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COSCO's Decision to Quit Israel Raises Strategic Concerns

COSCO ship arriving at a seaport
File image courtesy COSCO

Published Jan 28, 2024 8:10 PM by The Maritime Executive

 

The maritime security crisis in the Red Sea is creating new tensions over a Chinese-operated container terminals in Haifa. After China's state-owned ocean carriers ceased service to Israel, the chairman of the port of Ashdod accused China of "maintaining a trade boycott," and he threatened to stop sharing information with a Chinese-operated terminal in Haifa. 

In mid-December, Chinese-owned carrier OOCL said that it would suspend all shipments to and from Israeli ports, citing "operational issues." In early January its parent company - state-owned China COSCO, the world's largest shipowner - followed suit and canceled all service to Israel. The two lines have not provided further explanation, and the Israeli transport ministry has said that it is seeking clarification. 

Shipping from Asia to the Eastern Mediterranean has been seriously disrupted by Houthi rebel attacks on merchant vessels in the Red Sea. Virtually all large container ships are diverting away from the area and circling Africa instead. Ports in the Eastern Mediterranean and Red Sea are most affected by this decision, because they are the ports for which ex-Asia sailing distance increases most after to the diversion. The extra distance adds cost, and at least one service string to the Red Sea (from THE Alliance) has been suspended altogether.

In a letter obtained by Reuters, Shaul Schneider, chairman of the board of Ashdod Port, questioned whether COSCO's decision to quit Israel was motivated by business concerns. "In practice it is maintaining a trade boycott on Israel," said Schneider. In response, Schneider wrote, Ashdod Port will not share information with SIPG, the new operator of a container terminal at Port of Haifa. 

Israel's national ports and shipping regulator disagreed with his assessment, characterizing it as "inaccurate" and potentially harmful. In a written response, the head of the agency said that Schneider's sentiments could cause damage to "seaborne trade and foreign relations and even damage the war effort" in Gaza, according to Reuters. 

SIPG opened a new $1.5 billion modern terminal at Haifa in 2021. It was not without its critics: U.S. officials flagged the security risks of having a Chinese-operated port facility right next to an Israeli Navy base, where U.S. Navy vessels have called in years past. 

In 2022, Israel's government accepted an Indian bid to privatize the Haifa Port Company, which operates a large container terminal near SIPG's site. The 2022 award was widely viewed as a way to counterbalance Chinese interests in Haifa.