China’s tech-driven port in Haifa aims for interconnected Mideast

Vision of regional transportation network attracted Shanghai company, which opened terminal in 2021 and now handles 14% of Israel’s container traffic

HAIFA, Israel – Commercial ports are usually a cacophonous jumble of clanging metal, screeching chains and yelling dock workers engaged in a race to unload massive container ships. But the barely two-year-old Haifa Bayport run by the Shanghai International Port Group on Israel’s Mediterranean coast is quiet enough to hear the seagulls caw.

The port, where a fleet of electric vehicles ferries cargo 24 hours a day, has barely any humans in sight. Massive red and white cranes that carry the company’s name in Chinese characters loom 100 meters (328 feet) over the nearly silent pier, hoisting the containers above the freighters with state-of-the-art technology and logistical expertise.

China’s SIPG, a state-owned industrial conglomerate that operates the world’s biggest port in Shanghai, is playing the long game. Having won a bidding war in 2015 to construct the new facility and compete against the existing Port of Haifa that was built 90 years ago, the company is looking eastward. With Israel linked now to the United Arab Emirates and Bahrain through the 2020 Abraham Accords, SIPG officials say Haifa can be a maritime gateway to the broader Middle East. The vision fits into China’s global “Belt and Road” initiative, which aims to build transportation infrastructure around the world and create an uninterrupted, modern-day Silk Road.

“In the future, the port will be a very easy way to help connect all of the countries around Israel,” SIPG Bayport Israel CEO Miao Qiang told The Circuit during a tour of the facility. “We can really contribute to connecting the entire Middle East.”

Some 99% of all cargo arriving in Israel enters through Haifa and the two other port cities of Ashdod and Eilat, which last year handled 3.1 million containers in total. As outdated technology and sluggish government bureaucracy proved unable to handle increased traffic over the past decade, Israel decided to build two more ports at Ashdod and Haifa and put the operations at all four sites up for bidding by experienced international port companies. Besides SIPG, the older Haifa port is now run by India’s Adani Group in a joint venture with Israel’s Gadot Chemical Terminals. A new facility in Ashdod is operated by Terminal Investment Ltd., which is based in the Netherlands.

“These ports are essential to the Israeli economy, they’re a lifeline,” said Yoav Zuckerman, Bayport’s vice president, who previously led the government’s initiative to build the new terminals.

The Haifa Bayport, which was built on a landfill peninsula jutting out into the sea, operates 24/7, including holidays. When a ship arrives, the giant cranes play a game of Tetris to unload the containers, lowering each onto waiting electric trucks that take them to storage bays. The cranes are almost completely automatic, controlled by people sitting in a second-story office a few hundred meters away, navigating a joystick like a computer game.

While competition from SIPG has steadily eaten into the older Haifa port’s market share, the new owners, led by India’s second-wealthiest man, Gautam Adani, are overhauling the facility to fight back. Adani’s winning bid of $1.1 billion was strongly supported by the U.S., which expressed security concerns about China’s operation of the Bayport. The older port has also become a centerpiece of the so-called I2U2 initiative, which created a regional West Asia trading bloc two years ago comprising India, Israel, the United Arab Emirates and the U.S.

Building on I2U2, U.S. National Security Adviser Jake Sullivan was expected during a meeting on Sunday with Saudi, Emirati and Indian counterparts to discuss the possibility of connecting Gulf and Arab countries via a network of railways that would also be connected to India, Axios reported. While Israel’s role is not directly part of the discussion, it could be added later, the report said.

Zuckerman said SIPG welcomes India’s competition, comparing the ports to a shopping mall. “If I’m Gucci, and Louis Vuitton is coming… that’s good for me,” he told The Circuit. “The product we are selling is certainty, productivity and efficiency, and if we’re considered an efficient port, more ships will come to the port and all the shops in the mall will benefit.”

Previously, ships waited upwards of a month to unload their cargo in Haifa, leading to floating traffic jams on the Mediterranean and driving up costs. Ships idling in the bay with their engines running can also contribute to air quality problems, an ongoing issue in Haifa, which has some of the worst air quality in Israel.

Since the Bayport opened, the number of idling ships has plunged and waiting time has for the most part been eliminated. Lingering, though, are American concerns about the Chinese company’s operating essential infrastructure so close to the old Haifa Port, which houses Israeli military installations and is also an important refueling stop for the U.S. Navy’s Sixth Fleet. The Biden administration has also raised alarms about construction of an alleged secret military base at a Chinese-owned commercial port in the UAE, north of Abu Dhabi.

SIPG says the concerns are unfounded because Israeli authorities handle all security matters. “We are not dealing with any defense or security issues whatsoever,” Zuckerman said. “We are just loading and unloading containers and general cargo.”

Sam Chester, an Israel-China analyst who previously consulted for Beijing-based China Harbor Co., said Bayport’s ownership makes commercial sense and Israel should better articulate the security precautions put in place. “Israel gets into problems with the U.S. and China when Israel hasn’t lifted up its head and explained what’s happening,” he told The Circuit

Although the Bayport is small, Chester suggested that given China’s growing diplomatic influence in the region, the existence of Chinese infrastructure could provide a deterrent for the launching of missiles into northern Israel, such as last month when 34 rockets were launched from Lebanon. “You want China to become more of a responsible stakeholder, you want them to be more responsive to the peacemaking process in this region… [then] you want influential parties to put their money down and be invested here.”

SIPG hopes more normalization agreements will be signed that enable development of a regional transportation network linking Haifa to Jordan, Iraq, Saudi Arabia and other Gulf states by railway. That vision of Haifa becoming “the Gateway to the Levant” motivated the British colonial authorities in Palestine when they opened the port in 1933.

“Haifa is actually the closest way to get [from Europe] to Mecca or Baghdad,” Zuckerman said. “Sailing from here to the Arab Gulf is 7,000 nautical miles  (13,000 nautical kilometers), but if we take a car now and just drive to Baghdad, it’s only 900 kilometers.”

Sailing from the Mediterranean to the Gulf also requires paying high fees for passage through Egypt’s Suez Canal, which adds significant cost to the goods, Zuckerman said. Haifa’s direct rail link to Israel’s eastern border town of Beit Shean – which can be extended to Jordan if diplomacy allows – is among the reasons that SIPG decided against bidding for the Ashdod contract, even though the city is closer to the populous center of the country.

SIPG’s Qiang said he believes business interests will drive normalization faster than diplomatic negotiations. “When [businesses] cooperate, we can make things more efficient,” he said. “When we help shipping reduce their costs, it creates a structure to make the entire market bigger.”

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