The Bottom Line / The oligarchs are not coming, the oligarchs are not coming
The Knesset Economics Committee yesterday had a revelation. By request of MK Avshalom Vilan, the committee held a stormy hearing on the sale of storage and fuel company Pi Glilot. Vilan led the discussion with a call to halt the company's sale to Yitzhak Tshuva, who owns Delek. "Israel is turning into a nation of oligarchs," Vilan steadfastly declared.
This revelation, which took the committee by surprise, was particularly interesting in its timing: It came a day after the tender to sell Pi Glilot to Delek. Had the MKs truly been bothered by Israel becoming a "nation of oligarchs," one would expect them to have held such a hearing before Pi Glilot's sale, and not after it. Before the tender, MKs could have influenced its outcome by keeping out the oligarchs. The same call ex post facto is equivalent to closing the stalls a day after they're emptied.
If the MKs were in fact bothered by the local fuel industry's competitive structure and the small number of companies that control it, they should have held this hearing a year ago. That's when the tender for the Ashdod refinery, a much more strategic asset, was conducted. A bigger company than Delek - Paz, which is owned by another tycoon, Zadik Bino - won the tender.
Some lament in retrospect that Paz was allowed to compete for the Ashdod refinery, claiming that Paz thus solidified its position as the country's strongest fuel company. They assert the Paz victory destroyed the hopes for competition in the fuel industry in the wake of the dismantling of the Haifa and Ashdod refineries. Paz now consumes Ashdod's full capacity, which makes Haifa the only refinery to sell fuel products on the open market - in uncompetitive conditions, though.
In contrast, some claim even now that the decision to break up the two refineries and to allow fuel companies to compete for the smaller one, Ashdod, will meet its goals. The fuel market of the past year is a new one, they say, in which there are no longer simply four companies with equally anti-competitive interests. Now there are five players will totally different interests.
One giant, Paz, owns a refinery. Another large refinery (Haifa) belongs to the Israel Corporation, which is threatening to become a new fuel company. Delek found itself out of the competition without a refinery, so it bought Pi Glilot to improve prospects of importing fuel. The other two companies, Dor Alon and Sonol, lack strategic assets and will therefore have to compete for anything else that moves. Hopes are that this structure of divided interests will obtain a new kind of competitiveness in the fuel industry.
It's too early to tell which scenario will develop in the industry, but clearly, discussion of its future should have been held a year or more ago. Now, it's too little, too late.
It's also a bit of an exaggeration to term this structure a "nation of oligarchs." This is not just because oligarchs, in the Russian context, are associated with buying public assets on the cheap and in not entirely legal ways. All three assets mentioned were sold in fair and open competition at prices that surpassed expectations. Whether or not the buyers profit from their acquisitions, the presentation of Israel as a state being stripped of its assets at unreasonable prices is simply not true. Government companies in Russia were sold at a tenth of their value. In Israel, at least during the past decade, almost all government companies were sold at or near their full value.
The term "nation of oligarchs" does an injustice to the tycoons to whom it is attached. Not one of them is tainted by suspicions of dire criminal acts like the Russian oligarchs are. In any event, we are not Russia, neither in its positive associations nor its negative ones. Israel, in contrast to Russia, is a very small market, which makes it very vulnerable to economic overconcentration. Even if the term oligarch does an injustice to all the Dankners, Tshuvas, Binos, Ofers and Levievs, there's no doubt a feeling of discomfort is seeping in because of the growing strength of a small number of tycoons.
This deserves attention, and we should continue to consider whether there's room in the Israeli market to limit the power of those who hold a great number of companies simultaneously. Is there room for legally limiting the concentration of power from different branches in a few hands, which leads to excessive power? This question remains in full force with the reopening of the privatization of Bank Leumi, and the possibility that both Nochi Dankner and Tshuva will compete for it. The Knesset needs to debate this question well before the bank goes out in a new tender, and not like it did the sale of assets in the fuel industry, whose fate was determined more than a year ago.
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