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Netanyahu and Obama find a shared interest — screwing the Israeli people

Despite the years of endless clashes of both personality and policy, this dramatic political saga really won’t surprise you one bit.

Prime Minister Netanyahu and President Obama in the Oval Office, March 2012 (photo: The White House / Flickr)

Prime Minister Netanyahu and President Obama in the Oval Office, March 2012 (White House photo)

The rather lousy relationship between Israeli Prime Minister Netanyahu and U.S. President Obama has been the subject of much discussion in recent weeks as former Ambassador Michael Oren brought already ridiculous levels of behind-the-scenes speculation to new lows. Years of public clashes over settlement construction, peace talks, negotiations with Iran, and more, have provided endless fodder fueling public clashes between the two leaders.

There is one area, however, where President Obama and Prime Minister Netanyahu have suddenly, and perhaps surprisingly to outsiders, found their interests aligned.

American Ambassador to Israel Dan Shapiro attempted to use his influence to determine the outcome of a fateful vote in the Israeli Knesset this week. It is a rather bizarre political story with surprising actors being asked to play even more surprising roles. It is a story of foreign intervention into questions of domestic Israeli policy in ways that upend the narrative regularly spun by right-wing Israelis. It is a story that shouldn’t surprise anybody, and yet surprised nearly everybody.

The story starts with two of the most common ingredients found in nearly all Middle Eastern dramas: fossil fuels and American economic interests. You see, about six years ago a surprising discovery was made off of Israel’s coast— the largest natural gas reserves in the Mediterranean. Almost immediately, people started talking about the discovery as a game-changer, both geopolitically in the region, but also for Israel’s economy. The gas was supposed to be enough to domestic supply in Israel for decades.

The Tamar natural gas platform (Photo: Noble Energy)

A natural gas platform over the Tamar natural gas field off of Israel’s coast, one of two major gas discoveries made in Israeli waters in recent years by a consortium of companies led by Texas-based Nobel Energy. (Photo: Noble Energy)

Unfortunately for most Israelis, the contracts to search for said fossil fuels were negotiated decades earlier, at a time when nobody took seriously the prospects of actually finding any gas. Thus, as economic incentive dictates, the increased economic risk for the energy companies was contractually offset by massive profit margins in the unlikely situation that gas was discovered. So what did Israel do when gas was discovered? It unilaterally “renegotiated” the contracts to give itself a significantly greater portion of future profits. The energy companies were not happy but they ultimately agreed to the new terms.

In the five years that have passed, all but a few thousand Israelis forgot about the game-changing importance of the gas discovery. People assumed that they, the citizens, were getting ripped off in the whole affair, because, well, that’s the default Israeli position — to assume you’re being ripped off somehow. Yet those concerns consistently took a back seat to more tangible and immediate issues like the price of housing and food, and, you know, wars and boycotts and the ayatollahs.

But let’s fast-forward to today. With surprising attentiveness to at least part of some of the interests of the Israeli people, the Netanyahu government renegotiated a new financial and economic framework for the gas, its distribution, sale, pricing, ownership stakes and competitive guarantees. Except, there was a problem with that last one; Israel’s anti-trust commissioner refused to sign off on the deal. Then, this month, the only man who could overrule the anti-trust commissioner, Shas Chairman Aryeh Deri, refused to do so. So Benjamin Netanyahu did what any good Middle Eastern politician — or rather, any politician at all — would do in such a bind: he declared the natural gas deal a matter of national security, allowing him to overrule the anti-trust commissioner himself and put his plan to a vote.

However, despite a massive haul of 30 mandates in recent elections, Netanyahu only managed to cobble together a razor-thin coalition of 61 out of 120 Knesset seats. Even worse for the fourth-term prime minister, three of his ministers announced that they were recusing themselves from the entire matter because of close personal relationships to stakeholders in the deal. So Netanyahu was short a majority to move his plan along.

