Analysis

Netanyahu’s New Monopoly Rules: Deception, Destruction and Denting Democracy

While we messed about with the minutiae of the gas deal, we almost missed the sheer scale of the madness in which our government is fighting on behalf of an interest group.

Another victory like that and we’re toast.

The euphoria last Monday night lasted mere minutes. A small group of social activists and rather larger group of demonstrators, and a surprising political constellation, managed to thwart Prime Minister Benjamin Netanyahu and his people, who proved unable to pass the so-called “plan for Israeli gas” through the Knesset.

Only after the euphoria of the victory – which could yet prove ephemeral – did we realize how pathetic this moment really was.

While we all focused on the plan for Israel’s offshore natural gas and the never-ending changes to the plan, while we considered the arguments of the Noble-Delek gas monopoly versus the Finance Ministry – we almost missed the true magnitude of the insanity in which we’ve all been participating. This is a truly twisted story, from beginning to end.

For about half a year, a small group of government officials had sat behind closed doors and negotiated with what will be the biggest monopoly in Israeli history (when asked why this team’s work was not being disclosed, government representatives said there was no team or commission, just routine work being done).

Yet just before that small group was done with its discussions, the prime minister and his people delivered an agreement to cabinet that no public eye had scrutinized. They argued that the issue at stake wasn’t economics at all, but security and defense. In parallel – in what was apparently a first in Israeli history – the prime minister tried to bypass the antitrust commissioner, David Gilo, who had wanted to break up the gas monopoly. (In early May, Netanyahu’s office, joined by the finance and energy ministries, opposed any such move.) Gilo resigned.

The astonishing thing is that only after the whole move fell apart, only after an eye-popping day in the Knesset – during which Netanyahu called the issue the battle of his life, and, when he lost it, accused two cabinet ministers who had abstained of corruption – only then did representatives of the government even publish the plan.

Pulling a fast one

There’s nothing new in trying to pull a fast one in the Knesset. That’s politics. But the chain of events behind Black Monday was unparalleled, including in the sheer scope of the issue at stake. Decisions about this gas will affect the Israeli economy, public health, the cost of living in Israel, the development of Israeli industry – and also the future of regulation.

This was the chain of events: The government decided to castrate the antitrust chief; then it decided not to hold a substantive discussion on the gas plan by defining the topic as defense, not business; however, since the antitrust commissioner wanted to dismantle the gas cartel, he needed bypassing. Transferring powers from the antitrust commissioner (to the economy minister) would have required the Knesset’s permission, which was sought through a last-minute vote. Yet throughout, the Knesset members had not been shown the plan in question.

There was also an embarrassing moment at the cabinet meeting, before the Knesset debacle. The prime minister presented the gas figures; the environmental protection minister asked how such a decision could be made without discussion and presentation of alternatives; the prime minister ignored him; and most of the ministers kept their peace and voted in favor.

Rooting for the monopoly

For decades now, Israeli governments, especially the Finance Ministry, have used sudden Knesset moves to push through economic ideas. The entire rationale behind the loathed Economic Arrangements Bill is for the Finance Ministry to bundle together a bunch of reforms in one single legislation, drop it on the ministers right before a cabinet meeting, wheel and deal, and in the morning – presto! – the people of Israel wake up to a new series of major moves.

But what the prime minister and Finance Ministry were doing this time around had the opposite economic and political logic.

The great disadvantage of the Economic Arrangements Bill is that the Finance Ministry uses it to bypass public debate and, mainly, the Knesset regarding economic reforms. Its advantage is that it enables the ministry to advance moves for the greater good that interest groups would have otherwise shot down.

A lot of important reforms for the greater good have passed through the Economic Arrangements Bill. But this time, the prime minister and Finance Ministry were trying to bypass public debate not because they feared that the monopoly – the interest group – would win, but that it would lose.

Opponents to the gas plan, as leaked to the press in recent weeks, included organizations and politicians without interests in the gas market, who wanted to represent the public good.

In the past, the Finance Ministry excused its opportunism by saying it was the only player in the public arena that could make sweeping decisions for the greater good of the unrepresented public, because the other players in the public arena (other ministries, parties, ministers) were far more exposed to pressure by the interest groups.

