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Chinese Intelligence In Africa: The Israeli Link
07-12-2010, 02:05 AM,
Chinese Intelligence In Africa: The Israeli Link




Chinese Intelligence In Africa: The Israeli Link

* Dr Gary K. Busch
* February 20, 2010

The recent article in Ha’aretz newspaper by Yossi Melman (U.S. ties Israeli billionaire with Chinese intelligence}, [i] points out the continuing relationship of Israeli business with China; and with Chinese intelligence in particular. This relationship of China with Jewish businessmen is not a new phenomenon. It predates the Communist victory on the mainland. One of the first, and perhaps the most bizarre, example of this tie was “Two-gun Morris Cohen”. Morris Abraham "Two-Gun" Cohen (1887–1970) was a Polish-born Jewish soldier and adventurer. Cohen had emigrated from Poland to Edmonton, Alberta and found himself engaged as a Canadian soldier in the First World War. In 1922 Cohen decided to try his luck in China. His military skills were useful, as well as his business skills, and he was asked to help train the troops of the new Chinese Army under Sun Yat-sen. He became aide-de-camp to Sun Yat-sen and a major-general in the Chinese army. Because of his international experience he was a founding member of the Republic’s intelligence service.[ii]

Another famous Jewish visitor, and later a naturalised Chinese citizen, was Sidney Shapiro. Shapiro was born in Brooklyn in 1915 and trained as a lawyer. He was taught Chinese by the US Army during the Second World War in anticipation of a US military push in China against Japan He went to China in 1947 and became a famous translator of Chinese literature. He worked for the Foreign Languages Press and married a prominent Chinese communist actress. He was made a member of the Chinese People's Political Consultative Council and has had extensive ties with Chinese intelligence. They named a street in Beijing after him. He is one of very few naturalized citizens of the PRC.

Perhaps the most famous and successful entrepreneur to tie up with the Chinese was another Polish Jew, Shaul Eisenberg, born in Galicia in 1921 and moved to Germany soon after. Escaping German persecution he fled to Shanghai and then on to Japan where he was welcomed owing to his marital connections with a prominent Japanese family. His connections with the Japanese led to his return to Shanghai under Japanese military occupation. In Shanghai, Eisenberg, along with Imperial Japanese military intelligence units, formed units of future Jewish terrorist groups -- the Irgun and the Shanghai Betar (Betar was founded in the 1930s by the Polish Zionist Yakob Jabotinsky) to battle the British for control of Palestine. The Japanese taught the Jewish paramilitary forces in Shanghai, including some who escaped from Joseph Stalin's Birobidjan (an Jewish Autonomous Region creation in the Soviet Far East on the Chinese border), how to disrupt colonial occupiers' logistics and command and control elements, strategies that had been successful against the British, Dutch, French, and American colonial authorities in Asia. The Irgun (‘Etzel’) and Betar gangs would eventually use the knowledge gained from the Japanese in their terror campaign against British and Arab forces in Palestine following World War II. Eventually, Irgun and Betar veterans would form the present-day Likud Party, now headed by Binyamin Netanyahu.[iii]

After the war Eisenberg formed close ties with the communist Chinese who were trying to oust the Kuomintang and expanded his Chinese business throughout Southeast Asia. His most important task was the arming of the new state of Israel. Eisenberg set up many of the weapons routes to the forming Israeli State in 1947-1949, and brokered massive supplies from China. This military connection between Israel and China pioneered by Eisenberg led to a very extensive research and development in the new State of Israel and the foundation of a major industrial sector, military technology. The new artillery rounds, re-entry warheads, ground-to ground and ground-to-air missiles, head’s up displays, improved avionics and the upgrade of the Chinese tank force was contracted for by Eisenberg in Israel. This was the major underpinning of the Israeli technological lead in military equipment. His company, IAI has become a world leader in this field. It was also profitable.

