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Amid US pressure, Israel Cancels $1.5 Billion Deal With China

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Amid US pressure, Israel taps local firm over China for $1.5b desalination plant

Officials cite huge expected savings in water costs and significantly better tender bid as reason IDE Technologies was awarded Sorek B project, largest of its kind worldwide

By AFP and TOI staff, 26 May 2020:

The Finance Ministry on Tuesday named a local company as the winning bidder for a $1.5 billion desalination plant contract, beating out Chinese competition amid reports of pressure from Washington.

IDE Technologies will build the Sorek 2 plant south of Tel Aviv, which by 2023 should be able to produce 200 million cubic meters a year of desalinated water from the Mediterranean, a statement from the finance and energy ministries said.

The Israeli company was chosen over Hutchison Water — part of the Hong Kong-based CK Hutchison Group — less than two weeks after US Secretary of State Mike Pompeo made a lightning visit to Israel during which he discussed Chinese investments.

The new plant will be the largest of its type in the world and increase Israel’s desalination capacity by 35 percent, saving the country money on water, the statement said.

It said the plant would save the Israeli government NIS 3.3 billion ($900 million) during its lifetime.

Finance Minister Israel Katz said the plant will “significantly increase the state’s water supply and save huge sums” in water costs.

Israel has boosted cooperation with China in high-tech and other sectors, but its key ally the United States has urged it to limit Chinese investment in strategic sectors of the economy.

Energy Minister Yuval Steinitz played down Israeli considerations of Washington’s concerns in the decision not to award the tender to Hutchison.

Steinitz told the Kan public broadcaster he was at the meeting earlier this month between Pompeo and Prime Minister Benjamin Netanyahu and “it didn’t seem to me that this plant was at the forefront of American interests.”

“The proposal by the Israeli company was significantly better than all the competitors, including the Chinese,” Steinitz said.
US Secretary of State Mike Pompeo, left, with Prime Minister Benjamin Netanyahu at his Jerusalem residence, May 13, 2020 (Kobi Gideon/PMO)

Newly appointed Water Resources Minister Ze’ev Elkin said the desalination plant would give Israel “confidence in the strength of our water resources,” even should a series of drought years occur.

In a May 13 interview with public television, Pompeo voiced concern over Beijing gaining “access to Israeli infrastructure” that could “put Israeli citizens at risk,” as well as endangering the “capacity for America to work alongside Israel on important projects.”

A spokesperson for the Finance Ministry would not comment on whether US concerns were a factor in the selection of IDE over Hutchison.

Hutchison Water had partnered with IDE to build and operate the first Sorek desalination plant, which has been providing potable water since 2013.

In 2019, IDE sold its shares in the first Sorek plant.

China and Israel have stepped up trade and business ties in recent years and launched free trade talks, but senior security officials have sounded alarm bells over Chinese involvement in infrastructure projects, warning they are a security risk and could jeopardize ties with the US.

Beijing and Washington are at odds as US President Donald Trump has in recent weeks lambasted China for what he says is Beijing’s role in allowing the coronavirus to spread.

US officials had questioned the China-tied company’s offer and expressed concerns over the possibility it could win the tender, Axios reported before Pompeo’s visit.

The report said officials in the Trump administration, including US Ambassador to Israel David Friedman, have raised their concerns with the Prime Minister’s Office and the Foreign Ministry.

Construction on the $1.5 billion plant is set to begin this year and when completed Israel, already a world leader in desalination, will be drawing fully 85 percent of its potable water from the sea.

The plant is planned for Nahal Sorek, near the Palmachim air base and a nuclear research facility in the area.

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