At a meeting on Tuesday to discuss a bill to establish a fund for profits from Israel’s recently discovered natural gas fields, former Finance Minister Yuval Steinitz said he had faced the most pressure regarding use of the profits from the White House.
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Steinitz made the remarks to the Knesset Science and Technology Committee, saying that while he was in office, the Obama administration had pushed harder than any of the other lobbyists and interest groups he had struggled against in negotiations over what to do with profits from the gas fields found off Israel’s Mediterranean coast in recent years.
Steinitz and other attendees used the meeting to urge a long-term perspective in the use of the profits, which has become a political issue in Israel.
“The main objective of this fund is to prevent the ‘Dutch disease’ from appearing in Israel,” Steinitz, said, referring to the economic theory that increased exploitation of a nation’s natural resources can lead to inflation, thereby harming its competitiveness, as observed in the Netherlands after 1959. “This requires a balance between import and export. Money from gas profits and this fund should be used for education, welfare and the economy or for dealing with emergencies. It stands to reason that this fund should benefit future generations. At this stage, it would be wrong to determine any investment policy.”
Eytan Sheshinski, an economics professor emeritus at the Hebrew University of Jerusalem who headed a committee to explore taxation of the gas, said he was pleased that Israel had adopted the Norwegian model, in which some of the profits are transferred to pension funds. He added that local markets are already adjusting to expected revenues.
MK Erel Margalit (Labor) warned against using the gas profits to fund security-related programs. “The defense establishment should be prevented from laying hands on even one shekel of these profits, since this fund will be a key financial instrument,” he said. “Their demagoguery should not confuse us. The main question is who manages the fund and in what manner. Overseas, profits have been used to develop infrastructure and the education system.”
By law, the government will be able to tap into the fund only with a 65-vote Knesset super-majority. Former MK Rabbi Michael Melchior said, “In order to prevent the government from using the fund to manage crises, the law should determine that it can only be used for multi-generational purposes”.
In contrast to most Knesset members, MK Meir Sheetrit argued the profits should be used to meet immediate needs. “The current generation has severe problems that cannot be neglected. Many people are poor with insufficient education and it’s wrong to forbid helping them with these funds,” he said.
Committee chairman Moshe Gafni warned against snap decisions, saying, “This bill will have an impact for many years, so there is no rush to push it forward. It’s important to study the issue carefully, listening to all relevant parties.”