Steinitz A vs. Steinitz B
Steinitz's about-face regarding the newly found offshore gas reserve raises the question of whether we are dealing with a man of reversals.
What has come over Finance Minister Yuval Steinitz? Perhaps beyond the pleasant-looking facade lurks a man guided solely by careerist considerations? Or just maybe behind that smiling persona lies someone motivated by public relations? Do we have a Steinitz A who is jousting with Steinitz B?
This is how the story unfolds. On April 11, the finance minister appeared before the Knesset to respond to a number of queries from Labor MK Shelly Yachimovich over royalties the state will collect from offshore discoveries of gas and oil.
According to Steinitz, the state should not alter the existing permits in any way. Steinitz, however, added that the state should examine royalty fees for new permits, but must do so quietly so as not to risk the financing of the drilling operations at the Dalit and Tamar fields. That way, Israel's supply of gas would not be hindered in 2013.
For the sale of gas, Steinitz explained that the state collects taxes and royalties at a rate between 35 and 45 percent, with royalties alone accounting for 12.5 percent - "a royalty rate that is standard for democratic countries operating in natural gas exploration via the licensing method."
He added that the tax level "is considered somewhat high for reserves found deep beneath the water where the process of development and production is extremely complex." It is known that the exploration fields in the Mediterranean Sea are very deep: three kilometers into the seabed under two kilometers of water.
The minister responded to another query by saying that the discovery of large natural gas reserves off the Israeli coast reduces the risk borne by future investors, thus making it worthwhile to consider modifying "the method of taxation for future discoveries." Just to remove doubt over the possibility that he planned to levy taxes against people who have already received exploration licenses, Steinitz added: "It is important to note that a retroactive change in permits that have already been issued and that have yielded investments would be problematic from a legal and ethical point of view."
Yitzhak Tshuva, a senior partner in the Dalit and Tamar projects, came away satisfied. But by June the minister's position reversed. Suddenly Steinitz said royalties should be raised, even retroactively, since "royalty rates in Israel are significantly lower than in other countries." During another appearance he declared animatedly that "natural resources belong to the people, our children and grandchildren, who need to benefit from the discovery." He then proceeded to blame all successive Israeli governments that behaved "clumsily or neglectfully and did not take up the matter since 1952."
But it is Steinitz who has acted "clumsily or neglectfully" because he could have "taken up the matter" when he was appointed finance minister rather than wait until discoveries were made.
The simple truth is that successive Israeli governments were quite pleased with the status quo ante. They did not invest even one agora in searching for oil and gas. Rather, a few lunatics poured in the money for those governments, among them Tshuva. The government was certain they wouldn't find anything, so what did they care about royalty rates?
Steinitz's about-face raises the question of whether we are dealing with a man of reversals. Once he was an ardent activist with Peace Now, but now he's on Likud's extreme fringe. Perhaps an explanation for his flip-flopping can be found in the public relations campaign he is now waging.
It is an open secret that Steinitz's standing in public opinion polls is at an all-time low. He is simply ignored. Everybody views Prime Minister Benjamin Netanyahu as the person responsible for charting the state's economic course, while Steinitz is viewed as his Sancho Panza. Now, however, the battle over natural gas has catapulted his name into the headlines as the man at the vanguard of a fight against the evil tycoon Yitzhak Tshuva.
Much like his army of media advisers, Steinitz understands that the most popular move he could make is to "stick it to the tycoons" and act "on behalf of the people." This apparently is the reason behind the myriad yet hopeless "reforms" he has inundated us with recently. One day he has a plan to encourage start-ups, while the next he is touting a communications reform that would lower prices. Another day he is flooding the state with affordable land for young couples, and now he has his war against Tshuva.
This is because Steinitz B so badly wants to defeat Steinitz A.