It was challenging to avoid the excitement around the European Soccer Championship this past summer all over Israel. Men, women and children have spent long hours watching their favorite teams winning or losing on the screen. For just a moment, Israelis managed to escape the endless trauma associated with the ongoing war.
Yet, I find one phenomenon hard to explain. While Israeli senior government officials and the press continue to remind us that Spain and its leadership are some of the most hostile anti-Israeli entities in Europe, many Israelis see the Spanish national soccer team as an idol. They can differentiate between statements made by the Spanish Foreign Minister, and magical moves made on the field by the Spanish soccer players.
This differentiation between Israel's interests on the global stage as a nation, from military to economic, and daily life pragmatism is a leading principle in today's Israel's foreign and economic policies. In fact, in many respects, it is the oxygen that keeps us going.
Sports is not the only space that gives Israel (and Israelis) the opportunity to express their nuanced interest in the world. Bilateral trade and investment is another obvious area where people often make commercial decisions based on business interests, while at the same time navigate hot political and diplomatic waters.
Turkey's vibrant economy is a case in point. When the Gaza war started, the Turkish leadership expressed a very anti-Israeli approach to both internal audiences and the international media. On top of hostile statements, the Turkish government introduced various bilateral commercial measures that made it difficult for Turkish traders to continue and trade in Israel as they used to.
However, the commercial reality is stronger than anything. Since the war started in October 2023, the bilateral Turkish-Israeli commercial trade continued to flourish. The economic interdependencies cover a wide range of industries and sectors, from textile to chemicals, and both Turkish and Israeli companies have found ways to use third parties, Israeli allies such as Bulgaria, in order to facilitate transactions while circumventing Turkish restrictions on bilateral trade.
I'm not naïve. The Turkish resistance did have an impact on Israelis' perception of Turkey and its approach towards Israel. For example, this past summer we saw a significant decline in the number of Israeli tourists in Turkey. Most Israeli families preferred 'safer' Greek and Cypriot islands, even if those islands are a bit more expensive than the all-inclusive cheap resorts they used to visit regularly. Yet, the point is that Turkish regional realpolitik did not destroy the need of both Israelis and Turks to continue and trade with each other, and to deploy capital in locations that are close and financially successful.
What these examples in sports and business can teach us about where Israel is heading, and what are the opportunities in the upcoming years for fresh and creative ideas in foreign and commercial relations?
The double standard, or what many people call the new decentralized word, pull many nations, and Israel included, more towards functional paralleled relationships, based on practical bridges and common interests.
The examples are many. From collaborating with Russia on Syria, while seeing their support to the Hamas leadership, to Chinese participation in Israel's public tenders, while hosting a 'Day After' summit for the Arab world – Isarel is facing a world where the collapse of the traditional blocks is forcing it to identify new alliances globally. These alliances can present Israel with new commercial opportunities, critical new military partnerships, or support from surprising places in international organizations, such as the United Nations and its various agencies.
India is one of the most complex, but promising, cases. While the Israeli government has already announced major strategic investments in India over the years, it is only recently that India started investing dramatically in Israeli defense solutions, building new partnerships between Israeli defense and tech companies and the Indian public sector. In FY 2023-2024 alone, the bilateral trade between the two nations stood at $4.42 billion beyond defense.
This is not just about selling the best tech out there to a large nation regularly facing regional security challenges from its neighbors. As India is the largest country in the world today, population-wise, and one of the fastest growing economies in the world (and potentially the largest one day), Israel's resilience model is critical to its future growth and success.
Israeli creative solutions in many sectors, such as food tech and cyber, can help India navigate the complex reality of leading a huge economy. India is also using Israel to build bridges with local nations in the Middle East, and it has already been disclosed that major projects will connect the Israeli port cities via the Gulf and Saudi Arabia with the Indian-Asian trade corridor. Israel, on its side, is getting access to many moderate Muslim communities, and strengthening the US-India global alliance.
It is not a coincidence that the US is serving as a point of reference in this Isr+aeli-Indian love story. The future will continue and allow Israeli companies to sell products and solutions to the Indian market by collaborating with major US commercial players. It gives the process legitimacy and extra professional credibility.
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The US is not the only example where a third party serves as a connector to help Israel and its partners. We have seen similar cases in Europe and Asia as well. Another third party-state that is playing a role in securing Israel's foreign and economic countries across the globe is Germany. As the largest economy in the European Union, Germany is using its economic and diplomatic power to advance its own and Israel's interests.
Germany was one of the first countries to abolish Hamas presence in Europe and to freeze its assets in European financial institutions. On the more positive note, Germany's industrial base serves as a lab for many Israeli innovations, and German companies are re-directing Israeli products and services towards the rest of Western Europe and Eastern Europe via a complex network of distributions channels. In essence, Germany is a critical stand along market, but also a window to the rest of the world.
