Prime Minister Benjamin Netanyahu said on Monday after talking with senior officials in the US administration about removing Israel from the list of countries on which restrictions on importing advanced graphics chips has been imposed that, “They plan doing it,” – as he put it. It is now a month since the Biden administration announced restrictions on the exports of AI processors to 170 countries in its AI diffusion regulations.
Prior to Netanyahu’s visit, the assumption was that the issue would be raised in the meeting with US President Donald Trump, but in the end the issue did not come up in that conversation, but rather when Netanyahu met with the Secretary of Commerce Howard Lutnick.
However, while the Israeli government is expressing optimism, the US administration is pouring cold water on any positive outcome. The very fact that the issue was closed in a forum at the Ministry of Commerce and not through direct involvement by Trump indicates that the issue also involves national security matters.
Moreover, the committee dealing with this in the Ministry of Commerce is the “Committee on Industry and Security”, the same body that, during the previous administration, also placed Israeli companies NSO and Candiru on a blacklist of countries that require special permission to buy US computer equipment. National security policy expressed in this ministry is sometimes dictated by the National Security Advisor or his deputy, as was the case during the Biden administration.
When Trump entered the White House last month, he ignored the controversial order and only revoked the order on regulation of speech and privacy restrictions within the US.
Therefore, it is believed that the US will not simply remove the restrictions on Israel, but will demand steps on its part in return and may even include removal of the restrictions as part of a multilateral agreement in the Middle East.
Israel together with Saudi Arabia and Singapore
According to the new export restriction regulations, Israel is placed in the intermediate category, alongside countries such as the UAE, Saudi Arabia and Singapore, which are subject to import restrictions of up to 50,000 graphics processors until 2027. This is while 18 other countries, such as the UK, Australia, Japan, France and Spain are exempt from any processor import restrictions.
Most Israeli companies and institutions are expected to be exempt from issuing a processor import license, as part of the minimum requirement of 1,700 processors in order to be required to obtain a license. However, the new restrictions will cool the motivation of US tech giants, like Nvidia, Amazon, Microsoft and Google, to build data centers in Israel, which are rich in graphics processors. This is because the new restrictions are biased in favor of the exempt countries.
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The new rules restrict tech giants from founding operations outside the US. From the time the rules come into effect, tech giants will be required to leave at least half of all their graphics processors within the US and not deploy more than 7% in a single country outside it. Government ministries are also concerned that Israeli entrepreneurs will found new AI companies where such restrictions do not exist.
Apart from Nvidia, which was damaged by the trade decision, there were almost no voices criticizing the decision, with the exception of Senator Ted Cruz, who wrote, “This significant restriction on chip exports was thoroughly drafted without the involvement of Congress or US companies and reflects their (the Biden-Harris administration) misguided approach to AI policy and threatens to harm innovation.”
Israel’s Defense Ministry expressed concern
Israel’s Ministry of Defense has also expressed concern. Col. Elad Dvir, head of the Ministry of Defense’s AI branch, admitted in discussions in the Knesset that the Ministry of Defense has begun to prepare for the new restrictions to come into effect and to accelerate procurement before the new regulations require an explicit explanation of the use of the processors.
The proposed US regulations are currently under review until May, when they may come into effect. According to Dvir, most of the restrictions will be directed at the defense industries, and therefore Israel is “moving away from defense independence.” The world was also surprised by the removal of Singapore, also a significant US ally and a major importer of graphics processors, from the exempt countries.
Israel is not the only Western country included in the list of restricted countries: the EU expressed its protest on behalf of several countries that were not included in the exempt countries category, including Austria, the Czech Republic, Poland, Greece and Hungary. Switzerland, which is not a member of the EU, was also added to the same restricted intermediate category by the US. It is believed that what Israel and all these countries have in common is the lack of laws and regulations to reduce technology leakage to the US’s rivals, including China and Russia.
The agreement that was not promoted and the Finance Ministry talks
Israel has been placed in the intermediary category, it is believed, due to the failure to pass regulations to prevent technology leakage to China, in a mutual agreement between Israel and the US (Trusted Technology), as requested since 2021.
The two countries began the process of signing an agreement for mutual sharing of technologies in AI and Quantum Computing under former Prime Minister Yair Lapid and former Minister of Science, Technology and Innovation Orit Farkash-Cohen. A memorandum of understanding (MoU) was signed between the countries in which “The two countries will work together to manage the risk for each of the industries, including data security in research, export restrictions and investment monitoring.”
The previous government fell before the agreement could be signed, and the current government has not promoted the issue as a high priority. However, Ministry of Finance officials are currently conducting talks on the required arrangements.
Published by Globes, Israel business news – en.globes.co.il – on February 12, 2025.
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2025-02-12 05:51:55