The ties between Eisenberg and the ‘Kirya’ led to a major engagement between his companies and Israeli intelligence. The Kirya is a generic name for the buildings behind the high wall on Rehov Shaul Hamalekh, a main thoroughfare in Tel Aviv. This is the headquarters of the Minister of Defence, the Chief-of Staff and the offices of Military Intelligence. One of the smaller buildings in the Kirya is 8 David Elazar Street, the headquarters of Sibat, Israel’s main arms trading company. A little further on is Hadar Dafna, the main Mossad building (the ‘Institute’). The co-operation between the Kirya and China pioneered by Eisenberg (who died in China in 1997) continues.[iv]

Now there are extensive ties between Israeli companies and private Chinese companies, especially in Africa. What is important to understand in this relationship is that many, if not most, of the Chinese companies are not really independent. They are part of the Chinese-military intelligence complex. They are corporations created in a similar structure to what might be called ‘zaibatsu’ in Japan or ‘chaebol’ in Korea. These ‘zaibatsu’ were large centrally-controlled vertical monopolies consisting of a holding company on top with a wholly-owned banking subsidiary providing finance, and several industrial and trading subsidiaries dominating specific sectors of a market, either solely, or through a number of sub-subsidiary companies. These are now international in scale.

Their spread followed the accession of power of Deng Xiaoping. Deng represented the second generation Chinese leadership and was instrumental in introducing Chinese economic reform, also known as the socialist market economy and partially opened China to the global market. He is generally credited with pushing China into becoming one of the fastest growing economies in the world and by raising the standard of living. Deng Xiaoping's ouster of Hua Guofeng was the moment when the market policies of economic reform began. This reform was carried on primarily by the military companies created in the various regions by the armies which controlled them.

It is not difficult to see why. The People’s Liberation Army (‘PLA’) controlled the security situation in its region. That meant it issued permits to enter or leave the region; it controlled the communications network in the region; it had the trucks and other transport under its control; and it was charged with maintaining order. It was, in fact, in charge. This was not controlled by one central PLA group but was under the control of the individual army for each region; some, like the 28th Army and the 39th Army were in economic hotspots and were able to thrive quickly. The Northern Army was quick to exploit its opportunities.

The opportunity arose in the wake of the civil disturbances of the Tiananmen Square uprising, when the Chinese Communist Party, under Li Peng, cracked down on China's democracy movement, ordering in the troops to battle the students. The PLA was ambivalent about this and seven retired senior military officers openly criticized the martial law order imposed by the Beijing government and called for the ouster of Premier Li Peng. In the march towards the capital at a village five miles southwest of Beijing, soldiers and peasants engaged in a brick- and rock-throwing brawl that injured as many as 40 people. The PLA did its duty but the populace were outraged and the authority of the Communist Party waned. The PLA realised it was free from the controlling hand of the Party and became agents of change; primarily corporate change, encouraged by Deng Xiaoping (retired but active).

They already had numerous companies under PLA control manufacturing goods for the defence sector. During Mao Tse-tung’s rule and the era of Sino-Soviet tensions, the military moved many of its factories inland in case of a possible attack on China. Manufacturing purely military products, such as arms, ammunition, as well as electronics, plastics and metals for military applications, these so-called "third-line" factories were built in remote mountain regions, far away from transportation routes and power sources. The factories bought supplies at subsidized costs from other factories, manufactured the weaponry and related products -- generally low-tech and low-quality -- and then sold them to the military at subsidized prices.

After Mao's death in 1976, the new leadership encouraged the military plants to begin exploring civilian uses for their products and to engage in the broader liberalizing economy. The most nimble managers were free to exploit new markets for their goods. During the early 1980s, the PLA's share of the national budget declined, spurring it to look to other sources for cash, especially hard currency. The higher organizational levels of the PLA created trading companies like China Xinxing, China Poly and China Songhai to take advantage of the opening of China's economy to the international market.

They formed banks, holding companies and international trading companies like Everbright to market these goods worldwide. Now the PLA runs farms, factories, mines, hotels, brothels, paging and telephone companies and airlines, as well as major trading companies.

The number of military-run business exploded during the boom of the late 1980s. The "third line" factories opened branches in the coastal areas, earning increasingly high profits from the manufacture of civilian goods. Even the lowest levels of the PLA set up production units. In fact the PLA had a largely captive audience of Chinese who had never really had the chance to acquire personal goods produced in China before. In addition to their international arms sales, their production of consumer goods for the domestic market soared.

