Berlusconi, Bibi and Club Bunga Bunga

Anyone familiar with the high politics of world leaders knows about the close friendship between Russian President Vladimir Putin and former Italian Prime Minister Silvio Berlusconi. The two understand one another and enjoy one another’s company.

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Both devote a lot of attention to their appearance, enhanced by periodic Botox treatments. You may recall the incident about a year ago in which Putin disappeared for a week, prompting media speculation about conspiracies of a Kremlin coup. But Putin had simply undergone a Botox session.

Berlusconi and Putin both love women publicly. Berlusconi’s name will always be associated with his wild bunga bunga sex parties. Mainly, however, Berlusconi and Putin do or did whatever they have felt like doing with their countries.

When he ruled Italy, Berlusconi transformed himself into a powerhouse, vertically enmeshing a triad of business, government and the media. He was prime minister, a tycoon who hired parliament members as company employees, a media magnate and the owner of a leading soccer team, A.C. Milan.

Putin has been the all-powerful ruler of Russia for a decade and a half. His associates have taken control of many of the country’s assets, particularly in oil and natural gas, and the financial assets that he controls are estimated in the billions of dollars. Putin may not directly control newspapers and television networks, but at the beginning of his rule, he saw to it that oligarchs with newspapers that opposed him fled the country and sold their media outlets to Putin associates.

In his book “The Strongman: Vladimir Putin and the Struggle for Russia,” Angus Roxburgh even wrote that Putin refused to believe that newspapers in the West ran stories without coordination or directives from government authorities in their countries.

In substance, the approach employed by Putin and Berlusconi is rather simple. It’s one big bunga bunga. Bunga bunga directed at government institutions, bunga bunga on personal lives and on the interests of members of the public.

Joining the club

A few months after establishing his government and hours before his cabinet approved the government’s policy blueprint on Israel’s major offshore natural gas reserves, it appeared that Prime Minister Benjamin Netanyahu had also decided to join the bunga bunga club. He also seems to want to have control of the entire business-government-media package.

Netanyahu began his new term in May by exerting control of sorts over the communications sector and immediately sacked the director general of the Communications Ministry, appointing his own man in his place.

The prime minister may have had editorial control over the pro-Netanyahu newspaper “Israel Hayom,” backed by his associate, Las Vegas gambling magnate Sheldon Adelson, but that wasn’t enough for him. Rather than appointing a communications minister, he took the ministry for himself to exert regulatory pressure on the news operations at the television stations.

Even before the elections, Netanyahu had begun asserting control over business. He brought about the resignation of Antitrust Commissioner David Gilo, who had sought to break up the natural gas cartel and pushed for quickly wrapping up a regulatory agreement with it. A week ago, he brought about the resignation of the chairman of the Electricity Authority through his proxy, Energy Minister Yuval Steinitz.

The next step in the link-up with business came this week with the cabinet’s approval of a revised gas policy framework. The plan, whicheffectively transfer s national assets to a private, unsupervised monopoly was pushed through the cabinet despite doubts expressed at a public hearing; in reports by State Comptroller Joseph Shapira and the Electricity Authority; and in comments by Bank of Israel Governor Karnit Flug.

Netanyahu, Steinitz, the Finance Ministry, the gas companies and the other patrons of the government’s plan contend that mechanisms and price ceilings have been added that ensure a fair deal for all sides, but the final framework agreement isn’t substantially different from the previous version. From the beginning, Netanyahu instructed his staff and those loyal to him to close the deal with Noble Energy and Delek’s Yitzhak Tshuva in a manner that would satisfy them.

And how do you satisfy a business monopoly? You give it those things that it wants most, minus a few things left out mainly to allow the entire package to pass muster with the cabinet, the Knesset and the public.

It didn’t have to be that way.

Other than the United States, where there is stiff competition among a number of large energy companies, almost all of the countries in the West have chosen to regulate their energy markets by combining public and private involvement, thereby gaining at least partial control of the market. Norway, the Netherlands, Britain and most other Western nations have adopted such hybrid models.

In Arab countries in the Middle East, the market is under total public control. Everything belongs to the government.

There is one country, however, where the whole market was put in the hands of a single business consortium with no price controls. That country is called Israel.

Steinitz and Amir Levy, the Finance Ministry budget director, would argue that at the last moment they managed to bring about a significant drop in the gas price, but it’s simply for show. A month-and-a-half ago, we noted that the price specified in the original policy outline was just for purposes of negotiations and that the price everyone intended from the beginning was around $4.80 per million Britishthermnal units of gas.

It did the trick. Economy Minister Arye Dery demanded a lower price on behalf of the “invisible” poorer sector of the Israeli population. Yesh Atid leader Yair Lapid said something about the cost of electricity for the middle class. Zionist Union Knesset member Shelly Yacimovich arranged conferences for all of the opponents of the plan, and Meretz party leader Zehava Galon issued statements almost daily.

The cartel said changing any of the framework terms was inconceivable; it was a package deal that had to be adopted as a whole, and when it came to price, there was nothing to talk about.

And what happened? The price was reduced to $5 per million BTU and to $4.70 next year, and the monopoly agreed. Now it is even harder for Knesset members to buck Netanyahu’s pressure and vote against the agreement.

But the government could have created a hybrid public-private partnership, as in Norway, and then the returns required by investors could have been much lower, for example, between 3% and 5%.

Such a structure would have put the interests of the domestic market ahead of the interests of the companies involved. Instead, the government went with an entirely corporate operation and surrendered to its demands for exports so that the companies could recover their investment more quickly. This all comes at the price of Israel’s energy future. What exactly will be left for future generations of Israelis?

Mission accomplished?

Now he is completing a huge first deal on the business side, getting cabinet approval of a gas framework that meets the demands of a cartel. That cartel will be beholden to Netanyahu for going to bat for them, and they also know that the prime minister could change the rules of the game in the future, were he to want to.

A government-business-media triad in the hands of one person? Mission accomplished.

Netanyahu might not have adopted some of the juicer behavior of the leaders of bunga bunga, but, that aside, he can ask for admission to the club frequented by Putin and Berlusconi and friends. If he had to appear before an admissions committee, Netanyahu could proudly present his accomplishments: Deals in the private sector benefiting companies close to him without any government oversight? Check.

Crushing regulators, senior functionaries and government institutions that bothered him? Check. Political deals at the expense of the public purse? Of course.

The good life, good food, attentive service and cigars? Of course. Taking control of part of the media and weakening other parts? A lot has already been done and they’re still working on it.

Bunga bunga parties? We don’t know about that, but if they do take place, the public isn’t being invited.