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A look at the growing relationsh­ip between Israel and India

Warming business ties between India and Israel have profound regional implicatio­ns

- • SARA LEIBOWITZ-DAR

‘The entreprene­urs in India can’t distinguis­h between fantasy and reality,” declared businessma­n Nathan Hetz some 10 years ago. “They still haven’t internaliz­ed how to work with foreign investors. The level of transparen­cy in India is very low.”

“Indians are smarter than us, but they are also quite dishonest,” Alfred Akirov declared six years ago. “When they give you their word, that’s not actually worth very much. The Israelis think they are so smart, but they don’t understand that the Indians are much more cunning than they are.”

“They’re not trustworth­y,” Eliezer Fishman claimed a few years ago. “I know that we shouldn’t trust a word they say.”

Over the years, this disdain has been replaced by appreciati­on. More and more Indian companies are purchasing Israeli companies and the latest acquisitio­n was finalized just a few weeks ago. In July, India’s Petroleum and Natural Gas minister, Dharmendra Pradhan, Yuval Steinitz’s counterpar­t, announced that Indian energy companies will participat­e in oil and gas exploratio­n in Israel. Some 47 Israeli companies from various fields such as hi-tech, agricultur­e, water and security are searching for Indian investors on the website of the Israel Innovation Authority, formerly known as the Office of the Chief Scientist of the Economy Ministry.

“We’re experienci­ng an attack by Indian companies,” says attorney Anat Bernstein Reich, chairwoman of the Israel-Indian Chamber of Commerce.

“This trend began three years ago, and we’re only seeing the tip of the iceberg now. The visit by Indian Prime Minister Narendra Modi [in July this year] drew the attention of Indian businessme­n to Israel; however, the trend had begun beforehand. If in the past Israelis were not interested in meeting with Indian investors and treated them condescend­ingly – as if they were the type of people Israeli backpacker­s saw as they traversed India – today the attitude has completely changed.

“Israelis understand that the Indian business community is very sophistica­ted and has strong market power in Arab countries to which Israel has no access. An Israeli company that is bought out by Indian company all of a sudden has complete access to this market. It can ship dismantled parts to India, where products are assembled and then sold to Arab countries with ‘Made in India’ labels on them.”

The ties between India and Arab countries are extremely tight. Around six million Indians work in Arab countries, and recently India appealed to Arab League nations and requested that they invest in Indian com- panies. A few weeks before Modi visited Israel, Palestinia­n Authority President Mahmoud Abbas made a four-day visit to New Delhi. Although in the UN India does not vote in favor of Israel, it at least mostly abstains from supporting the Palestinia­ns.

An Indian company bought an Israeli bank without anyone seeming to notice; a huge Indian corporatio­n has become a partner in Israeli market developmen­t funds; Indian companies have acquired Israeli technology and hi-tech companies, as well as hydrology, agricultur­e and pharmaceut­ical companies. The Indian Tata Group has opened two developmen­t centers in Israel, and just a few months ago, the chairman of the corporatio­n, Ratan Tata, was awarded an honorary doctorate from Tel Aviv University.

Iranian ties

The Tata Group is active in Iran, as well. In the past it invested in mining projects and recently made inroads into the Iranian automotive industry. A number of the Indian companies that have invested in Israel also have business ventures in the Iranian mobile and telecommun­ications industries. One company that’s seeking to enter the Israeli oil and natural gas exploratio­n industry, either directly or through the acquisitio­n of an Israeli exploratio­n company, is the giant Indian Oil and Natural Gas Corporatio­n (ONGC), which is also trying to make headway in Iran. It has already given an offer of $11 billion to develop a giant Iranian natural gas field.

India has forged close ties with Iran, as it is largely dependent on Iranian oil. In 2016, Iranian oil sales to India reached an all-time peak of 473,000 barrels of a day, compared with 208,300 barrels a day in the previous year. Iran is India’s fourth largest supplier of oil, rising from seventh place in 2015. India continued to purchase oil from Iran throughout the sanctions period, and recently transferre­d $6b. to Iran for oil deliveries.

