In the mid-1990s, Israel signed a contract to install Falcon radars on Russian Ilushin aircraft operated by the Chinese Air Force. The $250 million deal covered four such aircraft. In late 1999, an Ilushin-76 even arrived in Israel. However, in 2000, under U.S. pressure, the contract was canceled during Ehud Barak’s premiership, and Israel paid approximately $350 million in compensation.
In 1994, China purchased several Harpy suicide drones from Israel in a $55 million deal. In 2004, China requested upgrades for these drones, but U.S. intervention led Israel to seize the systems, which were returned to China without upgrades in 2005. Israel was a major exporter of advanced chips and processors to China. However, due to pressure from the U.S. Department of Defense and Department of Commerce, Israel was forced to strengthen oversight of sensitive technology exports to China, leading to the cancellation or suspension of many contracts.
In 2018, Intel accounted for 40% of Israel’s exports to China, significantly boosting China’s production capacity. Yet, as the U.S.-China tech war intensified, Israeli chip exports faced restrictions, with peak exports in 2017 and 2018 largely driven by Intel’s activities. Israel’s technions in Haifa and Hebrew University of Jerusalem also halted collaborations with Chinese universities, primarily in laboratory partnerships and technology transfers.
Chinese companies like Alibaba, Huawei, and Lenovo had invested in Israeli firms since 2010, but following U.S. pressure, Israel established a security committee in 2019 to monitor foreign investments in sensitive technologies. Many Chinese firms were excluded or restricted from Israel’s cyber and nanotechnology markets.
U.S. pressure also barred Israeli companies like NSO Group and Cellebrite from collaborating with China. In 2015, Israel signed a 25-year contract with China’s state-owned Shanghai International Port Group to operate and manage a new terminal at Haifa Port, which was inaugurated in 2021 with significant Chinese investment. The port’s proximity to Haifa’s naval base, a stopover for U.S. warships including the Sixth Fleet, raised serious U.S. concerns. American officials, including military and intelligence leaders, warned that Chinese-supplied heavy equipment and cranes could contain hidden surveillance or eavesdropping devices, potentially compromising U.S. naval operations. Between 2018 and 2021, the U.S. repeatedly urged Israel to review the contract or impose stringent security oversight on Chinese equipment, even threatening to limit military intelligence sharing if the collaboration continued.
This crisis prompted Israel to revise its policies on foreign investment in critical infrastructure. In 2019, Israel established a formal mechanism to oversee foreign investments in strategic projects. While the Haifa Port contract was not canceled, Israel committed to enhanced security oversight of the Chinese company’s operations. Notably, while China dominates over 60% of Israel’s electric vehicle market, Israel’s Defense Ministry, under U.S. pressure, halted the supply of BYD Atto 3 vehicles to army officers. Chinese vehicles were also barred from parking in sensitive intelligence and military base lots.
Meanwhile, India, China’s rival, has strengthened ties with Israel with U.S. approval. Intelligence cooperation between Mossad and India’s RAW began in the 1970s, with military ties expanding since the 1990s. From the sale of searcher drones in the 1990s to upgrades of Heron MK2 drones and joint development of the Barak 8 missile system, their partnership includes intelligence sharing, military satellites like TecSAR, and countering Islamic groups.
In 2010, India signed a defense vision document with Israel amid China’s restrictions. Joint space, water, and energy projects involving the UAE and Israel also emerged. The U.S. showed flexibility to compensate for India and Israel’s non-membership in treaties like the NPT, pushing China closer to Russia, Pakistan, and Iran. India’s Adani Group’s activities in Haifa Port and the Haifa-Jebel Ali corridor, backed by a $1.5 billion investment, serve as a U.S.-supported alternative to counter China.
Similar pressures are evident in the Caucasus and the Zangezur Corridor. While the corridor ostensibly benefits China, India, Armenia, and Israel cautiously participate. Russia seeks to control this route, while large-scale infrastructure projects like the Astara-Rasht railway remain stalled due to Iran’s security instability and mismanagement, limiting its role in these initiatives. Iran, meanwhile, is concerned about U.S., Indian, and Israeli influence in Azerbaijan and Armenia. The U.S. has pressured Israel to leverage its ties with India and Armenia to counter Iran, whose economic lifeline to China is at risk. This dynamic is considered a trap to initially involve China, only to shift projects toward India and distance the region from Russia, a concern even Moscow shares.
The Zangezur Corridor transcends mere border issues, effectively sidelining Iran from major trade routes. Iran’s ideological policies have exacerbated this trend. China’s 25-year agreement with Iran aimed to make it a strategic partner, but Iran’s economic and managerial weaknesses have hindered effective participation. The corridor has become a flashpoint between East and West, pitting India against China. China’s efforts to utilize Iran’s infrastructure remain stalled, leaving Iran in a precarious, unbalanced position, no longer a reliable trade partner for China and its allies.
Additionally, the longstanding India-Pakistan conflict poses a further threat to China’s regional influence. Escalating tensions between India and Pakistan, both nuclear-armed states, could destabilize South Asia, disrupting China’s economic and strategic interests, particularly its Belt and Road Initiative projects in Pakistan. Moreover, any expansion of the Iran-Israel conflict to Iraq, where sectarian and geopolitical tensions remain volatile, could further complicate China’s position. Such a spread of conflict could disrupt oil supplies and trade routes critical to China’s economy, forcing Beijing to navigate an increasingly unstable Middle East.
In Central Asia, China faces pressure as Turkic-speaking nations grow closer to the West and Israel. Israel’s new embassy in Cyprus, despite Turkey’s objections, and India’s strong ties with Israel highlight China’s waning regional influence. The potential escalation of the Iran-Israel conflict to Pakistan, Afghanistan, Iraq, or Turkey, combined with Russia’s preoccupation with Ukraine, leaves China increasingly isolated through its network of partners. While Chinese Foreign Minister Wang Yi has supported Iran and condemned U.S. and Israeli actions, Beijing seeks to avoid escalation and promote diplomacy, as a full-scale Middle East war could harm China’s Belt and Road Initiative. China also fears that resolving Middle East tensions could shift U.S. focus back to containing China, especially if Iran, Pakistan, Afghanistan, or Iraq destabilize, potentially bringing conflict to China’s borders.
With Russia’s absence in Central Asia, Israel and India’s influence is growing. Israel has opened new embassies, and India maintains a presence in Tajikistan’s airbases while activating the Ashgabat Agreement and holding summits with Central Asian states in June. Though China has not directly intervened in the Iran-Israel crisis, the question remains: if the conflict prolongs, will China remain neutral? Could it shift focus from Taiwan to diplomatic or even military involvement in the Middle East? The answer is unclear.
China remains preoccupied with Taiwan and avoids direct conflict. However, widespread instability could disrupt the global economy, including China’s. Can China be a more reliable partner for Iran than Russia, which maintains ties with Israel despite the Ukraine war? While China may be Iran’s only option in its strategic isolation, Iran is not China’s only option. As India, backed by the U.S., emerges as a China’s alternative, will China adopt a more active strategic role? Might it eventually address the U.S. concern that it gains from the global order without contributing to its formation? These questions remain open.