Benjamin Netanyahu gives a victory speech on election night, March 18, 2015. (Photo: +972 Magazine)

Prime Minister Benjamin Netanyahu gives a victory speech on election night, March 18, 2015. (Photo: +972 Magazine)

This is where it gets interesting. One of the two majority stakeholders in the natural gas deal, along with Israeli firm Delek, is Texas-based Nobel Energy. Now, as we know from then-historian Michael Oren’s fascinating book, Power, Faith, and Fantasy: America in the Middle East: 1776 to the Present, American interests in the Middle East have always been a little bit about religious obsession and a-lot-a-bit about American economic interest. Washington’s relationship with Israel has historically fallen along the religious/ideological end of that spectrum, but that is not to say that economic interests are in any way marginal.

But let’s get back to the Knesset.

Netanyahu was short three votes and the opposition was coalescing around its energetic determination to stop the prime minister’s plan. The only votes in play, it seemed, might be the Joint List, the combined slate of Arab parties. The Joint List, however, is adamantly opposed to everything Netanyahu. Since Election Day, the latter has gone after their and their constituents’ very right to participate in the democratic system. Most recently, the prime minister said nothing when one of his deputy ministers suggested they surrender their citizenship.

Joint List chairman Ayman Odeh stands in front of ultra-Orthodox MKs in the Knesset. (Knesset photo)

Joint List chairman Ayman Odeh stands in front of ultra-Orthodox MKs, Economy Minister Aryeh Deri (bottom-left), and freshman MK Michael Oren (top-left) in the Knesset. (Knesset website)

The thing is, the Joint List doesn’t have any love for Opposition Leader Yitzhak Herzog either. Herzog attempted to disqualify a Joint List candidate from even running in the elections, and just this past week, instructed his entire ‘Zionist Camp’ to abstain from voting on a law that forbids “family unification” for Palestinian citizens of Israel.

So the American ambassador attempted to tip the scales in Netanyahu’s favor by enlisting the one political group that hates him most. Stopping short of confirming the affair, a U.S. embassy statement released to Haaretz emphasized that Washington, “hope[s] that Israel will reach an arrangement that will allow the development of its natural gas resources.”

“We are proud of the contributions that American companies are making to bring cleaner and more efficient energy resources the Israel,” the statement read. “The specifics of any arrangement are, of course, a matter for the Israeli government and people to decide, but we have always been open with our Israeli friends about the economic, security, and commercial benefits…”

On the night of the vote, which was ultimately postponed once Netanyahu realized he had no majority, a spokesperson for the Joint List reassured that, “of course the Joint List will vote against Netanyahu’s policies on [natural] gas.” The slate is “independent and not swayed by pressure from tycoons like the Netanyahu government,” he added.

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    COMMENTS

    1. Cowboy

      Brian, you seem to have a man crush or Aymen Odeh. Perhaps you can get word to hm to find a tie that extends past his nipples. Your boy has not missed a meal since he was elected. (See bottom photo)

      Reply to Comment
    2. Pedro X

      Michael, another transplanted American coming to tell Israelis how to do things, has no clue about what he talks about. He says that:

      “You see, about six years ago a surprising discovery was made off of Israel’s coast”

      Of course, he is wrong. Exploration companies have been looking for major gas deposits off the coast of Israel for decades. Some of the older of us will remember the American Company call Zion Gas and oil which drilled off the coast of Haifa, losing millions in the process. Then in 1999 (before Michael came to Israel) the Delek group successfully found the Noa and Mari fields (1.1 billion cubic meters). In 2000 British Gas discovered the Gaza Marine field containing 1.1 trillion cubic feet of natural gas. Dalek and Noble Energy partnership continued to drill expecting to find a large field and in 2009 hit upon the Tamar field of 11 billion cubic meters of gas following by the Leviathan field of twice that amount. This was no accident or surprise. This is what they were looking for over more than a decade.

