Israeli Monopolies Have High Hopes for New Government

Port workers face privatization, but the cartels running the ports, supplying electricity and developing natural gas expect a benign environment.

Avi Bar-Eli
Avi Bar-Eli
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IEC's Reading Power Station, north Tel Aviv.
IEC's Reading Power Station, north Tel Aviv. Credit: Moti Milrod
Avi Bar-Eli
Avi Bar-Eli

Two weeks ago, when Likud broadcast a campaign video comparing port and Israel Broadcast Authority workers to Hamas terrorists, the Haifa Port union chief threatened to flood the polls with voters for Zionist Union.

“We’ll organize rides to the polls . Netanyahu is finished as far as we’re concerned,” vowed the union chief, Meir Turgeman.

But Turgeman didn’t come through, which isn't surprising because he's a declared supporter of Prime Minister Benjamin Netanyahu’s Likud party. But the port workers, like those of a host of other monopolies, can’t be too happy with the election results.

Yisrael Katz, a Likud leader and transportation minister, has been the driving force behind the government’s plan to set up two privately operated ports to compete with the state-run monopoly at the Haifa and Ashdod ports.

Observers say there are even odds that Katz will retain the portfolio, which would mean the next stage of the plan, a tender to operate the new Ashdod private port, will move ahead. On Monday, the tender to operate the Haifa port was awarded to China’s Shanghai International Port Group.

But even if Katz moves on to a more senior ministry, it's unlikely his successor will reverse or ease port privatization. A Likud minister won’t undo the work of a colleague. Naftali Bennett, the Habayit Hayehudi leader, is no friend of the port workers. Two years ago he called for the army to man the ports in the event of a strike.

On the other hand, the workers' committee at the Israel Electric Corporation stands a much better chance of retaining its monopoly as a state-owned utility.

David Tzarfati, the IEC union boss, is a Labor Party activist, but in the last Netanyahu government he won a compensation package for workers that would have cost the government billions of shekels in return for a mild restructuring of the power sector.

Yair Lapid, then finance minister, blocked the deal, but Lapid is almost certainly heading for the opposition.

Silvan Shalom was energy and water minister in the last government, ostensibly in charge of the IEC, but he opted to stay on the sidelines, neither supporting the mild reform nor opposing it. This way he could stay in the unions' and general publics' good graces.

Tsarfati, however, is likely to find a sympathetic ear from the prospective finance minister, Moshe Kahlon, the Kulanu party leader, who has traditionally been friendly to public-sector unions. “Better to struggle against tycoons and not the workers' committees,” Kahlon said during the campaign.

Finance Ministry officials have been at work the last two months crafting another plan for restructuring the electricity sector, with the IEC retaining its monopoly over transmission but losing it on generation. That would still entail layoffs and efficiency measures that unions would fight.

The stock market was convinced the day after the March 17 election that the natural-gas cartel, with Delek Group and Noble Energy at its center, would survive efforts by Antitrust Commissioner David Gilo to break it up. Energy stocks rallied the morning after.

The two companies, which control the giant Tamar and Leviathan gas fields, feared a political revolution that would have brought Zionist Union and Labor's Shelly Yacimovich into power. They were saved, but now they have to face the indifference that Netanyahu and Shalom displayed toward the industry, letting regulators like Gilo set policy without interference.

But two new personalities are entering the scene with the new government.

One is Kahlon, who has vowed to break up the cartel and ensure “fair and reasonable” prices for natural gas. Still, he has said he prefers to control prices via competition rather than regulation.

The other new man is Moshe Gafni, the head of the ultra-Orthodox United Torah Judaism party. Gafni, who is angling to take control of the Knesset Finance Committee, worked side by side with Yacimovich in the campaign against the Delek-Noble cartel and opposes any efforts to find a compromise to Gilo’s plan.

“Gas is a gift from God to all the citizens of the country, not to a small number of rich,” UTJ said in its campaign platform.

The water monopoly enjoyed by the state-owned firm Mekorot has gotten far less attention, but the company and its unions sweated out the election. A government committee headed by Ram Belinkov has faulted Mekorot for waste and inefficiency and has recommended that the return Mekorot is entitled to be slashed to 4.5% from 6.5%, and that it divest its EMS Mekorot Projects development unit.

Shalom has blocked the recommendations from being put into effect. Mekorot and its unions can therefore be confident this won’t happen during the next government, with Shalom retaining the portfolio and Kahlon overseeing the treasury.

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