Israeli gas deals create strange bedfellows

The monopoly held by Nobel Energy and Delek on Israel’s natural gas resources became virtually unassailable this week, as the resignation of local anti-trust chief David Gilo was swiftly followed by Finance Minister Moshe Kachlon absolving himself from dealing with the monopoly because of a close friendship with one of its stakeholders.

Breaking up Delek and Nobel’s monopoly was a key election promise of Kahlon, who built much of his recent political career on successfully breaking up a similar monopoly over the Israeli cellular communications market. But on Tuesday Kachlon announced he will hand the gas portfolio back to Prime Minister Benjamin Netanyahu, a strong backer of the monopoly who has clashed repeatedly with the now former regulator.

Israel’s recently tapped natural gas resources are set to become a crucial part of the Israeli economy in the coming years, boosting its GDP and casting many aspects of its foreign policy in a new light - from an East Mediterranean alliance with Cyprus and Greece, to new gas agreements with Egypt and Jordan. The gas discoveries also look set to affect Israel’s foreign and military policy, especially with regard to Lebanon, which is contesting Israel’s ownership of the northernmost gas field, Tamar 1.

The Israeli navy is set to be deployed to protect gas rigs, and the Israeli media has speculated frequently the rigs will make an appealing target for Hezbollah or other paramilitary organisations.

The security and diplomatic aspects of the burgeoning sector also partly frames Gilo’s resignation. The anti-trust regulator enjoys considerable autonomy, allowing him to issue binding rulings on cartels, which can only be challenged through prolonged and costly special tribunal hearings. However, the economy minister, to whom the regulator reports, can also overrule the decision by citing reasons of foreign policy or national security. The alliances with Greece and Turkey, the contestation by Lebanon and the strategic potential the gas fields hold for Israel’s future energy independence each tick both boxes, all the more so as breaking up the monopoly could endanger already existing contracts between the two companies, Egypt and Jordan.

And if that wasn’t enough, Gilo, who has been signalling his intention to clamp down on the Delek-Noble monopoly for the past year, was facing undisguised opposition from Netanyahu and considerable impatience from the United States, with Secretary of State John Kerry personally phoning the prime minster to express concern over Gilo’s plan.

With that in mind, Gilo decided to jump before he was pushed - although as senior Calcalist reporter Shaul Amsterdamski pointed out, this does nothing to preempt the outcome Gilo was protesting: if he was resigning for fear of the government overruling him to preserve the monopoly, now it won’t even have anyone to overrule. It seems Gilo’s move was motivated more by fear of such an overrule setting a precedent that could lead in the future to government intervention in other areas and harm the anti-trust regulation sector as a whole.

If Gilo’s resignation was answered with regret and concern among the more progressive analysts, Kachlon’s move a day later was met with a mix of scorn and disbelief. Kachlon, who has made his name as a champion of the consumers and citizens against major business interests, has frequently spoken of his intention to break up the Nobel-Delek monopoly and to open up the energy market to competition.

When interviewers brought up Kachlon’s friendship with secretive businessman Kobi Maimon, whose company Isramco owns more than one quarter of the Tamar gas field, Kahlon would brush it aside, insisting it was irrelevant and immaterial. On Wednesday, Kachlon still insisted the gas monopoly needed to be challenged, but made a perfect u-turn on his earlier argument, announcing he could not, in good faith, engage with the challenge of breaking up the monopoly - because of his friendship with Kobi Maimon.

Despite the unseemly reversal, the finance minister is not likely to suffer significant political backlash, and neither Gilo’s resignation nor Kachlon’s handover of the gas portfolio to Netanyahu are expected to provoke serious protests. The reasons are numerous: the natural gas market in Israel is still too young to have developed a significant political culture around it - it’s simply not part of the debate as much as it would be in Scandinavia, for instance.

Secondly, decades of aggressive privatisation have left Israelis fairly accustomed and apathetic to enormous corporations making the bulk of profit from natural resources - the nationalist ethos of collective dominion over the land is no longer translated into a feeling of collective ownership or responsibility; Dead Sea Works, which until the discovery of the gas fields was the largest exploiter of natural resources under Israeli control and is controlled by the Ofer family, is a case in point.

These two factors also constrain the popular imagination of what the break-up of the monopoly, or of the state taking a larger cut, could mean for the well-being of Israeli citizens. And finally, reneging on election promises is as much a par for the course for Israeli politicians as it is for their colleagues almost anywhere. Both Sir Malcolm Bruce’s affirmation last week that politicians lie and Terry Pratchett’s adage about installing smoke detectors in hell vividly come to mind.

Still, the lacklustre response to even the prospect of ever challenging the gas monopoly does hold a political lesson, albeit a depressing one. For all their problematics - not least the deliberate refusal to deal with the occupation of Palestinian territories - the 2011 social justice protests were hailed for shifting the very ground of political conversation in Israeli politics, expanding public debate from security and nationalism to class solidarity, capitalism and the welfare state.

If the irritated shrug of the Israeli public this week is anything to go by, this shift looks set to remain exclusively at conversation level for the foreseeable future.