We can, and must, be proud of the stormy debate in the Knesset Economic Affairs Committee on Monday regarding the natural gas regulation framework. It has been a long time since we have seen the country so stirred up over an economic discussion, especially one that is so complicated and difficult to understand.
- Government offers big tax perks to gas firms
- Government must work to improve natural gas deal for Israel
- Netanyahu’s new monopoly rules: deception, destruction and denting democracy
It is doubtful whether most of the public, not to mention the Knesset members, understand the issue in depth, but nonetheless everyone is shouting as loud as they can, going out to demonstrate, being interviewed and filling the media with little but natural gas. If there remain those who doubt the amazing success of the cost of living protests in the summer of 2011, the current debate should put those doubts to rest: Israel has grown up and changed over the last five years, and economic issues now occupy our attention no less than those pertaining to security. We should be proud.
But such maturity did not come without the usual childhood diseases. One, the disease of cynicism and suspicion, erodes the publics faith in the government to such an extent that it endangers its ability to govern properly. Instead of arguing at a professional level, we are casting doubt on the legitimacy of the decisions, and even worse – on the legitimacy of those making the decisions.
The coordination of the messages of the gas companies with the spokespeople of the government is embarrassing, said MK Shelly Yacimovich (Zionist Union) on Monday, which seemed to imply that public officials were acting improperly and, it goes without saying, corruptly.
The government is abandoning Israeli interests and energy security, MK Dov Khenin (Joint Arab List) told the committee, in what is legitimate criticism – but also wildly extremist.
You are working for Noble Energy, said MK Miki Rosenthal (Zionist Union,) in what was less a hint than a harsh accusation against government officials, calling them corrupt. And it is impossible not to mention the most extreme of all of them (as always,) former Finiance Ministry accountant general Yaron Zelekha, who called on Saturday for the opening of a criminal investigation concerning the natural gas framework proposal.
What all these claims have in common is that instead of holding a legitimate public discussion on the gas regulatory framework itself – which no one claims is not problematic – instead, we are holding a debate over the legitimacy of the officials who made the decisions. Instead of trying to improve the proposal, or possibly proposing an alternative framework (which the Knesset has the authority to do,) we are busy slandering the good name of government officials in particular – and the entire country in general
The result is that it is doubtful whether the public understands the details of the arguments over the gas framework, but it certainly understands the bottom line: Israel is a corrupt country and its government officials have sold out the public to the gas tycoons. The Sicilian Mafia, it turns out, is here, too.
That is simply not true. There is not a shred of evidence that the Mafia has penetrated the ranks of government and, as far as we know, none of the Knesset members has any evidence either. (Nor, as far as we know, does Zelekha, which has not stopped him from calling for a criminal investigation).
The fact that the natural gas regulatory framework is so controversial – and that it was most likely possible to reach a better plan – is not enough to indicate corruption. At the very least it can teach us about the failings of government officials in conducting negotiations with powerful and sophisticated business organizations. It is not the first time, and it wont be the last, in which the government loses out in commercial negotiations.
All those calling for price controls on natural gas are advised to speak with the government officials who run the price supervision system in Israel. These officials are the first to admit that companies take advantage of them almost all the time. The supervisors of prices are aware that they really do not know how to evaluate the precise profitability of the products under their purview, and if all this true about setting prices for cottage cheese or standard loaves of bread, we can be certain that price controls over a complex product like natural gas will be many times worse.
Price controls would never lead to a competitive price for gas here. The gas producers would take advantage of the government and the supervised price would necessarily be higher than the true competitive price. We can already prepare for it.
That is the reason the government always prefers to create a competitive market over implementing price controls. In the case of the natural gas sector, we have failed to create a competitive market. Antitrust Commissioner David Gilo has one reason for this failure – we did not insist on a split between the two offshore fields, Tamar and Leviathan – while others, including senior officials in the Antirust Authority, have different explanations for the failure: The state woke up too late; it was never possible to create competition between two large offshore gas fields.)
In any case, the debate over the natural gas regulatory framework has started from the assumption that there will not be competition in the industry; a monopoly already exists. Given that uncomfortable situation, the question is what can now be done to minimize the damage as much as possible?
The focus on minimizing the damage has given rise to ideas such as making do with splitting off just the two small gas reservoirs (Karish and Tanin,) in the hope that it would create a small bit of competition (though we have our doubts.)
Another idea was to import a sort of competitive mechanism by, for example, basing the price of natural gas in Israel on an export price for gas – after all, there is no dispute that the gas export markets in Europe are competitive. A third idea was to reach an agreed-upon price limit for the gas with the companies ($4.5 per million BTUs today,) but that still requires holding hearings. We can assume with a good deal of certainty that it wont come to pass.
None of these ideas is exactly exciting. We are only undertaking damage control. But none of them are too bad, either. In other words, they do not serve foreign interests that cannot be justified economically. It is possible, and necessary, to improve the gas framework later. It is possible, and obligatory, to deal with a reduction in the price of natural gas through the hearings process. It is possible, and necessary, to remember that the main process of regulating the gas industry, that in which the government decided that its share of the companies profits will reach 60%, is the main strategic achievement of this process.
It is possible, and required, to remember that Israel wants to see the gas reach its shores as soon as possible, and even if mistakes have been made in pricing the gas along the way, they can be corrected later (with the entry of the export prices); and in any case, we will always have the not-so-cold comfort that at least we are enjoying up to 60% of the monopolys profits.
And in particular, it is important and necessary to remember that the supreme interest of the country is governance with the faith of the public. There is nothing in the regulation of the natural gas industry that shows us anything about government corruption, and therefore there is no room to cast aspersions on government officials and the state. The damage caused by a dollar more or a dollar less in the price of gas is less important compared to the damage of eroding the publics faith in the fairness of its government.
We have enough real problems concerning the functioning of the government – inefficiency, low productivity, half-baked decisions, atrophied bureaucracy, preferring short-term political interests over long-term national goals, veto power for large interest groups – without having any need to invent new problems for ourselves, which it seems dont really exist.
Government corruption is not the problem in the natural gas framework, so stop slandering the country. We must focus now on improving the proposed framework, and not in slinging mud and insults.