
Israel’s finance and transport ministries have reached an agreement to move forward with Jerusalem’s Blue Line tram contract after weeks of negotiations. Under the agreement, Chinese state-owned company CRRC will remain on the project but will build the tram cars at its factory in the United States.
Cost Escalation and Diplomatic Balance
This solution adds 5% to the total cost of the project, reducing costs by approximately It raises $27 million. But officials agreed it was the best option to avoid further delays. Initially, Polish manufacturer Pesa was supposed to supply the vehicles, but withdrew from the project after the war in Ukraine began.
The planned $2 billion contract between the JTrain consortium and CRRC has faced setbacks because CRRC is on a U.S. blacklist. U.S. officials have expressed concern about its links to China’s defense sector. Israel, in turn, has approved CRRC’s continued participation on the condition that production takes place outside of China. By choosing the U.S. facility, the Israeli government sought to balance diplomatic concerns with project continuity.
Deal Restarted After Delayed Signing
A formal signing was planned just before Passover but was cancelled at the last minute when Israel's state watchdog withdrew its approval. Political leaders intervened, temporarily halting the deal.
Thereafter, both ministries worked to resolve legal and strategic issues to finalize the contract. Shifting production helped alleviate external objections while preserving CRRC’s role in the tram supply chain.
The Blue Line will significantly expand public transportation in Jerusalem. The city is combining technological advancement with political compromise by using modern tram cars from a site in the United States. The development highlights the influence of international politics on infrastructure projects and how geopolitical sensitivities can shape commercial deals.