What Joseph would say about Israel’s gas deal
As Genesis’ account of Joseph and his circuitous journey to the top in Egypt is once again being read in synagogue, the debate over the agreement between the government of Israel and Tamar Gas consortium continues to rage. This Saturday concludes four successive weeks of Scripture filled with Joseph’s personal drama. At the same time, the campaign against Prime Minister Netanyahu’s signing of a highly controversial gas deal enters what may now be its final chapter in a Supreme Court challenge. It is well to bring these parallel processes together by asking a simple question: What would Joseph, surely the Bible’s wisest domestic policy advisor, have to say about natural gas policy for the Jewish state?
While Rabbinical commentators make no effort to whitewash Joseph’s flaws, they also highlight his intelligence, pragmatism and foresight. At the heart of Joseph’s wisdom is his uniquely far-sighted perspective: Long before the concept was embraced by international agencies and academics, Joseph understood the fundamentals of sustainability. Blessed with an uncanny ability to foresee the future, Joseph realized a famine was imminent and his achievements in the area of food security are most renowned.
By contrast, our generation has performed abysmally in making sure that all of the world’s people are fed. The UN reports that 3.1 million children die each year of hunger and related diseases. But due to Joseph’s prudent policies and prescient regulations, notwithstanding chronic drought, children in Egypt did not starve. There was even enough to feed the nomadic guests from Canaan.
So what would Joseph have advised his benevolent Pharaoh had Egypt discovered gas reserves within Alexandria’s territorial waters? And if we could but bring the Technicolor Dreamcoat Statesman back for a brief hour of consultation, what would he tell Prime Minister Netanyahu to do?
Joseph was well aware that economies are cyclical and that vicissitudes are inevitable. Given environmental and fiscal uncertainties, a modicum of deferred gratification and saving for the future surely makes sense. It is also the ethical thing to do when exploiting dividends from non-renewable resources. Accordingly, Joseph would have called for a more deliberate path of extraction: a path that ensures that sufficient reserves remain available to meet any foreseeable national needs in the event of boycotts or shortages; a path that sets aside most of the gas revenues for future use.
And if you think Joseph’s strategic approach is irrelevant to today’s markets and global jockeying, try telling that to Norway, which has spent several decades managing its oil reserves precisely as Joseph managed food stocks. Here is a contemporary society that decided to prioritize the economic well-being of future generations. The results: the Norwegian Petroleum Fund, now enjoys capital worth a trillion US dollars; the fund holds roughly 1.3 percent of the world’s stock.
After an unprecedented, non-partisan public hue and cry, an earlier Netanyahu government also agreed to create a similar fund so that gas revenues could be shared with generations to come. Unfortunately, Israel’s government talks the talk of intergenerational justice but doesn’t walk the walk. In practice, it will be a very long time before the fund begins to receive meaningful income even though Israel has been pumping gas from the Tamar fields in the Mediterranean for several years now. Delek-Noble conglomerate must first receive a 280 percent return on its initial investment.
When money does start to trickle in, it will not come from the revenues of the gas conglomerate, but rather will be taken out of general public taxes. Most disconcerting of all, a loophole was inserted into the legislation that allows the government to take “loans” from the Petroleum Fund if it should face cash flow problems. After six months, future finance ministers can declare loans to be grants. If the shameless pilfering from the Quarry Rehabilitation Fund by past governments is any indication, Israel’s new Petroleum Fund, which should be guaranteeing our grandchildren’s prosperity, may very well serve as an ATM dispenser for the financial handouts of profligate coalition agreements. It is hard to imagine that Joseph would have agreed to anything short of the Norwegian model.
Joseph was also champion tax collector – and as the Torah portion read in synagogue this past week describes, unhesitant in nationalizing natural resources (paying in return a modest price) if it served the public good. The taxes to be imposed on Delek-Noble are far more modest than the government touts. Even after waiting for the gas magnates to pocket their aforementioned 280 percent in profits, royalties paid to the national coffers are limited to 11%. Corporate income tax is paid, but that’s only if the company makes a profit. So, given the creativity of multinational company accountants, it is very likely that some revenues will remain nontaxable.
In 2010, Professor Sheshinski’s ministerial committee tried to push the tax rate on natural gas revenues up to 60%. Yet, best estimates suggest that all-told, taxes from the Tamar fields will never exceed 35%, as higher rates are only applied incrementally. In Norway – there is a flat 79% tax on oil revenues: no monkey business. Joseph would have had little tolerance for the magnanimity Israel grants foreign corporations, which, in the zero-sum game of natural resource revenue distribution, comes at the public expense.
Among Joseph’s best attributes was his sense of fairness. After three generations of patriarchs produced dysfunctional family dynamics due to their preferential treatment, Joseph opted for impartiality. Our sages teach us that Ephraim and Menashe, Joseph’s sons, got along well because they were treated fairly by their father. Not only did Joseph treat his boys equally, but he was transparent in his dealings with them.
But there was nothing fair or transparent in the way the rights to Israel’s natural gas were granted. There was never an open tender conducted where different companies could vie for the privilege of developing Israel’s Mediterranean reserves. The Petroleum Council selected, behind closed doors, the present monopoly to explore and develop the fields and never explained why. Israelis are hardly immune to the corrupting force of obscenely high profits from oil and gas development. Apparently, former Minister of Infrastructure Binyamin “Fuad” Ben-Eliezer could not resist such temptations; his imminent indictment for graft is linked to the natural gas deal he helped broker with the modern Egyptian government.
That’s one of the reasons many people express discomfort when the prime minister, a free-market zealot, insists on circumventing Israel’s antitrust law and allowing the gas consortium monopoly to continue to operate without competition. Because there is no market and no regulation of gas, Israelis today pay 5.69 dollars per million-btu – roughly double the world market rates for gas which actually belongs to them! Worst of all, the gas deal signed by the prime minister last week leaves the gas consortium unregulated for ten more years.
Not all officials agree with this position. Many who were smart and conscientious felt otherwise. Because they thought competition might be in the public interest, chief antitrust official, Professor David Giloh, was shown the door and the chief electricity regulator, Orit Farkash was essentially fired. While refusing to sign off on the monopoly status, past champions of Israeli consumers, like Moshe Kachlon and Aryeh Deri chose not to confront the Prime Minister.
The discovery of gas in the Mediterranean is indeed a godsend. And with his direct connection to the Almighty, Joseph would undoubtedly convey the people of Israel’s collective gratitude. But his story also teaches us that society must use these gifts — our precious natural resources — judiciously, fairly and for the public good.
Most of all, long before he rationed food for Egypt, young Joseph was dreaming in Canaan of how the sun would serve him. Undoubtedly he would remind us that modern Israel never needed to discover natural gas for it to be a model of sustainability. Even a thimble-full of political will could have made Israel an international leader in renewables rather than the slacker that we have become with a disgracefully trivial clean energy capacity. Joseph would look to the future and say that true energy independence will only come when we break our fossil fuel addiction and become a nation fueled by solar power.