What Adani’s Port of Haifa Purchase Means for Indo-Israeli Relations

In depth: The Indian consortium led by Adani, which has close ties to Prime Minister Modi, has bought Israel’s second-largest port. While the acquisition will strengthen bilateral relations, New Delhi also seeks to improve regional economic relations.

The days of Nehru and India’s support for Palestinian self-determination are over, with Modi’s India taking relations with Israel to unprecedented levels, fostered by close cooperation between partners like the UAE and Israel, especially in infrastructure and transport projects.

At the end of July, India’s largest port developer and operator, Adani Ports and Special Economic Zone Limited (APSEZ), acquired the lease of the port of Haifa, Israel’s second largest, until 2054, with the chemical group and Israeli logistics Gadot. In closing the NIS 4.1 billion ($1.18 billion) deal, Adani owns 70% of the shares, while Gadot holds a 30% stake.

The implications are expected to reverberate far beyond the region and position Israel at the heart of global competition for dominance of trade routes. It can also come at the expense of other states in the region, including Egypt and its precious Suez Canal.

The Indian group had been pushing for the port deal for two years, but without success. This time, the price offered was 55% higher than that of the second highest bidder. According to an Israeli media Globes the offer was well above the $870 million Tel Aviv expected to receive.

For Adani, it was a “strategic purchase”, as the group operates 13 maritime terminals in India and controls almost 24% of India’s maritime trade. After the sale was completed, the group’s shares jumped 1.9% and rose a further 0.56% in the following days.

“In late July, India’s largest port developer and operator, Adani Ports and Special Economic Zone Limited, acquired the lease of Haifa Port, Israel’s second largest, until 2054”

Avigdor Lieberman, Israel’s finance minister, welcomed the deal, saying, “The privatization of Haifa Port will increase competition in ports and lower the cost of living.”

Finalized after a two-year bidding process by the Israeli government, the privatization of the port will help reduce import prices for Tel Aviv as well as shorten queues at local ports.

Since 98% of all goods enter and leave Israel by sea, the government has modernized the sector to preserve its economic growth. Haifa happens to be Israel’s leading deep-sea port, handling almost half of the country’s cargo volume in 2021.

As Opher Linchevski, CEO of Adani’s partner group, Gadot, said: “The length of the lease and the growth we anticipate in the Israeli economy, as well as in the surrounding regions, means that we are well placed to invest. in the construction of one of the best ports in this region”.

Interestingly, this port deal came to fruition right 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 the Biden’s visit to Jerusalem.

Finalizing I2U2, a new quadrilateral arrangement to rival China’s Belt and Road Initiative (BRI), the four leaders may well have discussed the Haifa Port deal.

“Israel’s award of the purchase of its Haifa port to the Indian-led consortium Adani Ports is of great significance,” Professor Michael Tanchumnon-resident researcher at the Middle East Institute (MEI) and senior researcher at the Austrian Institute for European and Security Policy (AEIS), said The new Arabic.

In closing the NIS 4.1 billion ($1.18 billion) deal, Adani owns 70% of the shares, while Gadot holds a 30% stake in Haifa Port. [Getty]

But what are the benefits for both sides of this deal in the broader context of Indo-Israeli relations, and will there be any regional impact?

First, Tel Aviv was already seeking to strengthen its relations with India. Israeli Defense Minister Benny Gantz was in New Delhi last month for an update on security cooperation and trade relations. Along with this, 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 globally. Trade ties are on an upward trajectory and have grown from $200m in 1992 to $6.35bn – excluding defense – in 2022, and the trade balance is in favor of India.

“Adani’s acquisition of the Israeli port of Haifa with Gadot is an important development given the growing relationship between India and Israel,” Ashok Swainprofessor of peace and conflict research at Uppsala University in Sweden, said The new Arabic.

Additionally, Israel can expect new deals in the defense sector, as the Adani Group has already partnered with major Israeli defense companies to set up a drone manufacturing company in India.

