Analysis

Netanyahu Ensures Loyalists Get Crucial Economic Ministries

Transportation, Energy and Environment are usually considered to be second-string portfolios, but for the prime minister they are critical

Hagai Amit
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Prime Minister Benjamin Netanyahu, flanked by Likud MKs, at a campaign event during the last round of elections in Ramat Gan, February 29, 2020.
Prime Minister Benjamin Netanyahu, flanked by Likud MKs, at a campaign event during the last round of elections in Ramat Gan, February 29, 2020.Credit: Tomer Appelbaum
Hagai Amit

Two days before the new government is slated to be sworn in, the public’s attention has focused on which Likud politicians will be getting which portfolio.

The allocation of ministries between the parties has already been decided. Yaakov Litzman (United Torah Judaism) will get Housing and Construction, so that housing for the ultra-Orthodox will get priority at the ministry. No less important is that Kahol Lavan is getting the “democracy” ministries – Justice and Communications.

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Prime Minister Benjamin Netanyahu’s Likud chose for itself the infrastructure and energy sectors, meaning the ministries of Transportation, Energy and Environmental Affairs. That’s no accident.

Netanyahu not only chose those ministries for his party but wants to ensure those closest to him get them. Thus, Miri Regev is the top candidate for Transportation; Yuval Steinitz is likely to remain at Energy, if he isn’t appointed ambassador to London or Paris; and Zeev Elkin is expected to get Environment.

His reasons are manifold. Some of them involve public relations and jobs that are critical for maintaining loyalty. In other cases, it’s to make sure those closest to him are making decisions that affect powerful business interests and labor unions. These ministries are often regarded as second string, but they have considerable power.

The energy and transportation ministries have a relatively large number of state-owned companies under their umbrellas, meaning they offer lots of opportunities for political appointments.

Combined with the fact that Likudnik Yisrael Katz will be heading the Finance Ministry, Netanyahu will control appointments to senior positions at Israel Electric Corporation, the water company Mekorot, Israel Natural Gas Lines, the ports, Israel Railways, The Israel Airports Authority and the company building the Tel Aviv Light Rail.

More than that, government sources who spoke on condition of anonymity explained that these ministries offer the prime minister the opportunity to use ribbon-cutting ceremonies and other photo-op benefits he can use as political capital.

The Transportation Ministry provides ample opportunities to show concrete achievements and over the next three or four years of the incoming government there will be plenty of these, most notably the inauguration of the Tel Aviv Light Rail. Netanyahu can be counted on to be there as each station is ceremoniously opened.

Likewise, the completion of the Jerusalem railroad electrification and the inauguration of the new, privately owned and managed ports in Haifa and Ashdod will offer more photo ops.

Thus, it’s important for Netanyahu to have a loyalist at the Transportation Ministry, just as he had in the past when Katz held their portfolio and made sure to invite the prime minister to the opening of every new highway interchange.

In addition, a loyalist at the Transportation Ministry can be sure to steer the prime minister clear of controversial issues, such as construction work on Shabbat.

Beyond the public relations value of the ministry, it also gives the prime minister a connection with the most powerful workers committees – at the ports, airports, railways and taxi drivers. All of them have a big presence in the Likud Central Committee and can exert a lot of political influence.

Having a politician from outside the Likud, such as Bezalel Smotrich (Union of the Right-Wing Parties) who has held the portfolio for the past year poses the risk of needless warfare with the unions. Netanyahu also needs someone running the ministry who can massage regulations and antitrust issues to suit his political needs – without the prime minister getting involved and taking responsibility.

An example of this occurred last January when Netanyahu was forced to personally reject a proposal by Smotrich to reform the taxi industry by making pricing more transparent and lower for inter-city rides.

During the term of the next government, the Energy Ministry will be playing a key role in what energy industry sources say will be a major policy challenge – a giant initiative to electrify private transportation. This will impact on the business of the companies that now dominate the market and the minister leading it will be required to act carefully.

That is why, just like the Transportation Ministry, Netanyahu was not prepared to consider giving Energy to Kahol Lavan for the time being, according to the coalition agreement the two parties have signed.

In fact, Kahol Lavan has an appropriate candidate to take the Energy Ministry – Knesset Member Orit Farkash-Hacohen, who has spent most of her career in the energy sector and was chairwoman of the Electricity Authority until 2015.

But in the end, Likud got the portfolio due, as industry sources explained, to the far-reaching changes it will be overseeing and the business interests that are at stake as Israel moves into an era of low-carbon economies and a greater reliance on alternative energy sources.

The next minister will have to contend with the automobile importers, the oil companies and even building contractors, who will have to adjust to requirements for smart, energy-efficient homes.

A key component, they said, is to lead the transition from natural gas, of which has plenty thanks to the Tamar and Leviathan fields, to renewable energy. In the transition, gas will play a supporting role to eventual full reliance on renewables. That transition doesn’t square with the interest of the big energy companies that control the two fields.

By the end of this year, Israel is supposed to be generating 10% of its energy from alternative sources. Steinitz, who has geld the portfolio until now, wants the share to reach 30% by 2030. That isn’t an ambitious target by international standards, but for the gas companies it is still unwelcome.

The next energy ministry will come against the gas companies on other matters as well. Starting next year, IEC, by far the biggest consumer of domestically produced gas, will be entitled to ask for prices up to 25% lower for its gas. It will be the energy minister that decides when the utility acts to get the full price cut or only a partial one.

That responsibility has been magnified by the collapse of global energy prices in recent months. The decline has made the usually high prices that were fixed in the 2015 gas framework agreement even less justified than they were in the past. It will be the next energy minister’s job to threaten and cajole the gas companies.

His or her task won’t be made any easier by the fact that Yitzhak Tshuva, who controls Delek Group, one of the big two energy companies, is in financial straits after poorly timed investments in overseas energy assets. More than ever, he is reliant on the high pries IEC is paying for gas. The result is likely to be a bitter struggle over prices.

Vis a vis the Environment Ministry, Kahol Lavan had a good candidate for the portfolio with MK Miki Haimovich, who joined the Knesset with the plan to focus on green issues. Last year, she called for Israel to keep its natural gas in the ground and focus instead on alternative energy.

In all events, the environment minister will be tested in the post-coronavirus setting as business seeks easier standards to contend with losses and a sluggish economy.

Oil Refineries Limited is threatened by a plan to rid the Haifa Bay area of polluting factories like the refineries. It had been put on hold for the last year during the extended election season, but now that it can move forward under the new government, the plants that are affected are going to protest the extra costs

Regarding the gas companies, the struggle over the siting of natural-gas processing facilities has already been the issue of regulation of emissions will continue with the Environment Ministry at its center.

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