RUTHFULLY YOURS

The Arabs are always talking about driving the Jews into the sea. So it’s with delicious irony that Jews in Israel can now read about a discovery in that sea that could make them energy independent. A natural gas find 84 miles off Israel’s coast called Leviathan has been confirmed as a “supergiant”.

On December 29, Noble Energy, Inc., which operates the field, “confirmed its earlier estimates that the field contains 16 trillion cubic feet of gas — making it the world’s biggest deep water gas find in a decade, with enough reserves to supply Israel’s gas needs for 100 years,” according to the Wall Street Journal. It’s “easily the largest exploration discovery in our history,” the Houston-based company’s CEO Chuck Davidson said.

Leviathan is just one part of an area termed the Levant Basin, which has an estimated 122 trillion cubic feet of natural gas and 1.7 billion barrels of “undiscovered, recoverable oil”. It’s a remarkable turn of good fortune for a country about which Golda Meir had quipped, “Let me tell you something that we Israelis have against Moses. He took us 40 years through the desert in order to bring us to the one spot in the Middle East that has no oil!”

Unfortunately, what’s set to mar this happy news is the potentially third-world behavior of Israel’s government. One of the main reasons energy companies took a chance on exploring the region was a 1952 Israel petroleum law that granted generous royalty and tax benefits to exploration companies. Now that those companies have actually found something – at great expense and risk – Israel’s government wants more of the action.

Finance Minister Yuval Steinitz is debating whether to change the terms of the lease retroactively so that the government could get better terms. The Wall Street Journal quoted Noble Energy’s Davidson as saying a retroactive change would be “egregious”. Davidson said such a move “would quickly move Israel to the lowest tier of countries for investment by the energy industry”.

To defend its interests, Noble pulled in the State Department and former President Bill Clinton. “Mr. Clinton raised the issue in a private meeting with Israeli Prime Minister Benjamin Netanyahu in New York in July, according to a Clinton aide. ‘Your country can’t just tax a U.S. business retroactively because they feel like it,’ the aide said Mr. Clinton told Mr. Netanyahu,” according to the Journal.

Whatever Bill Clinton’s faults, he’s certainly in the right in this case. If Israel wants to create new rules going forward that’s one thing, but to alter prior agreements simply to get its hands on more lucre is unacceptable.

This sort of double-dealing is an old story and the U.S. isn’t without its own examples. In the latter part of the 1800s, for instance, the Southern Pacific Railroad, eager to get people to settle the land, promised those who came that they could buy it reasonably ($2.50 to $5.00 an acre), and that any improvements they made would belong to them, only to raise the prices by an astronomical amount ($35 to $40 an acre), and demand payment for the settlers’ improvements, such as homes, barns and orchards, once the official land grant came through.

It’s not the first time Israel has demonstrated poor judgment on energy. The quote from Golda Meir above was no doubt amusing when it was still fresh, but it wasn’t altogether true. The New York Times mentioned Golda’s remarks on June 10, 1973 when she reportedly made them at a dinner honoring West German Chancellor Willy Brandt.

This means that the Sinai Peninsula had already been in Israel’s hands for five years. With the Sinai came the Abu Rodeis oil fields, which produced some 85,000 bpd (barrels per day), enough to supply 60% of Israel’s domestic needs. (The remaining 40% came from a then-friendlier Iran.)

Displaying a deplorable lack of sense, Israel relinquished this vital resource in 1975 as part of the second disengagement agreement with Egypt.

If any nation should have absorbed the lesson of the criticality of a reliable, independent supply of energy, it should have been Israel. The country’s leaders had 20 years to figure it out, watching firsthand as the Arabs bent the West to their will with the weapon of oil.

Shmuel pointed out the stupidity of Israel’s actions when the Iranian revolution was in its early stages – the Khomenists promised that one of their first acts in power would be to stop selling oil to Israel. In “Irresponsible Attitude On Oil” (The Jerusalem Post, Dec. 8, 1978), Shmuel wrote:

Indeed the crisis in Iran throws into bold relief the almost incredible amateurishness, the light-hearted abandon, with which Israeli governments have handled the problem of the country’s supply of oil, today the indispensable commodity for the progress and the security of the peoples of the world.

It’s one thing to joke about your nation’s poverty of energy sources, but it’s another thing to abandon those resources you do have. Israel not only relinquished Abu Rodeis, but a few years later, as part of the Camp David Accords, forfeited the Alma oil fields in the Gulf of Suez. Unlike Abu Rodeis, which had been in operation prior to Israel’s conquest of Sinai, this was a field that Israel had discovered and developed on its own.

Yet, as Shmuel reveals in the same article, Israel let it go.

…William Levitt, a well-known businessman active in Israel’s cause in the US … was one of the early investors 10 years ago in the search for oil in Sinai.

After some characteristic vicissitudes, Levitt and his associates were accorded a 12 per cent share in the consortium which subsequently discovered, and has been operating the Alma oilfield in the Suez Gulf.

Another US company has 25 per cent, and the Israel government 63 per cent. The total amount invested so far amounts to about $100m.

Results have been good: the yield today is some 15 per cent of Israel’s requirements. Prospects are better: with the exploitation of proved resources, the yield will provide half of Israel’s present consumption.

Surveys already made beyond that, suggest a far greater potential, more than Israel’s requirements. This could have a tremendous impact on Israel’s security, a healthy effect on her economy and, in the best case, a substantial lightening of her economic dependence.

What government in the world, even the government of a country which was not surrounded by a coalition of countries threatening her destruction, would agree to relinquish these vital assets, existent and potential?

Following the Camp David agreement, William Levitt and his associates took up the matter of the Alma oil with the Defence Minister. Accepting Camp David as an established fact, they expected at least a rational explanation for the Israeli government’s not having made even a serious effort to ensure that the oil Israel had discovered would remain in her hands.

Logic alone, commercial ethics alone, surely dictate that — having made the unprecedented gesture of recognizing Egyptian sovereignty — Israel should be granted the right (through her National Oil Company, which had discovered the oil) to continue operating the field and handling the distribution.

Egypt would receive her income and would not lose a cent. Israel would receive the minimal recompense for her enterprise, and her security concerns, as far as oil supplies are concerned, would be assuaged.

Why, if Sadat really wants Israel to live in peace, should he refuse this reasonable, equitable arrangement? Levitt and his associates received a three-word reply from the Minister, breezy and illuminating: “Forget about it!”

The truth appears to be that while cardinal elements of Israel’s basic security were surrendered with at least some ripple in the negotiations with Egypt (before and during Camp David) the question of oil (like the claims for restitution of the 75,000 Jews who were forced to flee Egypt after 1948 leaving behind wealth estimated today at nearly $2b.) was not raised seriously and perhaps was not raised at all.

On the matter of Israel and energy, when did bad luck end and bad judgment begin? Let’s say it started in 1975 with Abu Rodeis. It continued with the surrender of the Alma oil fields. It continues now with the potential retroactive rewriting of lease terms to fill her coffers.

Rather than discourage energy investment, as such a move would surely do, Israel should express its gratitude to the exploration companies for their tremendous discovery of Leviathan. And the best way to do that is by honoring her agreements with them.