Thirteen years ago, Russneft, the Russian energy company founded by Michael Gutseriev, caused a huge stir in Israel after announcing it would join the bidding for the Ashdod oil refinery. In the end, the Shin Bet security service vetoed the idea after examining Russneft’s structure and ownership. A year later, Gutseriev revealed that the government was pressuring him to sell to Oleg Deripaska, a crony of Vladimir Putin’s. Gutseriev fled to London and Russneft was nationalized.
Four years later, in 2010, the discovery of vast quantities of natural gas offshore Israel in the Tamar and Leviathan reservoirs had Moscow worried that Israel might break the Russian grip on the European gas market. A team of executives from Gazprom were sent to Israel, officially to talk about buying liquefied natural gas from Tamar; behind the scenes, they were negotiating for drilling rights.
Again, the Russians were sent off. “The worry was that we would be importing corruption. Pure and simple. Nothing more than that. We didn’t want them here,” says one former senior government official.
Recent geopolitical developments in the Middle East – the U.S. abandonment of the Kurds, Russia troops coming in to fill the vacuum and Trump’s “America First policy” – raise the question of what will happen the next time Israel stands in the way of Russian economic interests. Next time Israel faces the Iranian threat, it might only have Russia to turn to.
Two events that occurred last week only strengthen the need to address this issue. The first was U.S. President Donald Trump’s explaining why America was sending 2,800 troops to Saudi Arabia despite his vow to bring the troops home. “Well, the Saudis are paying for it,” he said. The second was Putin’s visit to the Saudi capital of Riyadh to meet with Crown Prince Mohammed Bin Salman.
The leader of the free world is running a mercenary army and many Americans don’t have a problem with that. The Democrats may have a problem with Trump, but they aren’t much fonder of Middle East entanglements and many of them have little love for Israel. The days of unconditional U.S. defense aid may be numbered. In the future, Israel will have to give something back.
Putin is the new king of the Middle East. While his motives for being here are ideological and strategic, he has economic goals, too: He wants to sell arms and nuclear reactors and must be involved in regulating the global oil and gas industry to protect Russian interests. That’s why he’s become a Mideast player.
The question is: What does Putin want from Israel and can he get it?
The threat from foreign interests controlling Israeli assets isn’t the issue of the control itself. Just like the Chinese company that owns Tnuva, Israel’s biggest dairy company, isn’t going to smuggle cows out of the country, the Russians can’t line their pockets with profits from Israeli gas.
The risk is that they could use these assets for espionage or to undermine society, in particular standards of governance. The U.S. has now had plenty of experience in Russian meddling with elections; and in the run-up to Israel’s vote last April there were similar concerns about “foreign” interference.
Moscow operates hacker teams specializing in political interference in ways that leave no trace of official involvement. Russian IT specialist Aleksey Burkov, for example, is being held in an Israeli jail at the request of Interpol on suspicion he was behind the online theft of the credit card data of 50 million Americans, not for interfering in elections on behalf of the Kremlin.
“The Russians engage in political subversion all over the world. They see it as legitimate and Israel is no exception,” says a senior Israeli official who asked not to be identified. “Like the Chinese, the Russians want to show that the democratic system doesn’t work anywhere. ... They prefer to deal with leaders and hierarchical systems without institutions that balance and restrain power. So they challenge democratic structures everywhere, interfere in elections and create economic pressure via investments by oligarchs that serve the Kremlin.”
The second purpose is to steal intellectual property, which is a particular risk to Israel. “The Russians recognize the superiority of Israeli technology and see us as a research and development power. They steal from us like crazy, and not just them,” said the ex-officials.
Be that as it may, we should be careful about entering into a hysterical, xenophobic discourse. In other words, it is important to act cautiously but to remember that, in the Middle East, aspirations and abilities are not the same.
“The Russians have been operating under severe sanctions since the invasion of Ukraine,” notes Zvi Magen of the Institute for National Security Studies and a former Israeli ambassador to Russia and Ukraine.
“They wanted to raise their status and be recognized as a great power, but they’re far from achieving that. They hope to cash in on their successes in Syria, but so far they have not gotten anything significant. No one is buying much of anything even if they sell another weapons system or reactor.”
“At the end of the day they are stuck in the Syrian mud between four powers that give them nothing but headaches," says Magen. "The Iranians don’t want them, the Saudis aren’t loyal, the Turks are going wild – and Israel.”
More than a third of the Russian GDP is from exports of natural resources. Russians are not involved in the Israeli economy, nor in infrastructure projects or in high-tech. “They are relatively marginal players next to the Chinese or the Americans,” said Dr. Avinoam Idan of Haifa University’s Chaikin Center for Geostrategy.
“The Russians treat Israel with respect. They have an exaggerated image of Jewish influence in the world and perceive Jewish communities as having significant cosmopolitan power,” says Uzi Arad, a former chairman of Israel’s National Security Council.
In any case, he contends, Russia’s interests in Iran are stronger than they are in Israel. “They will side with Iran and Syria in the event of a clash, because ultimately their interests are rooted in those key countries and affected by energy and arms deals.”
Three ways Israel can cope with the challenge from Russia and other foreign powers is by:
1) Establishing a regulatory body on foreign investment, a mechanism for vetting proposals officially rather than on a case-by-case basis, with formal criteria. With America engaged in trade wars, the Chinese pouring money into Israel and the Russians just over the border, Israel must regularize the process to prevent itself from being infested by corruption. Proposals for such a body have been on the drawing boards for too long.
2) Putting restrictions on international participation in privatization and awarding concessions, such as the sale of the Israel Electric Corporation's power plants, and the light rail and desalination tenders.
3) Weaning Israel off the $4 billion in U.S. aid before Washington acts on its own. Preparing the defense industry for lost U.S. contracts and for the opportunity to compete head-on with U.S. rivals in world markets.
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