Gone are the days of Nehru and Indian support for Palestinian self-determination, with Modi's India taking relations with Israel to unprecedented heights, encouraged by close cooperation between partners like the UAE and Israel, especially in infrastructure and transport projects.
In late July, India’s largest port developer and operator, Adani Ports and Special Economic Zone Limited (APSEZ), acquired the lease for Haifa Port, the second largest in Israel, lasting until the year 2054, along with Israeli chemical and logistics group Gadot. Clinching the 4.1 billion shekels ($1.18 billion) deal, Adani holds 70% of the shares, while Gadot has a 30% stake.
The implications are set to reverberate far beyond the region, and position Israel at the heart of the global competition for domination of trade routes. It may also come at the expense of other states in the region, including Egypt and its prized Suez Canal.
The Indian group had been pushing for the port deal for two years but with no success. This time, the quoted price was 55 % more than the second bidder. According to Israeli news outlet Globes the offer was much higher than the $870 million Tel Aviv had expected to receive.
For Adani it was a ‘strategic buy’, as the group operates 13 marine terminals in India and controls nearly 24% of Indian maritime commerce. As the sale was completed, the group’s shares spiked by 1.9% and rose further by 0.56% in the following days.
Avigdor Lieberman, the Israeli Minister of Finance welcomed the deal, saying, “The privatisation of the port of Haifa will increase competition at the ports and lower the cost of living”.
Finalised after a two-year tender process by the Israeli government, the port privatisation will help lower import prices for Tel Aviv as well as shorten queues at local harbours.
Since 98% of all goods move in and out of Israel by sea, the government upgraded the sector to preserve its economic growth. Haifa happens to be Israel’s leading deep-water port, handling nearly half of the country’s freight volume in 2021.
As Opher Linchevski, the CEO of Adani’s partner group Gadot, said, “The length of the lease and the growth that we anticipate in the Israel economy, as well as the surrounding regions, means we are well positioned to invest to build one of the best ports in this region”.
Interestingly, this port deal materialised just after an online conference held between US President Joe Biden, Israeli Prime Minister Yair Lapid, UAE President Mohammed Bin Zayed, and Indian Prime Minister Narendra Modi during Biden’s visit to Jerusalem.
Finalising I2U2, a new quadrilateral arrangement to rival China’s Belt and Road Initiative (BRI), the four leaders may have well discussed the Haifa port deal.
“Israel’s awarding of the purchase of its Haifa port to the consortium led by India’s Adani Ports is of great significance,” Prof. Michael Tanchum, a non-resident fellow at the Middle East Institute (MEI) and a senior fellow at the Austrian Institute for European and Security Policy (AEIS), told The New Arab.
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But what are the benefits for both parties from this deal in the wider context of India-Israel ties, and will there be any regional impact?
Firstly, Tel Aviv had already been seeking stronger relations with India. Israeli Defence Minister Benny Gantz was in New Delhi last month for an upgrade on security cooperation and trade ties. Alongside that, a free trade agreement between Israel and India is also on the table.
New Delhi is Tel Aviv’s third largest trading partner in Asia and seventh largest on a global level. Trade ties are on an upward trajectory and have increased in value from $200 million in 1992 to $6.35 billion - excluding defence - in 2022, and the balance of trade is in India’s favour.
“Adani’s acquisition of Israel’s Haifa Port together with Gadot is a significant development considering the growing relationship between India and Israel,” Ashok Swain, Professor of Peace and Conflict Research at the Uppsala University in Sweden, told The New Arab.
In addition, Israel can expect further deals in the defence sector as the Adani group has already connected with leading Israeli defence firms to set up a drone-manufacturing company in India.
Secondly, since New Delhi is on good terms with most of the Gulf Cooperation Council (GCC) states and Tel Aviv has diplomatic relations with the UAE and Bahrain, this development could boost trade corridors.
With the Adani-Gadot collaboration, new trade lanes will be created to connect the Middle East with Europe and expand its footprint into the European port sector, which includes the Mediterranean region.
“The Haifa port deal entrenches an Indian-Med commercial corridor that has been years in formation. The corridor is a multi-modal, Asia to Europe commercial transportation route interlinking the Arabian Sea and the Eastern Mediterranean, with India, the UAE, and Israel as the main connectivity nodes,” Tanchum told TNA.
“It is a third way, providing an alternative to China’s 21st Century Maritime Silk Road and the Iran and Russia-centered International North-South Transit Corridor.”
With this port deal, Tel Aviv will also be balancing relations with several countries, such as China and India.
One intriguing aspect of the acquisition is the fact that Shanghai International Port Group has a 25-year management contract for a privately owned port in Haifa Bay, which is quite near Haifa Port. India and China, meanwhile, have remained in a military standoff on their mutual border since August 2017.
“China is the UAE’s largest trade partner and the second largest trade partner of both India and Israel. Beijing has built its own state-of-the-art private port in Israel’s Haifa Bay across the Port of Haifa,” Prof. Tanchum observed, explaining how this arrangement could work.
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Just two years back, Israel had backed off from granting China the lease to manage Haifa Port, as US ships dock in the vicinity very frequently and it would have been a security breach.
Then there is the Emirati angle. “The Indian-Arab-Med corridor differs from Chinese efforts as the route is anchored to Emirati-Israeli-Indian value chains,” Tanchum noted.
“While Washington may view the corridor through the lens of a larger competition for the Indo-Pacific, the trilateral cooperation among the UAE, Israel, and India is about geopolitical balance and ensuring an enhanced level of resilience in a fraying global commercial architecture.”
In addition, a rail link may be started from Haifa Port to Jordan. If that happens, according to a Haaretz report, it would be a “diplomatic and logistical game-changer”.
With India having a controlling interest in Haifa’s port and China holding a controlling interest at Haifa’s Bayport, it could well become a reality.
Finally, there will be a regional geo-economic impact to the port lease. Assessing it as an inter-regional trade route, Tanchum said, “The India-Arab-Med corridor is not an initiative engineered by Washington to make a ‘Middle Eastern Quad’”.
Indeed, the corridor’s evolution had very little to do with the US. As pointed out in a recent report, the Indian-Arab-Med Corridor is not a new initiative but has been developing organically among the UAE, India, and Israel through private sector, joint venture investments carefully cultivated via bilateral public-private partnerships.
But some experts have doubts about the project’s reach. “Even though Adani is the fourth wealthiest person in the world, he or his managed company can never aspire to compete with China or its BRI,” Prof. Swain told TNA.
With Adani one of the most indebted business groups in India, Swain says there are also question marks about its long-term growth strategy and viability.
“Due to Adani’s extreme closeness with the present regime, when there is a change of government in India, Adani might likely find it even tougher to operate from India,” Swain said.
In his opinion, “It will be too far-fetched to see it as India’s competition to China’s BRI. Despite its close link with the present Indian regime, Adani is a company and will pursue its shareholders’ interests rather than the country.”
Sabena Siddiqui is a foreign affairs journalist, lawyer, and geopolitical analyst specialising in modern China, the Belt and Road Initiative, the Middle East and South Asia.
Follow her on Twitter: @sabena_siddiqi