Company advances in tender for plant despite security concerns over China ties

Defense officials reportedly warned letting Hutchison Water construct major desalination facility could compromise sensitive sites; Energy Ministry says worries unfounded

The Sorek A desalination plant, located south of Tel Aviv, on November 22, 2018. (Isaac Harari/Flash90)
The Sorek A desalination plant, located south of Tel Aviv, on November 22, 2018. (Isaac Harari/Flash90)

A company now in the final round of a government tender to build a major new desalination plant has previously been flagged as a security concern due to its China-based ownership, according to a report Friday.

The Energy Ministry announced at the end of August that it had narrowed its choices down to two builders, IDE Technologies Ltd. and Hutchison Water International, a subsidiary of Hong Kong-based holding company CK Hutchison Holdings.

However, according to Haaretz, the Director of Security of the Defense Establishment, Nir Ben-Moshe, previously sent a letter to the Energy Ministry expressing his strong objection to Hutchison due to its Chinese ownership.

The plant, which is expected to produce some 200 million cubic meters of water annually, is planned for Nahal Sorek, near the Palmachim air base and a nuclear research facility in the area.

In addition, Israel is under pressure from the US to not sign major infrastructure projects with China due to its contentious relations with Washington and the Trump administration in particular.

The Sorek Desalination Plant, November 22, 2018. (Isaac Harari/Flash90)

Israel has not yet fulfilled a promise to Washington to set up an oversight body to monitor foreign investment in the Israeli economy, despite cabinet meetings on the subject. A May report in financial daily The Marker indicated that rather than set up a permanent oversight body, officials were recommending cases be considered on an individual basis.

The Energy Ministry said it had sent a response to the Defense Ministry two months ago in which it explained that Hutchison Water is an Israeli operation which is only indirectly owned by a Hong Kong company.

The ministry further noted that Hutchison Water already operates a water desalination plant in Sorek that is similar to the planned site.

“The ministry does not see how the Hutchison group’s participation in the new tender is different from the company’s existing operations in the country,” it said.

“Aside from that, we note our surprise that a confidential letter that was sent to us found its way to the newspapers.”

China and Israel have stepped up trade and business ties in recent in years and launched free trade talks.

Chinese firms have made major inroads in Israel, including the takeover of local food giant Tnuva in 2014 and deals to manage the key Haifa and Ashdod ports.

However, senior security officials have sounded alarm bells over Chinese involvement in Israel’s infrastructure warning they are a security risk and could jeopardize ties with the US.

Shin Bet head Nadav Argaman attends a Knesset Defense and Foreign Affairs Committee meeting on November 6, 2018. (Hadas Parush/Flash90)

In January the head of the Shin Bet security service warned that massive Chinese investment in Israel could pose a danger to national security, Channel 10 (now Channel 13) reported at the time.

“Chinese influence in Israel is particularly dangerous in terms of strategic infrastructure and investments in larger companies,” Nadav Argaman said at a closed-door speech at Tel Aviv University

In the wake of Argaman’s remarks, Beijing reportedly sought clarifications from Jerusalem about its position.

A week after Argaman’s caution US Deputy Secretary of Energy Dan Brouillette, who was visiting Israel for meetings that included talks with Energy Minister Yuval Steinitz, warned that unless Israel implements stringent screening procedures for Chinese investments, intelligence sharing between the two allies could be threatened.

Brouillette encouraged Israel to take “aggressive steps” to monitor foreign investment to guard against any weaknesses in Israeli infrastructure which could compromise intelligence sharing with the US.

“We know that the threat is growing each and every day,” Brouillette told reporters. “We’re going to share our experiences with China and let folks know that we have concerns with certain activities that we see coming out of China, specifically certain companies.”

Energy Minister Yuval Steinitz, foreground, and US Deputy Secretary of Energy Dan Brouillette, during a meeting in Jerusalem, January 16, 2019. (Energy Ministry)

According to Israeli media reports, concerns of growing Chinese involvement in sectors critical to national security led to the Finance Ministry scuttling deals to purchase insurance companies Clal and Phoenix in 2016 and 2017. Argaman was reportedly involved in those decisions.

When the new facility, Israel’s sixth, is completed, it will provide some 200 million cubic meters of water per year, or about one-fifth of household and municipal water consumed in Israel each year, according to the Finance Ministry.

Construction is set to begin in 2020, and water production in 2023, at which point Israel, already a world leader in desalination, will be drawing fully 85 percent of its potable water from the sea.

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