Many of the PLA companies have become firmly enmeshed in the global economy. According research done by David Whelker[v], “in pursuit of hard currency, many of the companies have listed themselves on capital markets in Hong Kong and elsewhere, opened representative offices in overseas markets, solicited foreign companies for joint ventures and partnerships in China and emphasized exports.” The so-called red chips, companies listed on the Hong Kong exchange but which are in fact mainland Chinese firms, are the hottest stocks on the market. Hong Kong is the PLA's favoured stock exchange because of its loose disclosure guidelines. China Poly Group has two listed companies: Continental Mariner Company Ltd. and Poly Investments Holdings Ltd. Both Continental Mariner and Poly Investments have a large number of subsidiary companies in mainland China, Hong Kong and tax havens like Liberia, the British Virgin Islands and Panama. China Carrie's listed company in Hong Kong is Hongkong Macau Holdings Ltd. China Carrie also owns HMH China Investments Ltd. on the Toronto Stock Exchange and HMH Gold Mining on the Australian Stock Exchange. 999 Enterprise Group, another company controlled by the PLA General Logistics Department, operates Sanjiu Pharmaceuticals Group, the largest pharmaceuticals manufacturer in China. 999 recently announced its plan to list soon on the Hong Kong exchange.

Smaller military enterprises, like the Songliao Automobile Company owned by the PLA Shenyang Military Region, have also listed in the domestic Chinese markets.

China Poly Group is a commercial arm of the Chinese People's Liberation Army (PLA) General Staff Department. The PLA General Logistics Department operates China Xinxing. The PLA General Political Department owns and operates China Carrie. And the PLA Navy runs China Songhai. “

Foreign companies looking for a foothold in China like partnering with the PLA because of the stability it can offer to any long-term project. Companies with military partners get the added security of knowing that the top "management" of many of the PLA companies are from the ranks of the "princelings," the children and relatives of senior Chinese Communist Party officials. These influential princelings assure that the business operations of the PLA will have the government connections that are so important in China's corrupt system. In the case of China Poly, chair Wang Jun and president He Ping act as brokers between the government and the military. Wang Jun is the eldest son of the late Vice-President Wang Zhen. He Ping is the son-in-law of the late Deng Xiaoping. Wang Jun's brother, Wang Bing, is the chair of the PLA Navy Helicopter Company. China Carrie's president is Ye Xuanning, the second son of late PLA Marshal Ye Jianying.

Chinese entities, including the disarmingly named Shandong Arts and Crafts Corporation, have been accused of selling missile guidance equipment and fibre optics for air defences to Iraq as recently as 2001. The most recent unclassified CIA report on weapons proliferation, which covers the six-month period ending June 2002, indicates concern about Chinese as a supplier in virtually every category of weapons. It finds continued contact with Iran, and "cannot rule out continued contacts" with Pakistan on nuclear weapons programs. It finds that China continues to provide chemical weapons, dual-use technology and equipment to Iran, and dual-use items, raw materials and technical assistance relating to missile production to Iran, Libya, North Korea and Pakistan. Lastly, it indicates that China continues to supply advanced conventional weapons, including fighter aircraft, to several countries. While China is not a major player in the international arms market, its proliferation activities are nonetheless troubling. Its sales contribute to the proliferation of weapons of mass destruction and to destabilizing "rogue" regimes, and China sells considerable amounts of dual-use technology.[vi] One of the biggest is NORINCO, owned by the Northern Army.

This is not just military project, seeking to earn revenue from the sales of its products, It is intimately tied up with the Chinese intelligence agencies and their search to acquire technology and to maintain a presence abroad. There are several intelligence agencies in China. The official, government run intelligence agency is the Ministry of State Security (MSS) ‘Guojia Anquan Bu’ [Guoanbu]. The MSS is primarily created to perform economic espionage. The MSS' methods for economic espionage follows three models. The first is the recruitment of agents, especially scholars and scientists, in the PRC before they are sent abroad to purchase information. The second model uses Chinese firms to purchase overseas companies which own or have access to the desired technology. The third method is the direct purchase of technology through Chinese front companies. This third model was the most commonly used.

However the main thrust of Chinese intelligence is contained within the structure of the General Staff of the People’s Liberation Army (PLA). These are also divided, as is the PLA, into military regions. The intelligence agencies inside the Army have, after going through several major evolutions, developed into the present three major military intelligence setups.