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It was only a few years ago when I got an invitation to join a panel of Heads of States of various islands around the world to talk about various trends in economic development and security. Quite quickly the discussion shifted to more exotic topics, such as sea level and defense alliances. Where am I?
The pacific islands have always been a wild cat. Small nations and economies with limited importance in the international community, the Israeli government managed to leverage its good relationships with the islands to mobile votes in international institutions, such as the United Nations. Since in these organizations every vote counts, and quite often an island is as important as a large economy, building trust through development support and access to the US leadership has been a key.
The Pacific islands, while not major countries on the Security Council, provided critical votes on issues that Israel is truly concerned about in the General Assembly of the United Nations. As these nations play an important role as part of the islands block that fights climate change policies internationally, Israel's new focus on climate solutions and policies, and the great Israeli startups in the space can address many of the challenges that many of these and other islands are concerned about.
Who is the next India? What are the next islands that can provide Israel fantastic opportunities on various international fronts? For that, we have to look at the state of the world today and better understand its internal dynamics.
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One of the fastest growing trends is the geo-economic influence in decision making. The intersection between foreign policies and economic dynamics is not new, but has been amplified in recent years. We all witnessed how Western and Eastern economies have been using economic tools to advance their security and economic interests. Russia used its monopoly power in the European natural gas market to pressure European countries during the Russia-Ukraine war, including during the cold dark winter days. It forced the EU to sanction Russian oil and to cap the pricing of gas imports from Russia.
US administrations, both on the left and the right of the political map, have been imposing restrictions on exports of sensitive technologies to China and its companies, from semiconductors to Artificial Intelligence tools, as part of the global trade and investment war between the United States and China.
Foreign economic considerations are not new to the Israeli government. From the rise of Chinese tourism in Israel to the ongoing strategic dialogue with India, Israel has been developing new economic alliances in order to advance its security and economic agenda. Yet, clearly Israel can do a lot more to use its unique characteristics to continue and build its place in the world.
Often called the Start-Up Nation, the Israeli tech sector is disproportionally exposed to the US market. While many investors come from Europe and Asia, most investors and tech partners come from the United States. The synergies between Israel's tech ecosystem and the Silicon Valley, for example, are unparalleled.
However, there is a role to play in advancing innovation and technology in countries in Africa and Latin America, for example, where Isarel is often fighting anti-Israeli sentiment. In those places, there is a huge demand for leapfrogging, using technology where old infrastructure is lagging behind, and Israeli companies and technologies are well equipped to develop the solutions and implement them in many of these emerging markets. It would help Israel build the trust and the relationships needed, especially in times of crisis like this past year.
Another sector that deserves the extra attention is the energy space. Both traditional oil and gas companies and renewable energy firms, such as battery storage companies, are ideal candidates to solve regional and global challenges while supporting critical security and diplomatic alliances. Joint exploration and import/export energy transactions in the EastMed region have been critical to this new-old economic region. Israel should find more ways to develop and export many of these resources to new markets.
Finally, the global trend of re-shoring, the shift from outsourcing abroad to local manufacturing, did not pass on Israel. The purpose of this shift around the world is to build sustainable supply chains and to diversify sourcing in light of the production challenges that were emerged during the Covid pandemic and the various recent wars, such as the war in Ukraine. Israel, as an island economy with a very limited number of suppliers, is specifically vulnerable in this area and exposed to risks associated with economic boycotts, terrorism and regional wars, and more.
The peak of this trend was the Gaza war where many companies had to shut down their operations in order to keep their employees safe. The need for sustainable supply chains and diverse suppliers has triggered a shift towards local manufacturing. This, in fact, could be a fantastic opportunity for the Israeli market, and many Israeli companies can use it to build economic bridges with potential buyers and their governments, especially in countries where the Israeli new products are in high demand.
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Israel, some would argue, is in one of its most challenging strategic intersections ever. Gaza's future is unknown. The Lebanon's threat is never-ending. Iran is close to a nuclear bomb and its proxies never been bolder and more active. Israel's historical new friends, such as China and Colombia, took other directions during the recent war and beyond.
Nevertheless, the new opportunities in today's world are endless. The collapse of the traditional blocks and the fragmented diplomacy allow Isarel to build many new diplomatic and economic alliances. These new alliances would build Israel's future in the years to come. This is not only a space owned by government officials and public servants. The private sector in Israel will play a pivotal role in supporting this new strategic shift. Investing in new markets and cultural sensitivities will be needed to pursue this new dream.
