No Oligarchs Here

The Knesset Economics Committee had an insight yesterday.

At the urging of Knesset member Avshalom Vilan, the committee convened to discuss the sale of fuel storage company Pi Glilot to oil baron Yitzhak Tshuva, and a stormy meeting it was.

Vilan set the tone by calling to stop the process of the sale: "Israel is turning into a state of oligarchs," he averred.

The insight that the Knesset Economics Committee suddenly had was interesting, mainly in its timing - the day after Pi Glilot's sale to Tshuva's company Delek Group.

One might think that if the about Israel morphing into " a state of oligarchs", in which a handful of rich men gained control over strategic assets, they'd have held the discussion before the sale, not afterwards. They could for instance have blocked the so-called oligarchs from participating in the tender.

But with the race finished and the winner declared, that's rather closing the stable door after the horse has bolted.

Actually - if the distinguished parliamentarians were genuinely worried about competition in Israel's fuel sector, and of a few veteran fuel companies mushrooming in power, they should have held the discussion a year ago.  That's when the tender for the Ashdod refinery, a much more strategic asset, was conducted. A bigger company than Delek - Paz, which is owned by another tycoon, Zadik Bino - won the tender.

Some lament in retrospect that Paz had been allowed to bid for the Ashdod refinery. That solidified its position as the country's strongest fuel company, they moan.

They assert that Paz's victory dashed any hope that competition might arise in the fuel sector, after Oil Refineries was split into two competing facilities (Ashdod and Haifa). Paz today consumes the Ashdod refinery's entire output, which makes Haifa the only refinery selling distillates to the local market, under terms that are, naturally, not competitive.

A new world?

Then there are others, who claim that the decision to split Oil Refineries, and enable the fuel giants to compete to buy the smaller one (Ashdod - the bigger one, Haifam was floated) will yet achieve the state's purpose. Israel's fuel sector has changed beyond recognition since then, they say: it is no longer controlled by four giants that had the same anti-competitive interest. Now there are FIVE players that have different interests entirely.

The five are: Paz, a giant that owns a refinery.  Israel Corp, which owns a controlling interest in the Haifa refinery and which threatens to open a new fuel company. Delek, which doesn't have a refinery and which therefore hastened to buy Pi Glilot, which improves its chances of importing fuel. And Dor-Alon and Sonol, which don't have any strategic assets and which will be pressed by competition from every possible direction.

The split in interests will usher in a new era of competition, some say.

It is still early days to say who's right. But it is clear that the debate is too late. It should have happened a year or more ago. With the Ashdod refinery sold to Bino, the Haifa refinery sold to The Israel Corporation, and Pi Glilot sold to Tshuva, it's no time to cry over spilled oil.

Wronging the local tycoons

It is also rather excessive to call this structure "a state of oligarchs". The context of oligarchs, in Russia at least, is rich men with corrupt connections in government, or the Russian mob, buying state assets for peanuts, by something other than legal processes.

Israel sold all three assets through open, fair processes, at prices that went far beyond initial projections. Whether the buyers will profit from their acquisitions or not - presenting Israel as a country stripping its public of their assets for ridiculous prices, is wrong.

Russia did sell government companies for a tenth of their fair value to darlings of the Kremlin. At least in the last decade, Israel has not.

The phrase "oligarchs" also wrongs the businessmen in question. None has been stained with so suspicions of crime, which cannot be said of the Russian "oligarchs". We are not Russia, for better or worse.

Worse - Israel has a tiny economy, certainly compared with Russia's giant one. We are more vulnerable to concentration of power.

However, even if the phrase wrongs the Dankners, the Levievs, the Tshuvas, the Ofers, the Binos - it is also true that the growing power of a handful of people makes everyone else feel uncomfortable.

Given their growing power, one may consider whether Israel should act to curb the power of people who own a large number of companies. In other words, should it impose curbs on horizontal concentration as well, which means, on people with interests in a wide range of sectors, who thereby attain excessive economic clout?

That question deserves to be asked as the privatization of Bank Leumi looms again. And it should be discussed before Israel's second largest bank is sold, not afterwards.