* The central level is composed of the Second and Third Departments under the PLA General Staff Headquarters and the Liaison Department under the PLA General Political Department;

* At the major military regions intelligence activities consist of the Second Bureau established at the same level as the Operation Department under the Headquarters, and the Liaison Department established under the Political Department.

* The third system includes a number of communications stations directly established in the garrison areas of all the major military regions by the Third Department of the PLA General Staff Headquarters. [vii]

The agents and officers attached to these units of the PLA operate overseas as part of the corporations which belong to the commercial vehicles owned by the particular regional army. They appear as managers or technicians in these ‘private’ companies. Many of the Chinese who reside abroad, especially in Africa, operate under corporate cover and report back to the army from which they come.

Perhaps the best example of how this is undertaken is the case of Angola. China's relationship with Angola is extremely important, with two-way trade dominated by oil and construction totalling more than $25 billion in 2009. Angola exports some 800,000 barrels per day -- half its crude production -- to Chinese refineries, and is China's largest source of oil. Chinese entities have lent Angola more than $7.5 billion in oil-backed loans and credits since 2002, and while Western companies still dominate oil production, Chinese companies lead in the construction sector.[viii] China’s thirst for oil is unquenchable.[ix] In this the Chinese managers and intelligence agents play an important role.

However it is not only in the oil sector that China is involved with Angola and with Israel. Recently the discovery of the giant 88 Queensway Group has raised an awareness of the strong ties among the groups operating in Angola... One building in Hog Kong has demanded attention. In the building are a group of companies nicknamed the 88 Queensway Group (the address of the building), which the U.S. administration suspects is nothing more than a cover for activity conducted by the People's Republic of China's foreign intelligence. Wu Yang, one of the group's senior directors, provided the Registrar of Companies in Hong Kong with an address that matches the address of Chinese foreign intelligence.

“The suspicions were spelled out in a report recently compiled by the U.S.-China Economic and Security Review Commission, which was established by Congress in 2000 in order to "monitor, investigate and submit to Congress an annual report on the national security implications of the bilateral trade and economic relationship between the United States and the People's Republic of China, and to provide recommendations, where appropriate, to Congress for legislative and administrative action." The report noted, among other things, that the group of Chinese corporations has business ties with Israeli businessman and diamond magnate Lev Leviev.”[x]

Using the group, Chinese intelligence acquires oil and energy companies and other important assets in countries in Africa, Latin American, Southeast Asia, as well as in the United States. In this way it promotes Chinese national interests, increases its influence and guarantees the supply of raw materials - first and foremost oil - necessary for its economy

The report mentions three international businessmen connected to the Angolan-Chinese cooperation, with the help of a company called China-Sonangol, which is registered in Hong Kong. China-Sonangol is part of the 88 Queensway Group. The Hong Kong-based firm Beiya International, a partner of Angola’s Sonangol in the China Sonangol joint venture, has just been declared by the Chinese Government as having no official ties with Beiya.

Through its affiliate China International Fund, Beiya recently signed a USD 8 billion contract to mine gold and platinum and to explore for oil and gas in Zimbabwe. The agreement also provided for the import and distribution of oil products. On Dec. 30, 2009 the Chinese embassy in Harare took the unusual step of publicly denying any ties between Beiya International, China International Fund or China Sonangol with Beijing. A statement to that effect from the embassy was carried by the New China News Agency Xinhua.[xi]

Africa Energy Intelligence reported that several of the host of companies set up by Beiya had no direct link with the Chinese government; they are linked to ostensibly private Chinese enterprises. These private firms in question, present in the oil sector in Angola, Congo B and Guinea, are very close to several Western businessmen well connected with African heads of state. Among them are Portuguese banker Helder Bataglia, president of Espirito Santo Commerce (Escom), Angolan affiliate of the Portuguese bank Espirito Santo, and the French-Brazilian businessman Pierre Falcone, who was sentenced to six years in jail in France in October for his part in the Angolagate affair. The case involved the sale of arms to Angola in the 1990s.[xii]

Many people don’t know much about Leviev. Leviev is an émigré from Russia living in Israel. has diamond polishing factories in several Russian cities, as well as Ukraine, Armenia, China, South Africa and Israel. In Russia, his factories process a sizable portion of the country’s diamond wealth. Along with his high profile in the diamond world, Leviev is active in other business ventures. The Leviev Group has a multibillion dollar portfolio of diamond, real estate, oil, construction and clothing enterprises. Leviev, who lives in Israel, seems the antithesis of a larger-than-life figure. He is quiet and self-effacing.

