U.S. pressure over China leads Israel to review infrastructure bid

Israel will review the participation of a Hong Kong-based company in a government tender for the construction of a $1.5 billion desalination plant, following pressure from the Trump administration.

Why it matters: The U.S. has linked the issue to potential Chinese influence in Israel. With Pompeo arriving in Jerusalem tomorrow in the midst of an intense campaign against the Chinese government, Israeli officials are wary of getting in the middle of U.S.-China tensions.

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• Israel notified the U.S. of its decision ahead of Pompeo’s arrival tomorrow, Israeli officials told me.

How we got here: As I reported last week, the U.S. asked Israel for clarifications regarding the participation of Hutchison Israel, which is controlled by the Hong Kong-based conglomerate CK Hutchison Holdings, in a bid for the “Sorek B” desalination plant.

• The company is among the entities that have reached the final stages of the process, and Israeli officials say it has a good chance of winning the tender.
• The new desalination plant is expected to be the largest such facility in the world, producing 200 million cubic meters of water annually — a quarter of Israel's total water consumption.
• The company that wins the bid to build the plant would operate it for 25 years.

Last week, U.S. ambassador to Israel David Friedman asked Prime Minister Benjamin Netanyahu to weigh in on the issue, sources tell me.

• Netanyahu then asked the national security council and finance ministry to convene a new government committee which monitors foreign investments in Israel.
• Israeli officials tell me that while a review will be conducted, they don't expect it to result in Hutchison being banned from the tender.

What’s next: The Israeli ministry of finance is expected to announce the winner of the tender on May 24th.

U.S. officials say Pompeo is likely to raise China during his talks in Jerusalem tomorrow. State Department spokesperson Morgan Ortagus told me:

“As the Secretary has repeatedly stated, the United States strives for trade and investment on fair and reciprocal terms, with reliable partners, for long-term mutual benefit. China’s business dealings, by contrast, are often opaque, transactional, and geared to benefit the Chinese Communist Party.  We speak often to our friends in Israel about these risks, and stand ready to help."

The Israeli ministry of finance and Netanyahu's office declined to comment for this article.

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