At 68 - is Israel isolated?

By Ambassador (ret.) Yoram Ettinger

Secretary of State John Kerry and other Western policy-makers - joined by the “elite” Western media - contend that 68 year-old Israel is increasingly isolated due to its defiance of global pressure to evacuate the mountain ridges of Judea and Samaria, which tower over Jerusalem, Tel Aviv, Ben Gurion Airport and 80% of Israel’s population, transportation, technological and business infrastructure.

Since 1948, global pressure on Israel to commit itself to dramatic concessions has been a fixture of Israel’s foreign policy and public diplomacy, accompanied by warnings that Israel was dooming itself to painful isolation.  An examination of Israel’s global position – economically, militarily and diplomatically - documents that irrespective of Israel’s uphill diplomatic challenges, these warnings crashed on the rocks of reality, and resoundingly refuted by an unprecedented integration of Israel with the global street.

Thus, side-by-side with the rough diplomatic talk which has always pounded Israel, there has been an increasingly mutually-beneficial, geo-strategic walk.  This is highlighted by Israel’s unprecedented civilian and military integration with the international community, in response to growing international demand for Israel’s military, economic, technological, scientific, medical, pharmaceutical and agricultural cutting-edge innovations.

Israel’s increasingly global integration is reflected by a series of developments in the last few weeks, which are consistent with Israel’s well-documented 68-year-old track record on the global scene.

For example, notwithstanding Europe’s support of the Palestinian Authority and harsh criticism of Israel, NATO does not subscribe to the “isolate Israel” theory, follows its own order of geo-strategic priorities, and therefore refuses to cut off its nose to spite its face. Hence, on May 3, 2016, NATO significantly upgraded its ties with Israel, inviting Jerusalem to establish a permanent mission at their Brussels headquarters. This upgrade will expand the surging, mutually-beneficial Israel-NATO cooperation in the areas of counter-terrorism, intelligence, battle tactics, non-conventional warfare, science, cyber and space technologies and defense industries, where Israel possesses a unique competitive edge. 

While Turkey’s President, Erdogan, has blasted Israel brutally on the diplomatic field, Turkey did not block the recent agreement between NATO and Israel. Moreover, the Israel-Turkey balance of trade has catapulted from $2.5 BN in 2009 to over $5 BN in 2015.  Turkey has not ignored the unique niches of Israel’s exports in the area of defense, medicine, pharmaceuticals and agriculture.

India, the seventh largest – and one of the fastest rising - economies in the world, has become one of Israel’s closest partners -  second only to the USA - in the areas of defense, counter-terrorism, intelligence, manufacturing, agriculture, irrigation, information technologies, space, etc..  Oblivious of the “isolate Israel” school of thought, India has become the largest customer for Israel’s defense systems, with Israel trailing only the US and Russia in terms of military sales to India. On March 29, 2016, Israel’s Rafael Advance Defense Systems concluded a long-term agreement with India’s $15 BN Reliance Defense Systems, which is expected to produce $10 BN in sales. A year and a half ago, Rafael won a $500 MN contract for the supply of missiles to India’s ground forces.

Aiming to leverage the momentum-gaining “integrate Israel” trend, China’s $10 BN Kuang-Chi technology conglomerate is launching an Israel-based international innovation Chinese fund to invest in early, to mid-stage Israeli and global companies, reflecting the vigorous Chinese interest in mature and start-up Israeli companies. Chinese investments in Israeli companies expanded from $70 MN in 2010 to $2.7 BN in 2015, while the China-Israel trade balance surged from $30 MN in 1992 to $11 BN in 2015. The trade balance could have been dramatically larger, but for Israel’s cautious attitude, in light of China’s close ties with Israel’s enemies. China has followed in the footsteps of the Hong-Kong-based tycoon, Li Ka-Shing, whose venture capital fund, Horizons Ventures, invested in 30 Israeli companies, accounting for almost half of its portfolio.

The 250 global high-tech giants, which established research and development centers in Israel, expose the isolation of “Israel’s isolators” from the real world. For instance, on February 22, 2016, Oracle ($156 BN, 136,000 employees) – which operates four centers in Israel - acquired Israel’s five-year-old Ravello for $500 MN, its fifth Israeli acquisition.  On March 3, 2016, Cisco Systems ($135 BN, 72,000 employees) acquired its 12th Israeli company, Leaba Semiconductor, for $350 MN.  On March 10, 2016, Intel ($144 MN, 100,000 employees, 10,000 of them in Israel) acquired its 9th Israeli company, Replay Technologies, for $175 MN. In 2015, Intel – which is currently investing $130 MN in a new center in Israel - exported $4.1 BN from its manufacturing plant in Israel. Some 60 Israeli start-ups are included in the portfolio of Intel Capital. In 2015, global pharmaceutical giants – such as MSD, Bayer, Astrazeneca, Novartis, Pfizer, Abbvie, Janssencilag, Roche, Merck and Eli Lilly – invested $150 MN (compared to $130 MN in 2014 and $100 MN in 2012) in ground-breaking, medical research, conducted in leading Israeli hospitals. 

Leading investment funds have been veteran supporters of the “integrate Israel” school-of-thought. For instance, the Silicon Valley (Menlo Park)-based Lightspeed raised $1.2 BN for its 11th fund dedicated to US and Israeli start-ups. The Israeli investment funds, FIMI, Vertex Ventures and Israel Secondary Fund-2 raised – mostly from overseas investors - $1.1 BN, $150 MN and $100 MN respectively.

Reaffirming the “integrate Israel” reality, Fitch Ratings - one of the three credit rating organizations designated by the US Securities and Exchange Commission (SEC) – upgraded Israel’s credit rating outlook from “stable” to “positive,” while retaining its “A” rating. The upgrade generates a robust tailwind to foreign investments in – and foreign trade with – Israel. In April, 2016, when all advanced economies are struggling, Fitch Ratings lauds Israel’s thriving economy in comparison to other OECD countries. Fitch commends Israel for its success in overcoming intense national security and homeland security challenges; reducing the ratio of government debt to GDP from 95.2% in 2000 to 64.9% in December 2015; reducing the budget deficit to 2.1%, the lowest figure since 2008; bolstering foreign exchange reserves to $90.6 BN; and sustaining the strength of the shekel.

At 68, Israel is highly integrated into the key global disciplines, in defiance of Secretary of State John Kerry’s warning that “if we do not resolve the issues between Palestinians and Israelis, there will be an increasing isolation of Israel.” The Secretary’s warning is overwhelmingly squelched by global reality, defies 71% of the US public, which considers Israel favorably according to the February, 2016 annual Gallup Poll, and is inconsistent with the US Congress’ systematic and massive support of Israel.