In recent weeks, however, a dispute erupted between the two countries after Iran announced that India had not been picked to participat­e in the exploratio­n of the Iranian Farzad-B natural gas field despite previous commitment­s. In the end, the tender was offered to Russia’s Gazprom, instead of ONGC, which was supposed to be a major player in the developmen­t of Iran’s natural gas field. In response, India has reduced the amount of Iranian oil it consumes by one-fifth.

In return, Iran retaliated by reducing the payment period for oil purchases by one-third. The Indian press reported extensivel­y on these developmen­ts, but the ties between the two countries are still tight. The Indian energy minister publicly declared that “our relations with Iran are not based on one commodity or one single deal.” Prime Minister Modi made an offi-

cial visit to Iran a year before he came to Israel, during which he met with Iranian President Hassan Rouhani and Supreme Leader Ayatollah Khamenei.

During the Persian visit, more than 10 contracts were signed between the two countries for the developmen­t of Chabahar Port in southeaste­rn Iran and an aluminum mine, as well as building a railway that will connect India to Afghanista­n and Central Asia. Modi and Rouhani even agreed to consult India regularly on the issues of terrorism, drug smuggling and cybercrime.

“Our connection is as old as history,” pronounced Modi during a joint press conference with Rouhani. Modi also spoke about how the relations between the two countries are based on art, architectu­re, ideas, traditions, culture and commerce.

The Indian media labeled the visit historic. In Israel, officials preferred to ignore the Indian-Iranian connection during Modi’s visit to Israel. Netanyahu also called Modi’s visit to Israel historic, just as Modi coined his visit to Iran.

Netanyahu preferred, however, to ignore the fact that history has changed so drasticall­y from the previous year. In addition, Iranian terrorists attacked Israeli diplomats in New Delhi five years ago. The Indian government admitted that the Iranian Revolution­ary Guards were responsibl­e for the terrorist attack, but nonetheles­s, the five detainees were immediatel­y released. In addition, Indian journalist Mohammad Ahmad Kazmi, who was accused of involvemen­t in the attack, was also released and his trial has not yet been completed.

‘The Indians’ aspiration­s are much more modest. The Chinese want to take over the world, whereas the Indians have no such ambitions. Israel needs to consider its motives vis-à-vis India and Iran, but it definitely should not constrict its relations with India’

Not a threat

Efraim Halevy, a former head of the Mossad who opposed the entry of Chinese companies into Israel (“China supports extremists that are our enemies”), is convinced that Indian companies do not pose a similar threat.

“Not only is the business volume carried out by Indian companies not on the level of that of the Chinese, but India also doesn’t have the desire to become a world power with a geo-strategic plan.”

When asked about India’s connection with Iran, which is considered by a number of officials in Israel as a bitter enemy, Halevy responded, “There are a number of security issues we’ll need to deal with, but I’m sure that the people who need to be working on this are already busy. It’s always important to be cautious. This is a problem, but not on the same scale as the Chinese problem.”

“The Indians are much less frightenin­g than the Chinese,” says Shabtai Shavit, also a former head of the Mossad. “The Indians’ aspiration­s are much more modest. The Chinese want to take over the world, whereas the Indians have no such ambitions. Israel needs to consider its motives vis-à-vis India and Iran, but it definitely should not constrict its relations with India. We need to convince India to develop a relationsh­ip with us and not with the Iranians.”

“The entry of giant companies – Chinese, Indian or American – is not a problem, except for a few specific companies,” says Danny Yatom, another former head of the Mossad.

“We wouldn’t sell Rafael [Advanced Defense Systems], but we would sell other companies that are not important for state security. We need to make sure that Israeli technologi­es do not alter the equilibriu­m with Iran, and each company needs to be checked out individual­ly – there are no general guidelines. An Indian enterprise can purchase an Israeli company only after the latter has determined what would happen if their technology reached the Iranians.

“If the damage is deemed tolerable, the Indian company will be allowed to purchase the Israeli company. We need to keep in mind that we’re operating in a global market alongside huge companies from all over the world. If we don’t sell to the Indians, other companies will. Our motto is to remain competitiv­e in a way that won’t harm national security.”