How Leviev arranged the Angolan connection is a matter of speculation. He says he presented Angola with a plan to reduce smuggling and increase revenue by funnelling diamonds through only one source – and the government accepted the plan. Others say Leviev’s friendship with Isabel dos Santos, the president’s daughter, and his connections with obscure Russian businessmen operating in Angola helped clinch the deal. Leviev says he expects that once Angola’s mining sector becomes more formalized and new ventures start producing diamonds, revenue benefiting Angola could exceed $100 million.

Angola is the world’s fifth largest diamond producer with nearly $700 million worth of high-quality stones annually, most of which are from widely spread alluvial sources and, therefore, harder to control. They are mined in hundreds of tropical riverbeds in Angola’s embattled northeastern Lunda Province near the Congolese border.

The tie-in with Zimbabwe shows the value of the Chinese-Israel connection. The Chinese have been major supports of Mugabe since the outbreak of fighting against the Rhodesian authorities in the late 1970s. Many Zimbabweans were offered military training in China. The bulk of the military supplies arrived in ZANU’s Mozambique headquarters from Chinese sources. Military supplies continue to arrive in Zimbabwe, especially from the Poly Corp military company. Zimbabwe has just discovered a massive kimberlite pipe which is chock-a-block full of diamonds. This may be a pipe 65 kilometres in length. It has been virtually taken over by the JOC (the military and police complex) who are mining the diamonds and exporting them. These exported diamonds are vulnerable to the Kimberley Process procedures (to prevent ‘blood diamonds’). A man like Leviev is a valuable asset in moving these diamonds into the market without a fuss. Additionally, there are sanctions in place which prevent the import into Zimbabwe of a range of weapons and systems. With the close relationship between Leviev and the Chinese military companies and intelligence agencies it is much easier to pay for the arms and to supervise their import to the JOC customers.

The Israeli diamond business in Africa (be it Dan Gertler, Bennie Steinmetz or Lev Leviev) is important for the Israeli military complex. Modern weapon systems require sophisticated maintenance and operation. There are precious few African technicians who can adjust, repair and deploy UAVs or missile systems. If one sells these systems they must come with technicians to service them. It is often impossible, politically, to station foreign military personnel in an African country without raising controversy. The ability to include these vital personnel in the country under the cover of a mining operation is often the difference between making a sale and not. In this the Israeli mining companies and agricultural investments offer their own industry a positive advantage by providing a plausible cover for its technicians. This is a service which can b performed for the Chinese as well as a substantial part of the Chinese technology is derived from Israeli inputs.

Throughout Africa there are Israeli and Chinese private companies engaged in mining, ore processing and agriculture; some of whose employees may be engaged in parallel pursuits.

[i][i] Ha’aretz 12/1/10

[ii] Among the several biographies of Cohen the best is Daniel S. Levy)- Two-Gun Cohen: A Biography , St.Martins (1997)

[iii] Jack;s Flame, “Shaul Eisenberg, Weapons Smuggler”; 12/12/07

[iv] Andrew and Leslie Cockburn, Dangerous Liaison, Bodley Head 1992

[v] David Whelker, “ The Chinese Military-Industrial Complex Goes Global”. Multinational Monitor June 1997

[vi] Canadian Security Intelligence ervice. “Commentary No. 84: Weapons Proliferation and the Military-Industrial Complex of the PRC, August 2003”.

[vii] FAS, “Chinese Intelligence” 26/22/97

[viii] Energy Intelligence Group,” Angola: China's Complex Connections” 14/8/09

[ix] Chatham House, “Thirst For African Oil” 8/09

[x]Ha’aretz 12/1/10

[xi] Africa Energy Intelligence, 12/09

[xii]Ha’aretz 12/1/10

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