Bloomberg News

Netanyahu Heads to China to Discuss Trade Amid Regional Tension

May 05, 2013

Israeli Prime Minister Benjamin Netanyahu

Israeli Prime Minister Benjamin Netanyahu has set a goal of bringing trade with China to $10 billion within three years, from about $8 billion. Photographer: Sebastian Scheiner/Pool/Getty Images

Israeli Prime Minister Benjamin Netanyahu arrives in China today to tighten economic ties and urge China’s new leaders to clamp down harder on Iran and its ally Syria, amid reports of Israeli airstrikes there.

Netanyahu boarded his plane the same day Syria said it was attacked by Israeli missiles, sending a fireball into the sky over Damascus. Netanyahu says a nuclear Iran would threaten Israel and warned last week that the Islamic Republic “must not be allowed to cross” the threshold where it can produce a nuclear weapon.

The four-day trip may give Israel an opportunity to present its case before China’s new leaders, while they are still forming their strategic outlook on the region.

“The Chinese leadership was recently replaced and it is expected to rule there for the coming decade,” Netanyahu’s office said in a statement. “Issues of strategic importance in a variety of fields are expected to be raised in Prime Minister Netanyahu’s meetings with senior leaders of the new administration; new bilateral agreements will also be signed.”

Even at this juncture, Netanyahu may find it easier to sell China on Israel’s economy than persuade it to support harsher sanctions on Iran or tighten the screws on Syria, said Yitzhak Shichor, a professor emeritus in Asian studies at the Hebrew University in Jerusalem and the University of Haifa.

$10 Billion Goal

Netanyahu has set a goal of bringing trade with China to $10 billion within three years, from about $8 billion, his office said in the statement. In addition to Chinese President Xi Jinping and Prime Minister Li Keqiang, he plans to meet industrialists and businesspeople in Shanghai and Beijing to advance a free trade agreement and economic cooperation accords in research and development and innovative technology, according to the statement.

China, in its own media coverage ahead of the trip, has barely mentioned Syria or Iran, focusing instead on trade and China’s desire for Israeli technology. It already imports products from Israel Chemicals Ltd. (ICL) and Israeli facilities of Intel Corp. (INTC:US)

On political matters, “the likelihood of Israel persuading China to change its mind is almost nil,” Shichor said. “The Chinese have other interests that have nothing to do with Israel.”

‘Concrete Results’

At the same time, he said, the economic issue “is very, very important” because it strengthens ties without political complications. “Everyone is interested in commercial ties, academic ties,” Shichor said. “This is where there might be concrete results.”

Iran is a top supplier of oil to China, which has used its veto power in the United Nations Security Council to undercut more stringent U.S.-backed measures against the Iranian government. Netanyahu says Iran, despite its protestations to the contrary, is using its civilian nuclear program as a cover to build bombs and he has hinted repeatedly he would be prepared to attack it.

“If Israel is a factor in China’s considerations on the Iran issue, it would be primarily through Beijing’s perception of its close relationship with the U.S.,” said Yoram Evron of the University of Haifa’s Asian Studies department and a research fellow at Tel Aviv University’s Institute of Strategic Studies. “Netanyahu might also be able to influence Chinese thinking if he convinces them he is really ready to take military action against Iran” -- something that could disrupt the flow of Gulf oil to the Chinese.

Military Strike

China has also bucked Israel and its Western allies on Iranian-backed Syria, vetoing UN resolutions condemning President Bashar al-Assad and opposing direct intervention.

Israel has said it would prevent Syria from transferring chemical weapons and other advanced arms to Assad allies such as the Iranian-backed Lebanese militia Hezbollah, which warred with Israel in 2006. It is suspected of having attacked a Syrian convoy in January for just that reason, and twice within the past few days. Israel, which called a snap military drill last week along its northern border with Lebanon and Syria, has not confirmed these attacks.

China and Israel are also at odds over the Palestinians, with the Chinese backing their statehood bid at the UN, over Israeli and U.S. opposition. Palestinian President Mahmoud Abbas is scheduled to meet Chinese leaders in Beijing as Netanyahu lands in Shanghai. Last week, a Chinese Foreign Ministry spokeswoman said China was willing to help if the Israeli and Palestinian leaders wanted to meet there.

Political disagreements shouldn’t get in the way of improved strategic ties with Beijing, Evron said.

Disrupted Ties

“The turmoil in the Arab world has disrupted China’s traditional ties in the region and Beijing, which values stability above all, could see Israel as a more valuable regional relationship than it has in the past,” he said.

That relationship was damaged a decade ago after the U.S., concerned that China’s military capability was growing, pressured Israel to cancel sales to China of the Phalcon radar system and parts for armed Harpy drones it already sold the Chinese, in effect ending arms trade between the countries.

Commercial ties, by contrast, have taken off in the past decade. China is Israel’s third-biggest trading partner, after the U.S. and European Union, with imports in 2012 totaling $5.3 billion and exports at $2.8 billion, according to Israel’s Central Bureau of Statistics. Israel’s main exports to China are chemicals mined from the Dead Sea by Israel Chemicals, electronic components and agrotechnology.

Promote Small Companies

“Israel’s exports to China are dominated by a few big companies like ICL and Intel, so what Netanyahu and his team have to do is promote more medium and small companies,” said Ilan Maor, managing director of SHENG-BDO Zvi Haft, which assists Israeli and Chinese companies doing business together. “The Chinese are especially interested in Israeli expertise in technology, including life sciences, renewable energy, water treatment and homeland security.”

Last year, Israel signed an accord to sell China $300 million in water technology.

Chinese investment in Israel has also grown, including the 2011 sale of 60 percent of fertilizer maker Makhteshim-Agan Industries Ltd. to China National Chemical Corp. for $2.15 billion and last month’s acquisition of Alma Lasers Ltd. by Shanghai Fosun Pharmaceutical (Group) Co. (600196) for about $240 million. Israeli firms with operations in China include Teva Pharmaceutical Ltd. (TEVA), Iscar Metalworking Co. and Israel Corp.’s electric car venture Better Place.

One project Netanyahu would especially like to involve China in is the construction of a proposed rail link between Israel’s Mediterranean ports and its Red Sea port of Eilat, opening up an alternative trade route to the Suez Canal. That prospect may now seem more attractive to China with Israel’s recent discoveries of natural gas fields large enough to allow exports.

“If we can increase Chinese investment in Israel, we can take the economy to another level and help it to continue growing during the global financial crisis,” Netanyahu told Israeli diplomatic officials in Jerusalem last week.

To contact the reporter on this story: Calev Ben-David in Jerusalem at cbendavid@bloomberg.net

To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net


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