Now everything is upside down. The prime minister and Finance Ministry budgets department are negotiating with the interest group – apparently the biggest and most focused interest group in the history of Israeli economics and politics – and they are making every effort to prevent discussion with representatives of the group that’s supposed to enjoy (or suffer) from the results of the gas plan: the public.

So while the prime minister undermines democracy, the Finance Ministry’s budgets department is undermining its own most important principles. It is shooting itself in the foot. The budgets department, whose entire status relies on it being the only professional entity that can and is prepared to take on the interest groups, is trying to close a deal with a gigantic interest group, without public discussion.

Former budget officials say the ability of the government in general, and of the department in particular, to spearhead structural reforms has been damaged by the growing power of the interest groups and the loyalty of most politicians to those groups, which know how to reward loyalists. We have seen these things at the Israel Electric Corporation and the ports. And in recent years we have seen the capitulation to every belligerent group, within the government or without, that didn’t want the status quo to change.

The only remedy for this political paralysis, admit Finance Ministry people, is for the public to become aware of the things that matter, even if they don’t touch its pocket immediately.

Regarding the gas, the public is waking up – as we see from the thousands of people taking to the streets in protest. The government, however, has been ignoring them. It is a sad day for Israeli democracy.

It is in the prime minister’s nature to disregard other voices. His tendency became even more extreme after the latest election, identifying any opposition as a left-wing plot designed to overturn the government. But over at the Finance Ministry’s budgets department, they know how to distinguish between opposition to a giant monopoly and issues of Greater Israel. Yet they took this democratic moment and trampled all over it, hand in hand with the prime minister.

The budgets department had been a crucial protective element in Israeli public service, and it should – and must – regain that status. It needs to shake off the mind control of the monopoly, put a stop to this process of approving the gas plan, and insist on a public debate, ahead of building the Israeli energy market – based on the understanding that it’s one of the most important markets we have, and we’re only just starting the learning process.

The headline says “mislead.” That’s a harsh word. But when the prime minister and his top people lead a process like the one we described, it’s hard to find a different one.

Steinitz’s complaint

All the people involved in writing the agreement of surrender to the gas monopoly have been blitzing the public with spin – none more enthusiastically than Yuval Steinitz. When the former finance minister repeated, for the umpteenth time, that he’d been the one who set up the Sheshinski committee (which studied the question of Israel’s royalties on the gas), something that happened just before the panel’s recommendations were approved came back to mind.

To recap, the Sheshinski committee, headed by economist Eytan Sheshinski, had precious few supporters in government. A lot of people at the Finance Ministry and the Prime Minister’s Office objected, at first, to amending Israel’s tax system, just because reservoirs of gas had been discovered beneath the Mediterranean Sea. Today, it is clear that the tax law needed amending. But back then (2010-2011), there was no such consensus. Steinitz, to his credit, ignored the internal government opposition and answered the public call to set up the committee, and threw his weight behind its recommendations.

Steinitz found himself facing fierce opposition in the Knesset. That was the interesting moment: A senior member of the government, wanting to promote the committee, started calling a certain senior editor, urging him to write more and more articles in favor of the panel and its recommendations. That newspaper fervently supported the committee anyway and, as the senior member of government said, without the newspaper’s support, the whole thing would collapse. It had to be on the front page day after day, because otherwise, taking on the tycoons would be hopeless.

He didn’t have to ask – the paper never stopped its campaign in favor of the committee, until it had passed the Knesset test.

This week, that very same individual faced the cameras and complained about that very same newspaper. The same concepts and the same battle against the monopoly, against the monopolistic rent, against the ties between government and big money, against the stranglehold of the interest groups – all were suddenly termed “Bolshevik,” socialist or just un-Zionist.

Steinitz, who had protected the Sheshinski committee, suddenly turned into the most fevered publicist for a move that voids much of the committee’s work. Taxes that were supposed to be paid by the monopoly are being rolled onto the consumer through doubled gas prices, with no controls or competition; the government also promised the monopoly protection from regulation for 12-15 years.

Steinitz spent a week running between television studios, brandishing the messages from the prime minister – which seemed like the messages from the monopoly. One might almost have forgotten that two years ago, during an interview, he said that when he’d been trying to push through the Sheshinski recommendations, he was afraid he’d be “eliminated.” Just so. Yet now he’s the best friend of this monopoly that two years ago had been so powerful, it might have been able to “eliminate” a senior minister.