In the midst of carpet-bombing coverage of the Prime Minister Benjamin Netanyahu's speech to the US Congress and the ongoing election campaign, important economic news, both good and bad, has been overlooked.
On the good side, the Israeli economy continues to power ahead. A weaker shekel and expanded Asian markets have caused a large increase in Israeli net exports over the last two quarters, and that in turn has resulted in GDP growth of Chinese proportions. The recent pace of growth is unlikely to be sustained, but relatively rapid growth is likely to continue for some time.
On the other side of the ledger, however, is the ongoing crisis of offshore gas development, triggered by the December decision by David Gilo, director of the Antitrust Authority, to renege on his agreement of the previous March with the developers, Noble Energy of the US and the Israeli Delek and Ratio groups, demanding that they relinquish control of either the Tamar or the Leviathan gas fields.
As a result of that reversal, development of the Leviathan field has ceased, Jordan and Egypt are looking for alternative sources of gas, such as Cyprus's Aphrodite field, and Edison of Italy has withdrawn from consideration of a bid on the development of the smaller Karish and Tanin fields. A committee set up by the government proposed a compromise settlement so complex and unworkable that it was immediately rejected by all sides and withdrawn.
Now the Ministry of Energy has reported that in 2014, the first full year of production from the Tanin field, the government earned 744 million shekels in royalties, expected to rise to 820 billion this year "...and climb to 3.2-3/4 billion by 2019, PROVIDED THAT PLANS FOR EXPANDING THE ...GAS RESERVOIRS ARE CARRIED OUT WITHOUT ANY DELAY CAUSED BY THE RECENT EVENTS IN THE ENERGY SECTOR." (emphasis mine) It goes on to say "The contribution of natural gas to the Israeli economy is extremely significant".
Indeed, and would also have improved the geo-political position of Israel in relation to its immediate neighbors Egypt and Jordan, which latter country just signed an historic agreement with Israel to reverse the decline of the Dead Sea. One can only dream of the schools, hospitals, housing developments, security and defense equipment and so on that could have been financed by the sums mentioned in the ministry's report, now in serious jeopardy because of Prof. Gilo's action.
Thus the good and the bad. We can hope that whatever the makeup of the new government after the elections, it will turn its attention to correcting the gas situation in such a way so as to ensure that all the economic news is good.
Norman A. Bailey, Ph.D., is Adjunct Professor of Economic Statecraft at The Institute of World Politics, Washington, DC, and teaches at the Center for National Security Studies and Geostrategy, University of Haifa.
Published by Globes [online], Israel business news - www.globes-online.com - on March 5, 2015
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