Netanyahu Defends Contentious Natural Gas Deal as 'National Security' Interest

Prime minister presents case to Economic Affairs Committee; regardless of committee's recommendation, Netanyahu has power to override anti-trust law.

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Screen grab of Prime Minister Benjamin Netanyahu's testimony before the Knesset's Economic Affairs Committee. December 8, 2015.
Screen grab of Prime Minister Benjamin Netanyahu's testimony before the Knesset's Economic Affairs Committee. December 8, 2015.Credit: Knesset Channel

Prime Minister Benjamin Netanyahu appeared Tuesday morning before the Knesset's Economic Affairs Committee and made his claim for the contentious framework deal for Israel's natural gas market, which has been labeled as monopolistic. As acting economy minister, Netanyahu cited geo-political considerations for the deal and tried to make the claim for why they trump consumer or economic considerations.

"The security consideration is strong and comprehensive, and that cannot be ignored," Netanyahu said. "In connection to foreign relations: A country that exports things that are crucial for the surroundings or for other countries has far more power. I'm starting with an assumption that strengthening the country's power is vital for international security. Alliances and peace are made with the strong and not with the weak. If you're strong at cyber they come to you. The ability to export gas makes us more immune to international pressure. We don't want to be vulnerable to boycotts."

"The problem of energy costs is of concern to our neighbors. They think it's connected to their stability. We know that they live in a very shaky and difficult situation. What separates stability from instability and collapse are small things. Of course supplying gas to those countries adds another layer of stability that is in our interest even when it's in their interest. This is of particular importance to us in light of the commerce of extremist Islamic groups," Netanyahu added.

"As far as Egypt is concerned, we're speaking to them at length, to put it mildly. Yesterday I came to an agreement with the Egyptian government that I would send a special envoy to conduct a discussion for finding a solution in light of the strategic interests common to both sides. That's a very great interest. Those interests will dictate the reality," the prime minister said.

Members of the Knesset's Economic Affair Committee, December 6, 2015.Credit: Emil Salman

In response to Netanyahu's remarks, opposition chairman MK Isaac Herzog (Zionist Union) said that "It's clear to everyone today that on the gas issue the government's conduct under your leadership is amateurish. I don't understand how your entire speech is related to the energy economy and the consumer price."

Netanyahu will also have to explain how he intendeds to address the issue of a concentrated energy market by revoking the authority of Israel's anti-trust commissioner and by shielding the firms involved in the gas deal from regulation for the next 15 years, as the framework deal promises.

The gas deal has been criticized by both the opposition and the public as shady and exploitive of the country's natural resources. Israel's antitrust commissioner determined that the partnership of Israeli and U.S. companies - including Texas-based Noble Energy and Israel's Delek Group - constituted a monopoly.

Protesters wear masks depicting Prime Minister Netanyahu, Finance Minister Moshe Kahlon and outgoing Economy Minister Arye Dery at a rally against the gas deal in Tel Aviv, November 7, 2015.Credit: Ofer Vaknin

Economy Minister Arye Dery resigned from his post in October after refusing to invoke Section 52 of the Anti-Trust Law, which allows for overriding the law due to national security concerns.

Netanyahu assumed the role, and with it the ability to overturn the Anti-trust Law. This is the final hurdle that stands in the way of a green light for the gas framework. Regardless of the Economic Affairs Committee's recommendation, the prime minister has the power to go forward with his plan.

Benjamin Netanyahu and Arye Dery in the Knesset in 2015.Credit: Ronen Zvulun/Reuters

Thousands of people have taken to the streets in recent weekly protests - the biggest show of discontent with the government's economic policies since demonstrations over the country's high cost of living in the summer of 2011.

"The reason people are going out into the streets... is not just because the public opposes the deal. It's because the public understands, and it's not so difficult to understand, that a dubious deal has been prepared here," said Stav Shaffir, a student leader of the 2011 protests who is now an opposition lawmaker.

A partnership between Noble Energy and Delek Group, which is led by billionaire Yitzhak Tshuva, is the main developer at Israel's two larger gas fields, Tamar and the heftier, Leviathan. It also owns two smaller reserves. Leviathan, which contains an estimated 530 billion cubic meters of gas, has not yet been developed.

Energy Minister Silvan Shalom, right, and Yitzhak Tshuva, the controlling shareholder of Delek Group, on a drilling rig, March 27, 2013.Credit: Moshe Binyamin

The firms have been selling gas to the Israeli market from the Tamar field, which went online in 2013, and have agreed to sell to neighboring countries as well.

When the gas was discovered, it was billed as a panacea to Israel's economic woes, offering potential energy self-sufficiency, billions of dollars in taxes and royalties, and the chance to affect some energy diplomacy by exporting to Arab countries.

Israeli gas platforms, controlled by U.S.-Israeli energy group Noble and Delek, are seen in the Mediterranean sea, some 15 miles (24 km) west of Israel's port city of Ashdod.Credit: Reuters/Amir Cohen

Under the deal with the gas firms, Delek must sell its entire share of Tamar, and Noble Energy must sell most of its holdings, within six years. The companies must also sell their entire stake in two smaller fields. The forced sales are aimed at opening the industry to competitors. The deal also sets a price ceiling for future sales to Israeli companies and commits the gas firms to complete the development of Leviathan by 2020.

Bini Zomer, Noble's country director for Israel, said the Israeli government was responsible for seeing through its policies.

Critics say the fixed prices are too high when compared to other countries, and that the deal does not adequately break up the monopoly.

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