U.S. Administration Wields its Influences on Gas Legislation in Israel

For quite some time, the American administration has been showing great interest in the Israeli energy industry--in particular Noble Energy's interests. A few years ago, when Noble confronted one of its first obstacles in Israel, it recruited former U.S. president Bill Clinton as a lobbyist. That hasn’t stopped the Israeli Knesset (Parliament) from raising taxes on oil and gas revenues, but it has helped to soften the blow.

Last August, before the Israeli parliament was supposed to vote on the transfer of regulatory powers, representatives from the American embassy in Tel Aviv contacted Arab MPs, whom are part of the opposition, in order to persuade them to vote with the coalition. The parliament's attempt failed and, since the government had no majority in the chamber for its resolution, the vote was cancelled.

This week the American Embassy renewed its efforts to influence the outcome of the political process concerning the natural gas framework in favor of the monopoly of Noble Energy and Delek Group. According to Calcalist business daily, an energy adviser from the American embassy contacted the office of the chairman of the parliamentary Economic Committee and tried to find out the timetable of the committee's debates about the natural gas regulatory framework.

The committee must debate the matter before the Economy Minister can sign an article that bypasses the anti-trust authority, though the committee has no power to stop the Economy Minister from signing the article. In the past, embassy's employees sent text massages to coalition members demanding the approval of the framework.

Last January Israel and Jordan were supposed to sign, in the White House, a $15 billion contract for supply of natural gas from Israel's Leviathan field to the Jordanian Electric Power Company. However after the U-turn by the Israeli anti-trust chief, Jordan cancelled the negotiations.

Currently, the U.S. administration is trying to promote commerce and cooperation between Israel and its neighbors, Jordan and Egypt. It claims that it is an essential geopolitical move that will stabilize relationships between Israel and its neighbors and will create interdependence between the countries that will reduce the risk of confrontations.

On those national security grounds the Israeli government is attempting to bypass the anti-trust authority. However, those arguments became almost irrelevant when Eni S.p.A made its discovery of the huge Zohr natural gas reservoir in Egypt. Before the discovery, the Leviathan consortium was interested in exploiting the shortage of gas in Egypt and exporting gas to the local Egyptian market. Based on this assumption, advisory bodies to the prime minister had long argued in official opinions that helping Egypt to fill the gap with gas from Israel would strengthen the ties between Israel and Egypt by increasing the interdependence between the two states.

The Zohr field discovery radically changed the situation between the two states. After the discovery, the opposition blamed the advisory bodies in issuing opinions that were intended to support and satisfy the prime minister's attempt to bypass the anti-trust authority, while ignoring the potential gas discoveries in Egyptian waters.

Last week Prime Minister Netanyahu, asked the National Security Council and the Ministry of Foreign Affairs, to adjust their recommendation to suit the new situation, in light of the Zohr find and the new assessment, that Egypt will need no more Israeli gas for local consumption. Despite that, the advisory bodies will likely now argue that the gas is needed for re-export from Egypt; therefore, on national security grounds, the prime minister in his capacity as the Economy Minister, a job he inherited just last week following the resignation of the former Economy Minister, will be able to sign on article 52 to the Israeli anti-trust law and by doing so bypass the anti-trust authority.

Ya'acov Zalel

Israel Correspondent