China has very substantial investments in Israel. However, the Haifa Port acquisition by the Adani Group, an Indian conglomerate, in spite of Chinese bids, was quite a coup. However, navigating through the challenges ahead will definitely prove to be an arduous task for the Adanis.
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The Finance Ministry of Israel finalised a deal to privatise the Haifa Port, one of the largest ports in the Eastern Mediterranean, on 10 January 2023. A consortium of Adani Ports and Special Economic Zone Limited and Israel’s Gadot Chemicals, Tankers and Terminals Limited had bagged the tender, last year, for 4 billion Shekels (US $1.18 billion).
The timing of this ‘strategic purchase’ was seemingly jinxed. On 24th January, the US-based Hindenburg Research claimed that Adani Group was utilizing offshore tax havens for improper business dealings. Israeli ambassador to India, Naor Gilon, promptly defended the deal in February, stating that the Adani Group, which now holds 70% ownership of Haifa Port in Northern Israel, had “paid in full.” So, the dirt was dished, and the world moved on. After all, Adani acquisition of Haifa Port would create a trans-Mediterranean maritime link for India. Bypassing the Suez Canal, now Haifa port would cut the shipping time from Mumbai to Europe by almost 40%.
As Tel Aviv and New Delhi clinched the deal, the historic significance of Haifa for India was fondly remembered. On 23rd September 1918, Indian soldiers from Mysore, Hyderabad, and Jodhpur liberated Haifa from the Ottoman conquests during the First World War. Walking distance from the port is the Haifa India Cemetery that recounts the audacious zeal of Indian soldier Dalpat Singh, also called as ‘Hero of Haifa’. A plaque dedicated to Singh with his moniker was unveiled by the Indian PM Modi in 2017. In 2022, the Israeli Foreign Ministry had discussions with Bollywood producers on Indo-Israeli films, especially ‘Heroes of Haifa’.
The triumph of the deal and its political razzmatazz further emerged with India and the US co-chairing the India Middle East Europe Economic Corridor meet on 10th September, at the side-lines of the G20 Summit. But were ample details really shared and analysed. Definitely not. It was because of US pressure that Israel had to stop chasing Chinese competitive bids for the Haifa port tender – an opportunity that cosily fell into the lap of India’s billionaire industrialist. Even Dubai’s DP World withdrew in December 2021 from bidding for the tender for reasons unknown.
Three major concerns emerge as far as the port deal is concerned. Firstly, why is Israel privatizing its ports? Secondly, what was the United States’ concern against China in Haifa port? Lastly, will the Adani group manage to quell the protests of labour unions – a very powerful lobby – against privatization?
Adani Groups Linkages with Israel
Currently, Adani Group handles 13 sea terminals in India which amounts to 24% of the maritime trade of India. Haifa Port is the first international acquisition for the Group. Adani group has also been co-producing Hermes 900 medium altitude and long endurance drones, Galil Sniper rifles, Negev light machine guns, and Tavor X95 assault rifles, along with Israel. It also partners with the Israeli Innovation Authority, Israeli Weapons System, and Elbit Systems.
In fact, during the Hindenburg accusations, GQG Partners, an American asset management and investment company, announced an investment of $1.88 Billion into four companies under Adani Trust, getting a 4.1% stake in Adani Ports, amounting to $640 million. Along with the acquisition of Haifa port, Adani Group would also open an artificial intelligence lab in Tel Aviv. Therefore, the 30 years of India-Israel diplomatic relations were further cemented with this port deal. After the Covid pandemic haemorrhaged the port industry and caused ‘blank sailing’ on major international shipping routes – this was a breath of relief. But in reality, it was the United States that emerged as the geo-economics champion rather than India or Israel.
Haifa Bayport: The Dragon’s Presence in the Mediterranean
Just as India, China also celebrated 30 years of diplomatic relations with Israel. Israel was the first country to recognise the Communist Party leadership of China but the diplomatic relations emerged only in 1992. Currently, Sino-Israeli trade amounts to $24 billion per annum. Both are discussing a Free Trade Pact. In the late 1990s, Israel had started selling Falcon early warning aircraft as well as drones to China as a part of a billion-dollar deal, but due to American pressure, the deal was annulled. Israel had to pay China $300 million in damages.
