Anger grows over Israeli government’s Leviathan gasfield deal, (*Or, Thieves Fight Over Stolen Loot) – John Reed/FT.com
Benjamin Netanyahu’s two-month-old coalition government is facing its most serious challenge yet after an angry backlash over a backroom deal agreed with natural gas companies to develop Israel’s large offshore Leviathan field.
Yuval Steinitz, energy minister, on Tuesday was obliged to present details of government’s agreement with the investors, led by Noble Energy of the US and Delek of Israel, after opposition MPs rounded on the government for a lack of transparency surrounding a compromise needed to unlock the $6.5bn project.
The disagreement between the government and opposition MPs, which had been building for months, reached a peak on Monday. Mr Netanyahu had been preparing to submit a motion to the Knesset allowing his government to overrule an antitrust ruling against the project and push through a compromise deal with the gas companies allowing Leviathan to go ahead.
However, he withdrew the measure after it became clear that it would not have enough votes to pass. Three members of the Israeli prime minister’s cabinet, including Moshe Kahlon, the popular centre-right finance minister, said they would abstain from the vote, pleading conflicts of interests.
Avigdor Lieberman, ex-foreign minister and head of the Yisrael Beiteinu party, said he supported the compromise on antitrust issues, but was not prepared to help Mr Netanyahu with the votes needed for Monday’s measure to pass.
The fracas has underscored the weakness of Mr Netanyahu’s five-party coalition formed in May, which holds 61 seats or a one-seat majority in the 120-seat Knesset, after a contentious election campaign in which the long-serving Israeli leader antagonised political foes and allies alike.
It also attests to a populist mood in the Knesset. Many MPs are feeding on public discontent with social inequality in Israel and public anger at the tycoons who control some of Israel’s biggest companies. Delek is majority owned by Yitzhak Tshuva, one of Israel’s richest men, who according to Forbes is worth $4.1bn.
“If I were to implement a populist economic policy, we would be in the same situation as Greece,” Mr Netanyahu told his Likud party on Monday, ahead of the abortive vote. “We need to act responsibly. The gas plan is a good one.”
David Gilo, Israel’s antitrust commissioner, ruled the Leviathan project a cartel in December, triggering a scramble by the government to ensure the long-delayed project is completed.
Mr Gilo and other critics of Delek and Noble contend that the two companies hold too much power over Israel’s gas reserves and market prices because they control both the still-undeveloped Leviathan and Tamar, Israel’s biggest operative field, which began producing gas in 2013.
Mr Gilo last month announced he was quitting after expressing disapproval for a compromise emerging in private talks between Mr Netanyahu’s government and the gas companies.
That agreement, outlined by Mr Steinitz on Tuesday, would require Delek to sell its stake in Tamar within six years, and Noble to decrease its stake from 36 per cent to 25 per cent over the same period. Both companies will sell their entire stakes in two smaller offshore fields, and agree a new price control mechanism for future contracts.
“The outline we reached is not just good; it is the best,” Mr Steinitz told journalists at a press conference in Jerusalem. “It is the best possible, in reality.”
Mr Netanyahu and his supporters have argued that a workable compromise needs to be reached with gas companies, or Leviathan — with estimated reserves of 22tn cubic feet — risks never being developed.
Gas companies have voiced frustration with Israel after Mr Netanyahu’s former government doubled taxes and capped the amount of gas they can export to 40 per cent of their total output. New drilling for gas off Israel has ground to a halt because of investors’ worries over Israeli regulatory risk.
Leviathan’s backers in government and industry have also argued the project could improve Israel’s delicate relations with its regional neighbours as Delek and Noble have inked preliminary deals to export billions of dollars of gas to Egypt and Jordan.
However, opponents of Mr Netanyahu, including MPs from the centre-left Zionist Union and leftwing Meretz parties, accuse his government of caving to the gas companies.
Guy Rolnik, editor of The Marker, the business publication of Israel’s left-leaning Ha’aretz newspaper, last week accused Mr Netanyahu and the “gas barons” of telling Israelis “lies” about the compromise deal made with gas companies.