Analysis

Submarines and 'State Secrets': The Red Flags in Netanyahu's Latest Version

The prime minister's surprise interview with Channel 12 was meant to resolve issues raised by Gantz's party. It did just the opposite

Prime Minister Benjamin Netanyahu at the weekly cabinet meeting in Jerusalem, July 23, 2018.
Alex Kolomoisky

These are the five main points that emerged from the surprise interview Prime Minister Benjamin Netanyahu gave to Israel's Channel 12 news on Saturday night about the submarines and stocks affair.

1. Netanyahu admitted for the first time, after avoiding and evading a response for nearly two years, that he is the one who informed the Germans that Israel no longer opposed the sale of advanced submarines to Egypt.

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2. Netanyahu confirmed – also for the first time – that he had excluded Defense Minister Moshe Ya’alon and Israel Defense Forces Chief of Staff Benny Gantz, now both members of the Kahol Lavan political alliance, from his decision and failed to notify them afterward about his communications with the Germans. 

3. Netanyahu admitted that the price he got for the shares he held in the American companies Seadrift and GraphTec International (a supplier for ThyssenKrupp, the German manufacturer of the submarines) – a premium of 700 percent over the original investment – reflected the future potential value of the shares.

4. Netanyahu admitted that his cousin, the American businessman Nathan Milikowsky, remained a significant shareholder in Seadrift for several more years after the prime minister sold his own shares.

5. Netanyahu vaguely confirmed, trivializing the matter, that Seadrift was a secondary supplier to the German shipbuilder, ThyssenKrupp.

All of Netanyahu's first-time revelations connect to one main suspicion: A cloud of conflict of interest hangs over him. About a year after he returned to the premiership, in 2010, he sold stock in a company that was a supplier to ThyssenKrupp, expecting a significant rise in the value of the company. Before the sale, and also shortly thereafter, Netanyahu pressured the defense establishment to purchase a sixth submarine. Later, he led the effort to buy three more subs in the future, despite the objections of defense officials. At the same time, he discussed the purchase of ships for the Israel Navy from ThyssenKrupp, the demands for the standards of which constantly rose, making the project much more expensive. And in 2014 and 2015, when his cousin Milikowsky was still a major shareholder in the American company, Netanyahu also approved the sale of the submarines to Egypt.

Milikowsky, who is the main funder of Netanyahu’s legal defense and who from time to time buys him expensive suits, directly enjoyed the profits from the American company and the rise in the value of its shares. At the same time, another one of Netanyahu's cousins, attorney David Shimron, who represents the prime minister in a number of legal and political matters, was made aware of all these facts. Shimron handled the stock deals for Milikowsky, in the second of which the value of the shares was expected to rise.

But that’s not the end of it. First of all, Shimron’s partner, Isaac Molho (also a distant relative of Netanyahu through Shimron) was the man who represented the prime minister and Israel in sensitive diplomatic contacts, including with Germany and Arab nations, including Egypt.  Second, during those same years, Shimron acted as legal adviser to the intermediary Michael Ganor, and as such stood to benefit from the ever-expanding submarine deal. Shimron was also involved in communications regarding the tender for the ships and other purchase plans (which for a short time also included anti-submarine ships). He was even Ganor’s partner in an attempt to take over and privatize the Israel Navy shipyards – the real economic bonanza, because long-term maintenance of ships is the largest budgetary item in all of these deals.

State secret in private hands

Netanyahu’s version of the shares affair has undergone quite a few changes with regard to the date of purchase and the extent of his knowledge of the joint investments with his cousin. His statements Saturday night on this matter also raise many questions, as Gur Megiddo outlined in TheMarker on Sunday morning.

But from the security perspective, the most upsetting aspect of this affair is the permission to sell submarines to Egypt. Contrary to claims over the past few days, it seems that Egypt could not have purchased submarines of such quality from any other country. The Egyptians wanted the advanced German subs and, in keeping with an earlier agreement between Israel and Germany that the latter would not sell advanced weapons to the former's neighbors without a green light, Netanyahu gave the nod to German Chancellor Angela Merkel.

According to Ya’alon’s version, which was reported extensively two years ago, not only did Netanyahu keep him out of the loop, the prime minister also lied to him when asked about it and denied giving approval (the Prime Minister’s Office denied Ya’alon’s claims at the time). On Saturday, as aforementioned, Netanyahu admitted that he excluded the defense minister and the chief of staff and explained that the reasons he had approved the sale of the subs were state secrets. There are things that even the defense minister and the chief of staff don’t need to know, he said.

Who did know? The national security advisers, Yaakov Amidror and Yaakov Nagel, and Attorney General Avichai Mendelblit (Netanyahu explained it to him, it seems, during the investigation. Mendelblit denied this later Sunday). But Nagel said last week in an interview to Radio 103 that there was “no way the Germans ask for permission from Israel to sell subs to Egypt,” a matter that Netanyahu in fact confirmed on Saturday night. Netanyahu forgot to respond to claims that his main confidant in the Egyptian affair was Isaac Molho, his political adviser, who was also involved in contacts with the Germans. And according to reports by Israeli daily Yedioth Ahronoth two years ago, he was the one who notified Merkel of Netanyahu's approval.

FILE Photo: Prime Minister Benjamin Netanyahu and Yaakov Nagel at a cabinet meeting in 2016.
Mark Israel Salem

It’s hard to overstate the importance of this point. Molho is a private individual, not a state employee. The rules governing his actions in Netanyahu’s name are deficient, to say the least. Molho voluntarily left his position two years ago, not long after the sub affair blew up – an affair in which his partner, Shimron, was deeply involved (the police are now recommending that Shimron be indicted), and a moment before the High Court of Justice discusses a petition regarding details of his employment. According to the report in Yedioth Ahronoth, Molho has thorough knowledge of a top secret security affair whose importance, as Netanyahu hinted, is great. Ya’alon and Gantz know nothing about the deal, which has implications for marine challenges faced by the Israel Defense Forces. And no one reported, oversaw or could present another consideration on a question that is being discussed solely by Netanyahu and his close advisers?

Molho said in response to the report: "in total contrast to what the article says, Attorney Molho was not involved with any business related to submarines and naval vessels – not those of Israel, not those of Egypt, and not those of any country, and any attempt to create such a connection is false The Israel Police, which examined different suspicions regarding the submarine issue, did not recommend prosecuting Attorney Molho."

It is being said that Netanyahu decided to stop for an interview at the Channel 12 studio at Neve Ilan after the feeling took hold in the Likud campaign that the video Netanyahu posted on Friday had not been a sufficient response to the questions Kahol Lavan raised against him about the submarines affair. But the interview left many questions unanswered and it seems that Netanyahu will have trouble providing good enough responses to some of the claims arising from this complex affair. It remains to be seen what the impact of the affair and the interview will be on Election Day on April 9. For the moment, it seems that his decision to be interviewed – a 35-minute long conversation that omitted the situation on the Gaza border (which is damaging to Netanyahu and U.S. President Donald Trump's recognition of Israeli sovereignty on the Golan Heights (which helps him) – has revived the issue for a few more days to come.