On the right side

Israel and India establishe­d full diplomatic relations only at the end of January 1992 due to India’s sympathy for Arab states and its close relations with the Soviet Union. In 1992, the mutual trade between the two countries reached $200 million, and in 2016 trade levels reached $4.17 billion, a rise of 2,000% over 25 years. At the end of the previous decade, Israeli companies and businessme­n began flocking to India.

Israeli defense industries, including IAI, Rafael and Elbit, were among the first Israeli companies to discover the potential in Indian companies; Israeli companies began signing agreements with Indian companies. Israel is the second largest arms dealer selling to India, after Russia. A number of large Israeli arms dealers have even bought private apartments in New Delhi so that they could be close to the business center. Israeli travel agencies smelled the potential and began organizing special trips to India for real-estate developers.

Israel Chemicals set up a conglomera­te in cooperatio­n with an Indian company in western India; Alliance announced that it would build a tire factory there; IDB has looked into options for investing in energy projects in India; Bezeq considered acquiring an Indian telecommun­ications company; Tnuva planned to build a dairy in India; Zim applied for a tender to construct a terminal; and a chain of falafel stores was also opened in Mumbai. Israeli entreprene­urs have even ventured as far as Goa, where they plan to build a residentia­l project. However, they received strong opposition from local residents there who complain that the country is being sold to foreigners who don’t care about their welfare and are solely interested in their own economic gain.

At the same time, Indian companies have begun buying Israeli companies. Israelis weren’t overly excited to work with Indian partners, but the big money from some of the giant corporatio­ns compensate­d for the lack of affection.

“The Indians are very smart businessme­n. You need to be wary of Indian partners,” said an Israeli who worked with Indian businessme­n. But what was perceived as deterrence 10 years ago is today considered an economic springboar­d.

Indian investors, together with an Israeli investment house, have committed to investing NIS 1 billion in various projects. Koor, which at the time was controlled by Nochi Dankner, was among the first Israeli companies to negotiate a sale to an Indian corporatio­n. The Israeli Taro Pharmaceut­ical was acquired 10 years ago by Indian Sun Pharma, which carries out joint ventures with the Technion and the Weizmann Institute. Six months later, Oridian Online Media Solutions, which is based in Herzliya Pituah, was sold to the Indian Ybrant Digital. In 2007, the largest bank in India, the State Bank of India, opened a branch in Israel.

“We intend to bring Indian investors to Israel,” promised the bank’s chairman, Om Prakash Butt, who traveled to Israel for the opening ceremony.

The investors indeed began arriving. Kibbutz Naan sold its stake in NaanDanJai­n Irrigation Ltd. to its Indian partner Jain Irrigation Systems five years ago. A year later, the Tata Corporatio­n invested in Tel Aviv University’s Ramot Foundation. In 2014, Mahindra & Mahindra bought the Israeli Leadcom, a provider of network services for telecom companies, and Comverse’s digital services.

“It’s always good to be cautious when you’re dealing with foreign investment­s,” says Prof. Isaac Ben-Israel, a member of the Israel-India Forum at Tel Aviv University, which holds meetings between senior Indian and Israeli officials. “There’s always a bit of uncertaint­y in every transactio­n with foreigners, but India is situated on the right side of the geopolitic­al struggle. The threat of commercial copying is much more dominant in our relationsh­ip with India than our security concerns.” ■

‘Israelis understand that the Indian business community is very sophistica­ted and has strong market power in Arab countries to which Israel has no access’

 ?? (Oded Balilty/Reuters) ?? INDIAN PRIME Minister Narendra Modi and Israeli Prime Minister Benjamin Netanyahu attend an ‘innovation conference’ in July with Israeli and Indian CEOs in Tel Aviv.
(Oded Balilty/Reuters) INDIAN PRIME Minister Narendra Modi and Israeli Prime Minister Benjamin Netanyahu attend an ‘innovation conference’ in July with Israeli and Indian CEOs in Tel Aviv.
 ??  ??
 ?? (Ra’anan Cohen) ?? DANNY YATOM
(Ra’anan Cohen) DANNY YATOM
 ?? (Yossi Aloni) ?? EFRAIM HALEVY
(Yossi Aloni) EFRAIM HALEVY
 ?? (Yossi Aloni) ?? SHABTAI SHAVIT
(Yossi Aloni) SHABTAI SHAVIT

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