Gas Deal Proves Netanyahu Is a Captive of Crony Capitalism

The prime minister has sent regulators a clear message: Toe the line or face the ax.

Emil Salman

Four years ago, Eytan Sheshinski headed a committee that recommended jacking up tax on oil and gas discoveries in Israel. Last week he was asked why he now supports the government’s deal with the gas monopoly, which moots much of his committee’s recommendations. “The commander has changed his mind,” Sheshinski remarked, not naming names, but leaving no doubt whom he meant.

Not the energy minister Yuval Steinitz, whom Sheshinski advises these days. No, the professor had been referring to Benjamin Netanyahu, who led reforms to reduce economic concentration and create competition – but has abandoned these principles in the last half year, and is building the biggest private monopoly in Israeli history.

What happened to Netanyahu? That’s anybody’s guess, but Bibi seems to have changed his spots. He seems to have lost interest in economic affairs and when it comes to the gas, to get positively hysterical.

Yossie Hollander, a high-tech entrepreneur who’s been active in the global energy industry for the last 10 years, stands jaw agape at the keenness with which the prime minister has been serving the interests of the gas monopoly that overcharges us, its customers, and wants to step up exports, which imperils Israel’s energy security.

About a week ago, Orit Farkash-HaCohen was fired as chairwoman of the Public Works Authority (Electricity), who kept insisting the Israel Electric Corporation was being charged too much by the gas monopoly, and also warned against the dangers to Israel’s energy economy from the plan the government and monopoly are pursuing.

But Farkash-HaCohen wasn’t really an obstacle to the prime minister and his minions in their mission to push through the plan for the gas (which sets, among other things, the price of gas to Israeli industrial consumers and how much of it may be exported).

Farkash-HaCohen was brutally punished mainly for outing the government’s conduct regarding the gas. Her ouster wasn’t about who sets policy (government or regulator), nor was it about policy itself. Her dismissal was a signal by the prime minister and his partners to the regulators: Toe the line or face the ax.

Four years ago, Netanyahu was exhorting his ministers to “be Kahlons” – referring to Moshe Kahlon, the man who stood tall against the mobile magnates and brought Israel the cellular reform. Prices fell by 80%. This week Netanyahu’s message to the ministers was “be Steinitzes” – do what I tell you to do.

That is a destructive message. By human nature and economic incentive, regulators would rather serve the very bodies they regulate, not the amorphous general public. Regulators see their cronies who toed the line get cushy jobs, and regulators who fought the monopolies on the unemployment line.

And now Netanyahu has brought a new parameter into the equation: If you get too independent, you’ll be fired. Even if you think the law assures your independence, no law will stand in the way of a prime minister who wants to fire a senior official. Or maneuver him into quitting, as Netanyahu did with David Gilo, the former antitrust commissioner.

The cost-of-living protests that began in 2011 and the collapse of a few tycoons who had run the country changed the face of regulation in Israel over the past four years. One after another, the government bodies have had to adopt norms of serving the unwashed masses, not the powerful interest groups.

But independent regulation wouldn’t serve Netanyahu – he prefers strong regulation only when he can control it. His victory in the last election made Netanyahu more drunk with power than ever before.

A year and a half ago, in March 2014, he talked differently, telling TheMarker: “the main source of power that companies can unite with is politicians, thereby creating crony capitalism. In our system, it can also happen by connecting to other powers, such as the power of the press which has control over political powers, giving you crony capitalism If you prevent competition, you raise prices and you usually are penalizing the lower segments of society who are more dependent on lower prices for products and services as a proportion of their income. And that’s something that I’m particularly keen on avoiding.”

The commander has since changed his mind, and evil winds of crony capitalism are again frisking through his government.