Chinese companies are currently involved in the construction of light rail systems in Tel Aviv. China also has the largest stake in Tnuva, an Israeli food and dairy company. In 2017, both signed the Innovative Comprehensive Partnership treaty which includes Israel’s involvement in the Belt and Road Initiative (BRI) as well as the Asian Infrastructure Investment Bank (AIIB).
But the major strain in US-Israel diplomatic relations emerged when Shanghai International Port Group (SGIP) – a state-owned Chinese industrial conglomerate – won the 2015 bidding war for Haifa Bay Port – located one km away from Haifa Port. Built on a landfill peninsula, China imported 6 million tonnes of stone to create an 882 km long breakwater along with 13 million cubic feet of sand. In 2015, China was the only bidder and got the lease till 2046. The Chinese were thus getting an opportunity to possibly acquire intelligence without any overt footprints. The Haifa Bayport currently has 100 employees with few Chinese technicians and Israeli law does not allow Chinese nationals to work in its ports. This 24/7 Bayport works through giant automatic cranes, electric trucks, and 5G wireless communications with its fortified control room located nearby. It was Israel’s first new port in 60 years and became Israel’s largest container cargo harbour – making the Dragon’s presence in the sea quite palpable. It has also bitten into the traffic volumes of Haifa port.
But why did Israel start privatizing its ports? It was an attempt, right from the early 2000s, by the Netanyahu government to infuse competition in the port industry for better developmental prospects.
US Apprehensions of Chinese Presence in Israel
Even before the Pentagon leaks of China setting up a secret military base in UAE was unveiled, the US was quite reluctant of Chinese presence in Israel. Nadav Argaman, the Director of Shin Bet (Israeli Security Agency) from 8 May 2016 to 13 October 2021, issued warnings against Chinese investments. PM Netanyahu had to instruct the Finance and Foreign Ministry to balance US and China interests in the region.
But then, why is Haifa port so important? Firstly, Haifa port is important for refuelling stops for US Navy’s 6th Feet. In May 2020, then Secretary of State Mike Pompeo in his state visit had warned Israel and asked to call off any infrastructure project with China. Secondly, Haifa is also a crucial naval base, which is a secure area for docking warships and other support elements. Thirdly, it houses Israel’s nuclear submarine, which provides it with 2nd strike capability. Hence, the US was paranoid about possible Chinese espionage through the ‘gateway of Levant’ on both Israeli and US naval assets when SGIP won the tender. Americans themselves, however, have never applied for Israeli tenders in the port industry.
When Israel refused US inspection of the Chinese port in Haifa in 2021 by the US Coast Guards, the then CIA Director William Burns warned that the US would stop sending ships from the 6th Fleet to Haifa. It worked. The intensity of American pressure stopped Israel from wooing Chinese interests in Haifa and instead, trusting India – a core part of the I2U2 group established in October 2021.
Adani Group: Challenges Ahead
Currently, the Adani Group is in talks with the worker’s union in Israel to train the staff and offer a voluntary separation scheme. The Group that follows the Earnings Before Interest, Taxes, Depreciation, and Amortisation (EBITDA) rules, is trying this cost-cutting measure as manpower cost amounts to 80% of operating cost at Haifa Port. But the dockworkers and labour unions in Israel are quite strong, especially Histradut- the General Organization of Workers in Israel. In 1966, a collective agreement was signed by the Government of Israel that stated that any changes in the work methods would need the approval of the manufacturing committee.
The labour union workers have a strong and unique status in the day-to-day management of the port, just as the stakeholders. Haifa Port has always been a focal point for labour disputes, and strikes in 2008, 2014, 2018 and 2023. It is a battlefront between the Manufacturers Association and the government. Israel’s island economy suffered $2 billion in damages due to the strike in 2011. The agreement, therefore does not signal the weakening of the labour unions.
With all these considerations, the question that remains pertinent is will the Adani Group be able to outshine China which is the world’s leader in semi-automatic port technology and robotic transport systems. With the American investment in the Adani Group, would the Group have to toe the US line as it attempts to push its global presence? How would the 1000 port workers of Haifa be compensated; if the time comes? And, most importantly, won’t China’s espionage attempts impact India’s political footprints in the Mediterranean? As these nuts and bolts emerge, it would be callous to just brush them aside. Global business investments of inimical countries will need to be analysed from the aspect of their influence on our security and political concerns.
Dr Shubhda Chaudhary
Editor, Centre for India-West Asia Dialogue
