliver a project connecting the country’s major cities and industrial centers to Aqaba and the borders with Syria, Iraq, and Saudi Arabia. Extending a connection to Israel might not be easy politically; however, the increasing trade potential offered by the port of Haifa and the prospect of access to Mediterranean maritime routes can provide a stronger economic rationale for Jordan that can help overcome political barriers.

These plans are yet to materialize and it is all going at a very slow pace. The port of Haifa can change this. Improved capacity at regional container ports can help to increase trade volumes, making new railway lines connecting the regional markets with each other more lucrative and hence more feasible. In this way, new and stronger mutual dependencies between the countries of the region are formed, deterring conflict and supporting a more peaceful environment. The Middle East is the graveyard of international relations theories, yet this particular hypothesis has a good chance to hold, as the entire region is in dire need of economic growth. If and when it does, China will enjoy greater influence in the region thanks to its building of the trade infrastructure, a contribution to the region that is likely to be deemed more efficient than Beijing’s mediation efforts in the Israel-Palestinian conflict.

In today’s interconnected world, seaports have become geopolitical assets, especially when they are used for berthing military ships in addition to their commercial activities. As is the case with the port of Haifa, they can easily turn into a platform of great power competition. However, their real geopolitical importance lies in their capacity to enhance connectivity, not only on the sea but also through the land. Larger and more advanced seaports make it possible to conduct higher volumes of merchandise trade with greater efficiency, which necessitates improved logistics infrastructure connecting ports with consumer markets. It is useless to increase the capacity of a seaport if the capacity of the road and railway networks that carry the goods arriving in the seaport to their destination markets are not equally improved. In the meantime, greater connectivity makes countries more dependent on each other, which can induce a positive effect on the geopolitical realm.

The progress of the port of Haifa will be interesting to watch, not only for maritime economists but also for students of geopolitics.