Israel's Antitrust Chief Gone and the Gas Companies Will Push Netanyahu Into a Corner

PM may have overplayed his hand in forcing out Antitrust Commissioner Prof. David Gilo. He doesn’t have agreement with gas cartel and odds of getting one don’t look very good.

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Outgoing Antitrust Commissioner Prof. David Gilo, May 26, 2015.
Outgoing Antitrust Commissioner Prof. David Gilo, May 26, 2015.Credit: Ofer Vaknin
Avi Bar-Eli
Avi Bar-Eli

The dramatic resignation of Antitrust Commissioner Prof. David Gilo on Monday is brings a sigh of relief from the natural gas industry, lifting a heavy weight off the chests of government ministers and saving a host of senior civil servants the misery they would have endured in an internecine battle at the top of government.

Gilo’s departure removes the last obstacle to a compromise agreement between the State of Israel and the gas cartel, led by America’s Noble Energy and Israel’s Delek Group. The antitrust chief stood alone against the Prime Minister’s Office, the energy and finance ministries, and even his professional staff in opposing a compromise.

Or maybe his departure does not make everyone’s life easier. When the dust settles from the Gilo resignation, it is likely to leave as many question marks as it resolves.

For one, the compromise with the gas companies, over which Gilo quit in protest, does not in fact exist. Its main points have appeared in newspaper headlines only and even then only in partial form. The compromise formula hasn’t been signed on by Noble and Delek – actually, they haven’t even formally been presented with it.

In other words, the government and its chief antitrust regulator fought a harsh battle that led to the latter’s resignation, for now, over nothing, or certainly nothing to justify such a drastic action on Gilo’s part.

Prime Minister Benjamin Netanyahu on Tuesday adopted publicly what was termed the “final” proposal for partially dismantling the gas cartel without knowing that he has a partner in the form of the gas companies. He has committed himself to a theoretical and still unformed proposal, and now will enter into negotiations with the gas companies with Prof. Gilo serving as the bad cop to his good cop.

Say what you want about Noble and Delek, they don’t staff their top ranks with idiots. If the other side in future talks has already handcuffed himself to a single outcome, and given up the ace he was holding by not troubling to resolve a host of critical regulatory and commercial issues that remain open, they will press their advantage to the maximum. .

How can the government come back to the public after all this commotion about Gilo and say there’s no agreement?

Netanyahu didn’t let the negotiations proceed with Gilo still in office, but instead pushed him to resign by running a campaign of high-profile threats. It was a huge tactical mistake. What sword will the prime minster hold over the heads of the gas companies when he tries to set a ceiling price on natural gas?

While trying to establish who’s the boss, the prime minster pushed himself into a corner. The public, whose standard of living will be critically influenced by the structure and regulation of the natural gas industry that emerges from all this, has good reason to be concerned.

In tendering his resignation, Gilo will refuse to sign on to any agreement presented to the antitrust court based on a compromise negotiated with Noble and Delek. In order to ensure approval of the agreement, the government will have to decide between two difficult alternatives.

One will be to wait until a new antitrust commissioner is named and condition his or her appointment to signing on to the agreement. The second is to try to do an end-run around Gilo by making decisions at a cabinet or security cabinet level on the grounds that an arrangement for the natural gas industry is a national security issue, or that it has implications for Israel’s foreign policy. Less dramatically, they could try to convince Gilo’s boss, Economy Minister Arye Dery, to overrule his antitrust commissioner as he can under clause 52 of the antitrust law.

The fact is neither of these two strategies is likely to be used. They involve complicated legal maneuvering and lengthy procedures that will expose the government to petitions to the High Court of Justice. As it is, the government negotiating team is vulnerable to a suit because it acted without being officially appointed, without keeping minutes and without public hearings.

Given all the problems lying in wait, wouldn’t it be better to try a new round of talks with Gilo and bring him back into the process?

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