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Haifa Container Terminal Deal With China’s SIPG Under Review

Haifa container terminal deal with China’s SIPG under review

Haifa Container Terminal Deal With China’s SIPG Under Review

Haifa, Israel (PortSEurope) December 23, 2018 – The Israeli government is widely believed to be reviewing the March 2015 deal that gives China’s Shanghai International Port Group (SIPG) a 25-year control over the container terminal of the port of Haifa.

Haifa is Israel’s biggest and busiest port. It is also the base of its main naval fleets. Israeli submarines, often reported to be capable of launching nuclear missiles, dock there.

The Chinese firm will be taking over operations at the new Haifa Port (container terminal), which is currently under construction by Shapir Engineering and the Ashtrom group at a cost of NIS 3.96 billion (€920 million), in 2021.

Haifa regularly hosts joint U.S.-Israeli naval drills. It is also a port of call for the U.S. Sixth Fleet, operating in the Mediterranean Sea. The SIPG deal has raised intelligence and security concerns that are only now prompting an Israeli inter-agency review.

Under pressure from Washington, the Israeli government is considering possible changes to the parameters of the Haifa container port deal with SIPG (in 2015 SIPG was the only bidder for the new terminal), which has committed $2 billion to the project. It has been widely reported in Israeli media that country’s top-level security officials are examining the agreement with SIPG.

Unlike the sensitive issue of sophisticated arms sales to China, the Haifa port container terminal, part of which was transferred to SIPG operation in July 2018, has never been defined as being off-limits by U.S. officials to their Israeli counterparts. SIPG is a publicly traded company, but is under the control of the Shanghai government, which owns most of the company’s shares.

SIPG, a subsidiary of China Harbour Engineering (CHEC), won in 2014 a contract to build over a period of seven years and at a cost of around NIS 3.6 billion ($840 million) a new port at Ashdod on Israel’s Mediterranean coast. Bids to operate the new private facility in Ashdod have already been submitted by Terminal Investment, the Dutch unit of Switzerland’s Mediterranean Shipping Company and Germany’s Eurogate.

Under Beijing’s trillion-dollar Belt and Road Initiative (One Belt One Road), announced in 2013 to increase trade and connectivity in Asia, Africa and Europe, China has significantly increased its global investments, particularly in sea ports.

Big Chinese companies such as COSCO Shipping Ports and China Merchants Port Holdings are on a buying spree to acquire shares, lease or sign deals to build terminals at seaports overseas. China has invested also in the Mediterranean ports of Ambarli (Istanbul, Turkey), Piraeus (Athens, Greece), Vado Ligure (Italy), Bilbao and Valencia (Spain).

Should the Haifa deal not be blocked or watered down by any last-minute national security concerns or under U.S. pressure, then Israel would basically be giving the Belt and Road Initiative (also referred to as Silk Road) its best-ever international endorsement.

SIPG operates the world’s busiest container port, the port of Shanghai, along with other large terminals in China. China has been rapidly expanding its network of port operations leases worldwide – in Pakistan, Sri Lanka, Myanmar, Djibouti, Tanzania, the Netherlands and Cyprus.

Analysts speculate about the possibility that China has long-term ambitions of controlling the East Mediterranean port of Haifa – an European access point for Gulf resources – in case of any future Palestinian peace deal that results in the Arab states recognizing Israel and use its infrastructure for transport of goods and for pipelines in order to save more than 40% of the costs that they pay for transiting their cargo through the Suez Canal.

Some Israeli observers claim that in addition to the security concerns, the powerful Haifa port workers’ union is not happy with the Chinese company managing the container terminal at the port.

There have been two major cases when Israel’s efforts to develop ties with China have generated tension with the U.S.: In 2000 Israel’s sale (agreed four years earlier) of the Phalcon advanced airborne early-warning system was cancelled under Washington pressure; in 2005, the Israel Aircraft Industries (IAI) deal to upgrade the Harpy unmanned aerial vehicles (UAVs) – concluded with China several years earlier – was likewise blocked.

Israel’s trade with its immediate neighbours is rather symbolic. Nearly all the container cargo that enters and leaves Israel passes through its ports of Haifa, Ashdod and Eilat. The port of Haifa is the largest of the three. It has a natural deep water harbour, and serves both passenger and merchant ships. It is one of the largest ports in the eastern Mediterranean in terms of freight volume and handles over 30 million tons of cargo per year. The port employs over 1,000 people.

Haifa Port is close to the busiest shipping route in the world – from and to the Suez Canal. The port can handle any type of cargo – container (67% of all cargo), bulk, seeds, chemicals, fuel and Ro-Ro through a large number of approaches and quays.

The port is protected by two breakwaters: the main one is 2,826 m long to the north-west and the lee breakwater which is 765 m long to the east. The width of the entrance channel between the two breakwaters is 183 m. The channel is 13.8 m deep. Vessels with a draft of up to 13 m can anchor safely in the main port. The port basin has an area of 2 million m² and the land area of the main port zone is about 700,000 m².

In December, Israel’s government approved a tender for a strategic partner (investor) in the operation of Haifa port, in order to upgrade the harbour’s facilities and enhance its competitiveness. The tender will be launched in 2019 and is envisaged in a cooperation agreement signed by Israel’s transport and finance ministries, as well as Haifa port operator Namal Haifa and trade union Gistadrut. As part of the project, Israel’s transport ministry will carry out projects to construct access roads to Haifa port.

Apart of the ports of Haifa and Ashdod, China has also been involved in constructing Tel Aviv-Jerusalem railway; possibly the proposed Tel Aviv-Eilat railway; the Acre-Carmiel railway; Mount Carmel tunnels; Tel Aviv’s light rail transit system, water desalination sites. The estimated value of all these projects is $25 billion.

The port of Eilat (Elat) is the only Israeli port on the Red Sea, located at the northern tip of the Gulf of Aqaba. It opened in 1947 and is mainly used for trading with Far East countries. It allows Israeli ships to reach the Indian Ocean without having to sail through the Suez Canal.

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