      Israel is not alone in the Levant in exploring for gas. Cyprus has hit its own gas fields. The United States Geological Services estimates that the Levant Basin contains 122 trillion cubic feet of gas. Companies who cannot sign a satisfactory deal with Israel will look to other countries and benefits will flow to those other countries.

      Now consider who put up the money for the exploration and development of the Tamar Gas Field. It was private investors and shareholders of publicly traded companies. They took large risks and have a right to expect a large reward. The Israeli state and its public also expects large rewards. Reaching a satisfactory arrangement is complex and fraught with dangers for the state and the oil companies. Companies are not going to invest the money and technical expertise needed to exploit the Leviathan field amidst an unstable and unpredictable regulatory environment and a hostile investment climate.

      Negotiating the complexities of gas royalties, taxation rates, export licences, price regulation, anti-trust actions and environmental matters are extremely complex. The complexities of these matters are beyond the technical abilities of most politicians. Yet it is of prime importance for Israel to tackle these complexities to ensure that Israel’s Leviathan field is developed and exploited for the benefit of both Israel and the Delek Noble Group. If the Delek Noble Group shelves its plan for development Israel will receive no benefits.

      What Israel did in raising royalty rates and what Netanyahu did in renegotiating the rates finds a parallel in the Province of Alberta. A number of years ago, Albertans felt that they were receiving too small a slice of the gas and oil pie. Alberta raised its rates resulting in a revolt from the many companies operating in the Alberta oil field. They closed in production, cut exploration and developlent and threatened to exit the province and explore greener pastures. The conservative government of the day, with many members with experience in the gas and oil fields, decided that lowering the royalties and taxes were the better course than seeing its oil and gas sector gutted and leaving for greener pastures. They knew these were not idle threats.

      In Western Canada there is a saying, “Pigs get fat, hogs get slaughtered.” In other words, those who are too greedy get nothing. The Premier of Alberta and his cabinet understood this. Netanyahu understands this.

      Netanyahu knows that the gas fields will provide Israel with energy security. Back in 2012 Israel’s stable gas imports from Egypt disappeared as the pipelines were blown up and a wave of hostility demanded an end to the gas and oil agreements. The gas will also help phase out polluting coal fired energy plants which provide more than 35% of Israel’s energy needs. Much of the oil imported will also be replaced with clean burning gas. With a proper negotiated regulatory scheme Israel will reap billions and billions in tax revenues, employment and additional businesses.

      Yet those in the left, such as the Arab list, will play politics, opposing anything and everything that Netanyahu does despite the benefits to Israel and its people.

      Reply to Comment
      • Pedro X

        Correction to my post. Tamar contains 11 trillion cubic feet while Leviathan contains 22 trillion cubic feet of gas.

        Reply to Comment
      • Marnie

        “Michael, another transplanted American coming to tell Israelis how to do things, has no clue about what he talks about.”

        So what PedroX – Michael is adding to the Jewish nature of the state – you should be happy he’s here!

        Also, you’re in Canada and you are a permanent fixture on this site and usually the first to post (unless someone beats you to it), always telling the Palestinians what they need to do, what they don’t have any rights to, maybe that they don’t even exist. It’s funny that Michael “has no clue what he talks about”, yet here he is, a writer, editor, etc. Sounds like the green-eyed monster again.

        Reply to Comment
    3. Cowboy

      “The Joint List, however, is adamantly opposed to everything Netanyahu”

      This may be true, but it is misleading,

      The Joint List is adamantly opposed to everything Israel.
      See, I fixed if for you.
      This farce of a political block ruled out cooperating with any Jewish party before they were even approached. Indeed, the group represents a foreign entity at the expense of their own constituency. One MK said they were Palistinans before they are MKs. Could you imagine any politician in the U.S. saying something so absurd? Arab Israelis truly deserve better.

      Reply to Comment
    4. Electric Avenue

      Now where else can we read about such things?

      Reply to Comment