Second, since New Delhi is on good terms with most Gulf Cooperation Council (GCC) states and Tel Aviv has diplomatic relations with the United Arab Emirates and Bahrain, this development could boost trade corridors.

With the Adani-Gadot collaboration, new trade routes will be created to connect the Middle East with Europe and expand its footprint in the European port sector, which includes the Mediterranean region.

“The Haifa Port Agreement establishes a trade corridor between India and the Mediterranean that has taken years to form. The corridor is a multi-modal commercial transport route, from Asia to Europe, linking the Arabian Sea and the Eastern Mediterranean, with India, the United Arab Emirates and Israel as the main connectivity nodes,” said Tanchum. TNA.

“Adani’s acquisition of the Israeli port of Haifa with Gadot is an important development given the growing relationship between India and Israel”

“It is a third route, offering an alternative to China’s 21st Century Maritime Silk Road and the North-South International Transit Corridor centered on Iran and Russia.”

With this port agreement, Tel Aviv will also balance its relations with several countries, such as China and India.

An intriguing aspect of the acquisition is the fact that Shanghai International Port Group has a 25-year management contract for a private port in Haifa Bay, which is quite close to Haifa Port. India and China, meanwhile, have remained in a military standoff on their mutual border since August 2017.

“China is the largest trading partner of the United Arab Emirates and the second largest trading partner of India and Israel. Beijing has built its own state-of-the-art private port in Haifa Bay in Israel, across Haifa Port,” Professor Tanchum observed, explaining how this arrangement could work.

Members of the Youth Congress pose wearing cardboard masks cut out of key Indian figures during a protest against the decision on the national monetization pipeline program in 2021. Gautam Adani (R) is known to be a close friend of the Prime Minister Narendra Modi (second from left). [Getty]

Just two years ago, Israel backed out of granting China the lease to manage the port of Haifa, as American ships so frequently dock nearby and that would have been a security breach.

Then there is the Emirati angle. “The Indian-Arab-Mediterranean Corridor differs from Chinese efforts because the route is embedded in Emirati-Israeli-Indian value chains,” Tanchum noted.

“While Washington may view the corridor through the prism of broader competition for the Indo-Pacific, trilateral cooperation between the UAE, Israel and India is about geopolitical balance and ensuring a increased level of resilience in an unraveling global business architecture.”

In addition, a rail link could be established between the port of Haifa and Jordan. If this happens, according to a Ha’aretz report, it would be a “diplomatic and logistical game changer”.

“The Indian-Arab-Mediterranean Corridor is not a new initiative but has grown organically between the UAE, India and Israel through private sector investment in joint ventures”

With India holding a majority stake in Haifa Port and China holding a majority stake in Haifa Bayport, this may well become a reality.

Finally, there will be a regional geo-economic impact on the port lease. Assessing it as an inter-regional trade route, Tanchum said, “The India-Arab-Mediterranean Corridor is not an initiative designed by Washington to create a ‘Quad Middle East’.”

Indeed, the evolution of the corridor had very little to do with the United States. As noted in a recent report, the Indian-Arab-Mediterranean Corridor is not a new initiative, but has grown organically between the UAE, India and Israel through the private sector, investment joint ventures carefully cultivated through bilateral public-private partnerships.

But some experts doubt the scope of the project. “Even if Adani is the fourth richest person in the world, he or his managed company can never aspire to compete with China or its BRI,” Professor Swain said. TNA.

As Adani is one of India’s most indebted business groups, there are also question marks over its long-term growth strategy and viability.

“Due to Adani’s extreme closeness to the current regime, in the event of a change of government in India, Adani could likely find it even more difficult to operate from India,” Swain said.

In his opinion, “it would be too exaggerated to see India’s competition with the Chinese BRI. Despite its close ties to the current Indian regime, Adani is a business and will pursue the interests of its shareholders rather than those of the country.

Sabena Siddiqui is a foreign affairs journalist, lawyer and geopolitical analyst specializing in modern China, the Belt and Road Initiative, the Middle East and South Asia.

Follow her on Twitter: @sabena_siddiqi

Comments are closed.