Israeli strategic infrastructure is a battleground between the US and China

In the last week, three major infrastructure issues have seized headlines in Israel in the context of the growing tensions between the United States and China: a major desalination plant, the development of a 5G network, and now bidding on a major new power plant.

Under US pressure, an Israeli desalination plant, the tender for which was expected to be awarded to a consortium involving Chinese firms, was awarded instead to another group excluding the Chinese.  The Israeli defense ministry is also now making a major push toward excluding any Chinese firms from Israel’s 5G network, and will most likely prevail.  And a new power plant that a major Chinese firm plans to bid on is only now entering the picture and likely will be another area where U.S. pressure will be needed to swing the decisions away from China.

U.S. pressure was highly effective since there is a wall-to-wall consensus in Israel that its main strategic partner was, is and will remain the United States.  This probably makes Israel one of the most pro-American countries in the world in terms of both government and population.  As such, Israel tends to yield to Washington’s wishes when it comes to global strategic issues, such as China.

It is crucial that issues of strategic importance involving not only defense and defense technologies but also infrastructure have entered the US-Israeli dialogue over China. Israel is becoming a critical Western economic interest in terms of being an incubator of global high-tech.  In addition, little attention has been given to how this “start-up” nation will become the land of infrastructure spending and thus highly vulnerable to the temptations of China’s Belt and Road initiative.

With a population expected to double within 30 years, a complex and limited amount of land, and an economic transformation generating great wealth, Israel is on track to overhaul its lagging and highly inadequate infrastructure sector. The Israeli government is set to spend several hundreds of billions of dollars in the coming decade on rail, road, other transport, ports, tunnels, telecom, artificial islands, airports, energy and so forth. It has already planned and allocated much, as projects move from concept to tenders. The demise of the Arab boycott also unlocks Israel as a huge opportunity for infrastructure firms. Moreover, Israel is emerging through its infrastructure plans as a strategically critical land bridge to supplement the Suez Canal, which is likely one of the reasons China has been so aggressive in pursuing contract to run Israeli ports and connecting rail. China realized this very early and has aggressively moved to cash in.

But lurking behind the comforting thought that U.S. pressure still works on Israel and will continue to work in the foreseeable future lies a nagging worry: why is pressure even necessary in terms of Israeli infrastructure? Where are the U.S. infrastructure companies, or at least, where are the infrastructure companies of our allies, like Japan?  In the aftermath of the 1967 War, President Nixon, frustrated with the Vietnam War, met with Israeli Prime Minister, Golda Meir. He humorously asked if the US could trade three generals for Israel’s General Moshe Dayan. She answered: “Sure: General Electric, General Dynamics and General Motors.”  This is not the conversation we would have now with Israel.

And this betrays a deeper economic and strategic concern far beyond Israel. How long can we rely alone on pressure with allies, which demands ever increasing marginal efforts with each round and involves quid pro quos? Moreover, how can we continue to rely on pressure alone in an ever-increasing number of countries that are not beholden to their relations with the U.S., such as in Africa where China is also moving with even greater aggressiveness? Why, in terms of geo-politics, are our companies not inherently dominating the field so much that they themselves become a strong reason why countries seek to be strategically aligned with the U.S.?

Currently, the United States is strategically upside down.  It uses its geostrategic weight to help the infrastructure sector, or at least bound China’s, rather than the inverse.  That is, we use the weight of the U.S. infrastructure sector to advance our geostrategic dominance.  The world sees this, possibly correctly, as the behavior of a twilight power cashing in on and spending down its accrued stature down rather than the actions of a rising dynamic power building its reputation and amassing its power.  As such, the U.S. constantly projects externally that it is a declining power.

President Trump has single-handedly shifted debate in the United States on this issue and re-legitimized economic nationalism over absolute adherence to free trade ideology.  He has also signaled a strong interest in a major U.S. infrastructure initiative.  The two should be combined.

In a post-coronavirus world, it is imperative to avoid investing in and stimulating industries that have structural reasons for decline – such as “saving” typewriter companies from computers.  But a major national effort should be launched to use the post-coronavirus national reset to transform our infrastructure and overhaul the infrastructure industry to restore it to global dominance. Such dominance can then be a force multiplier leveraged to advance American power and to contribute to global strategic projection rather than hide behind, and thus slowly drain it.

In many ways, we never set a new national strategy to replace NSC-68 – which mobilized our nation and economy for the long struggle against Communism — in the post-Cold War world. Over time, we will need one to confront China, but for the moment, it is imperative that a major piece of it already be put in place:  a strong industrial policy in the infrastructure sector is needed to transform it into our strategic arm.

Last December, the administration already laid the initial foundations of such an effort through the Export Import Bank through its “Program on China and Transformational Exports” (Section 402). The 402 Program should be substantially expanded to tap the economic nationalism re-legitimized by the current administration to begin to formulate a national strategy to reinvigorate strategic industries that can be leveraged to advance our global power.  Further bipartisan legislation is being reintroduced currently, the “Endless Frontiers Act”, designed to allocate $100 billion into research to ensure enterprise in the United States reacquires global industrial predominance.

Perhaps we can use Israel as such a test bed, given that it has major infrastructure projects coming down the pike executed at the highest levels of complexity and sophistication, and that it seems to already be a major battleground torn between the temptations of the Chinese Belt and Road effort and Israel’s firm membership in the Western grouping.

This is a significant battle. We have sway to win it, and thus we can use it as a test bed to showcase what we can do among our allies and in regions like Africa to signal our strategic-industrial reassertion.