Israel has rejected a bid by a Hong Kong-based conglomerate to build the country’s largest desalination plant, buckling to US pressure to curtail Chinese investments in sensitive areas of the economy.
The $1.5bn Sorek 2 project, which could supply more than a third of Israel’s water, will be built by a consortium led by local company IDE Technologies and financed by Israel’s Bank Leumi and two European lenders, the government said on Tuesday, edging out a bid from CK Hutchison Holdings, controlled by Hong Kong billionaire Li Ka-shing.
The decision came days after Mike Pompeo, US secretary of state, made Washington’s opposition to any Chinese involvement in the plant’s construction a key issue during a lightning trip to Israel this month, two Israeli officials said.
The Trump administration has pressured Israel to block Chinese investment into so-called dual-use start-ups after Israel allowed a Shanghai-based company to operate a port at Haifa and telecoms equipment groups Huawei and ZTE expressed interest in expanding in the country.
Israel set up a committee to review foreign investments into sensitive sectors in October, partly to appease Washington, but US officials have complained the committee does not go far enough. Trade with China has grown about 400 per cent in the past decade to more than $14bn.
The rare point of discord between Israel and the US, its closest ally, has become a flashpoint as the Trump administration stepped up a trade war with China, while simultaneously blaming the Chinese government for its role in the coronavirus pandemic.
The Israeli security establishment had rallied against the decision to allow CK Hutchison to participate in the tender, arguing in public that the location of the plant, near an Israeli air force base, would allow Chinese nationals to surveil weapons programmes developed with US aid.
Security officials also argued that any financial savings promised by the CK Hutchison bid were outweighed by the risk that the project could damage the US-Israeli relationship. US officials raise the issue of Chinese investment in nearly every high level meeting between the two countries, said an Israeli official, who asked not to be identified.
The government did not publish details of the competing tenders, saying only that the Israeli winner would help save costs for consumers. The plant is expected to be one of the largest in the world.
Neither IDE Technologies nor CK Hutchison responded to requests for comment.