This article originally appeared in Diplomatic Courier. 

Chinese President Xi Jinping’s visit to the Middle East in January, was almost unnoticed in Israel. This is likely because China’s most ambitious leader since Mao Zedong did not include Israel on his visit. But make no mistake, Israel has become a strategic focal point for China, and if it fails to leverage this, it will miss a unique opportunity to not only upgrade and diversify its economy, but to position itself as a critical outpost on China’s New Silk Road. If Israel seizes the current window of opportunity, while being sensitive to America’s regional interests, it may become a critical trading route between East and West.

On January 20th, China signed an agreement with Djibouti, allowing it to build its first naval port outside of China. With a population of some 900,000, Djibouti is one of the poorest countries in the world, however, its geographic location on the Horn of Africa, the “Gate to the Red Sea”, is of great strategic importance to China. In the next few years, China will invest billions of dollars upgrading the country’s small port and expanding the railway connecting Djibouti to Ethiopia, one of the most important economies in East Africa.

China is not the first world power to establish a military presence in Djibouti. In 2001 The United States established Camp Lemonnier, a naval expeditionary base, home to the only permanent U.S. military base in Africa and center of operations for its special forces in the Persian Gulf. Djibouti, it seems, has found the magic formula that allows these rival super powers to dwell side by side at a critical geographic location where their interests of safe passage and free trade meet.

New-Silk-Road-Map
China’s One Belt One Road program, better known as the “New Silk Road”, will affect the economies of over 60 countries worldwide. Israel has a unique opportunity to leverage this program and become a vital trade corridor between East and West.

One Belt, One Road

China’s involvement in Djibouti is part of the One Belt One Road (OBOR), an initiative which represents a historic shift in China’s developing international role. OBOR was set up to deal with the overcapacity challenges inherent in the Chinese economy and especially within the state-owned enterprises segment.  As part of this plan, China is slated to invest in major infrastructure projects in over 60 countries. This would help it to increase the economic interdependence of OBOR countries in China, to leapfrog the economic developments of China’s western provinces, to increase the use of the RMB as a major trading currency and to create efficiencies in its trading routes.

President Xi has clearly identified how China’s economic power can pay geopolitical dividend and is determined to expand China’s international impact through infrastructure diplomacy. Thus, the OBOR initiative should be regarded as Xi’s doctrine to reinstate China’s 7th Century golden age, when the Silk Road was a critical international commercial route. Certain analysts would go as far as to say that Xi will be judged as a leader partly on how well he fulfils OBOR’s goals.

The U.S. is monitoring the development of this initiative with some concern recognizing that OBOR is also a tool aimed at undermining its spheres of influence in key regions. The Middle East is an important part of this initiative, and indeed at the end of January, Xi, addressed the League of Arab Nations in Cairo and committed tens of billions of dollars in funds aimed at financing  several projects in the region. He shuttled between Riyadh and Teheran and upgraded the relationships with both of these rival countries. Calling on Middle Eastern countries to seize opportunities stemming from China’s 13th five-year plan, Xi made it clear that the plan, with OBOR at its center, will be realized.

OBOR is Good for Israel

Though situated in a turbulent region, Israel is an island of relative stability with the highest “OBOR risk on investment” ranking. The growth in collaboration between China and Israel over the past few years is predominately due to Israel’s status as a Start-Up Nation which can supply China’s technological needs and help it to upgrade many of its industries.  Israel is a center of excellence in managing terror threats, an issue that Beijing decision-makers view with concern as they try to mitigate the rise of Islamist groups in China’s Western provinces.

Israel’s significance to China however exceeds the above. Its potential lies in becoming an overland bridge connecting China’s trade routes from the Far East through Africa up to the Middle East and on to Europe. Even if it does not proclaim it publicly, China sees Israel as a strategic outpost in its regional interests; a small dot on the map, but one which is vital for ensuring an alternative for the trade and energy routes of the world’s second largest superpower.

Chinese maritime companies are fervently active in countries in the region. In April COSCO secured a controlling share over the port of Piraeus in Greece. Other companies have holdings in seaports in Egypt (Alexandria, Adabiya, Port Said), in Algeria (Cherchell), in Turkey (Amberley) and in Italy (Genoa and Naples) – all of them arguably form part of China’s OBOR strategy.

China has been active in Israel too.  The Carmel Tunnels project was the first proof for Israel of Chinese infrastructure capability. The involvement continued with China Harbor chosen to build the private port in Ashdod and Shanghai International Port Group picked to be the operator of the private port in Haifa.

The jewel in the crown for China however, would be the land bridge – a connection the Red Sea with the Mediterranean Sea via rail which would provide a safe alternative route to the Suez Canal, and a dependable commercial center for China’s trading needs.   Such a development will turn Israel into an essential part of the global trading ecosystem while boosting its economy.

The OBOR initiative is already underway. At its helm is Vice Premier Zhang Gaoli, who has established its relevant bureaucratic entities while getting the majority of China’s provinces to commit to supporting the development of OBOR. China has also established the main financial bodies for the program, The Silk Road Fund and the Asia Infrastructure Investment Bank (AIIB), which Israel has joined as a founding member. Observing these developments are Chinese infrastructure, energy and communications companies, which have established business units for the purpose of participating in existing and future OBOR ventures.

Israel must recognize the significance of OBOR and the enormous economic and diplomatic opportunities. If leveraged cautiously and with full consideration of America’s interests in the region, Israel, like Djibouti, could become a small yet strategically critical outpost on China’s New Silk Road.

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Roi Feder

Roi Feder, managing director of APCO Worldwide's Tel Aviv office, provides support to clients in a variety of areas, including investment and market entry, media strategy and government relations. Read More