The state will oppose making the gas agreement subject to legislation, sources close to Prime Minister Benjamin Netanyahu said today. This follows the surprise that the High Court of Justice sprung yesterday, just before the hearing of petitions against the gas agreement, when the judges recommended that the government should pass the stability clause in the agreement as a law in the Knesset, and gave the government seven days to make a case against this. The assessment is that Netanyahu would have difficulty in mustering a majority in the Knesset, and embarking on that route would mean burying the agreement, the sources say.
"It's a death sentence for the agreement," another source said.
According to these sources, US company Noble Energy is starting to lose patience, and if the agreement is held up again it will sue Israel in international arbitration. The sources mentioned that only yesterday the Ministry of Justice presented to the High Court of Justice the latest opinion by a US law firm explaining why Israel is exposed to a huge lawsuit from Noble Energy.
"The more we delay, the greater becomes the threat of a lawsuit," one of the sources said, "Noble Energy will have a strong case in court, and we will end up being humiliated." The source added that Israel would gain a bad name not only among other gas companies, but among investors in general: "Just as Egypt is perceived as a country that does not stand by its word, so will Israel, and that's something that can't be reversed. As soon as Noble Energy sues Israel in arbitration, Israel will forever be remembered as an unreliable country."
Iran was also perceived as an unreliable country, and now investors are flocking to it.
"True, but Israel isn't Iran. Iran has huge gas reserves, and it is also moving swiftly to restore the confidence in it that was lost. Apart from that, Israel, unlike Iran, cannot afford to delay any longer. At present, Israel has one reservoir and one rig."
What the sources say reinforces the main point stressed by the prime minister in the High Court of Justice yesterday, which is that delaying the agreement will harm the Israeli economy. "For the sake of the development of the gas fields and our energy security, the huge revenues that await us and the strengthening of our standing in the region, we need one main thing, one word, and that is confidence. International confidence, confidence on the part of companies, of countries, of the banks. I can tell you that over recent years we have lost their confidence. In the past few months it seems we have managed to start to rehabilitate it," the prime minister said yesterday.
We can't wait
It is doubtful whether the judges in the High Court of Justice understood the consequences of their recommendation yesterday. As far as they are concerned, passing the stability clause as a law in the Knesset is intended "to remove doubts and avert a danger that must be taken into account," as Judge Elyakim Rubinstein phrased it. And there are doubts. In the stability clause, the state undertakes to make no substantial changes in the gas industry for 10-15 years, among other things in taxation, gas exports, and ownership of the reservoirs. The government thus binds future governments.
Taxation and ownership are not such problematic or risky matters, but that is not the case when it comes to exports. Under the gas agreement, the government allowed exports from the Tamar reservoir even before the Leviathan reservoir is developed and connected to the shore, contrary to the previous government's decision on the matter.
But what happens if the Leviathan reserve is not developed and Israel is left with one reserve? Will Israel allow massive exports from Tamar in those circumstances as well? Will the government be unable to change its decision and leave the gas in Israel? The stability clause is meant to stop it from doing so, and this is one clause that the gas companies insist upon.
So what happens now? Sources close to Netanyahu say that the state will try to persuade the judges that implementing the gas agreement is so urgent that it is not possible to wait for months until a law is drafted and undergoes first, second and third readings in the Knesset. "Just drafting the law will take months," said one of the sources, "and the discussions on it, in whatever Knesset committee they take place, will also take a long time. We don't have that time."
The state will argue that a hiatus of months will delay development of the Leviathan reserve and expansion of Tamar, that the letters of intent for exports of gas to Egypt are in danger, and that investors will flee to other countries.
What the state will not argue, since it is not the court's business, is that Netanyahu has no majority in the Knesset to pass the gas agreement since two of his 61 member coalition are prevented from voting because of conflicts of interests.
Published by Globes [online], Israel business news - www.globes-online.com - on February 15, 2016
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