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Is President Obama Imposing the ‘Auschwitz Border’ on Israel?

Introduction

On the cusp of the transition from the Obama to the Trump Administration, Israel has been in the crosshairs of actions at the UN and a Paris meeting convened on January 15, 2017 by outgoing French President Hollande.  Neither Israel nor the Palestinian Authority will be attending the gathering of 72 nations. The Quartet, as well as the 28 Foreign ministers of the EU will also be meeting on it and deciding what script is to be presented at the UNSC meeting on January 17th in New York. One ominous possibility might be a state of Palestine declaration.

Yet, a communique drafted by the U.S. and France and ‘leaked ‘widely proposes ‘coercively’ establishing borders that might imperil Israel’s sovereignty over Jerusalem and its national security.   That is the pre-1967 June Six Day War border what revered Israeli Foreign Minister Abba Eban called “the Auschwitz border” dividing Jerusalem, Israel’s eternal capital.  Shoshana Bryen, senior director of the Washington, DC-based Jewish Policy Center in an interview with the co-authors called the proposed borders, “Indefensible. Because you have an eight mile waist between what will be Palestinian artillery in the hills and the Israelis living underneath them. Ronald Reagan explicitly rejected the pre- ’67 borders.”

UN Security Council Resolution 2334

The Paris meeting  was  triggered by the passage of UN Security Council Resolution 2334  on December 23, 2016  and a subsequent controversial  speech by outgoing Secretary of State John Kerry at the State Department on  December 28th supporting  resolution 2334. Kerry in his State Department speech called Israel Prime Minister  Benjamin Netanyahu  the head of “the most rightwing  regime in Israeli history, with “an agenda driven by the most extreme elements” for “unfettered settlement construction and  flagrant violation of international law” forcing the end of the peace settlement talks with the Palestinian Authority.  Kerry’s comments were objected to by Netanyahu as “obsessive, unbalanced, “saying that “most of his speech blamed Israel for the lack of peace.”  UK PM Theresa May criticized Kerry’s remarks saying, “We do not believe that it is appropriate to attack the composition of the democratically elected government of an ally.”  Kerry was also criticized by a number of Republican and Democratic Senators and Congressional Representatives.

On  December 23, 2016, a crucial vote at the United Nation’s Security Council  passed an anti-Israel  Resolution 2334 by a vote of 14 to 0, with the US abstaining.  UNSC Resolution 2334 virtually abrogated Resolutions 242 and 381 passed in the wake of the June 1967 Six Days of War that reunified Israel’s capitol that had guaranteed Israel’s right to negotiate secure borders. Resolution 2334 stated that “Israel‘s settlement activity constitutes a “flagrant violation” of international law and has “no legal validity”. It demanded that Israel stop such activity and fulfill its obligations as an occupying power under the Fourth Geneva Convention.”  While UN Resolution 2334 had no ‘coercive’ effect under international law; nevertheless, it represented the first action the Security Council passed since 2009 on this issue.  Moreover, it was the first abstention by a U.S. government since the Carter Administration in 1980.

On January 10, 2017, Israeli Prime Minister Netanyahu told a visiting U.S. AIPAC delegation in Jerusalem, that, we have unequivocal evidence the Obama Administration Led UN Resolution [2334] that marked a major break with US policy.”

Background of Israel’s Legal rights to the Land

Under UNSC Resolutions 242 and 338 Israel lawfully built what the Jewish nation’s opponents called ‘settlements’.  These were Jewish villages and towns built on lands in Judea and Samaria with deeds conveyed in the Ottoman era.  Nearly 90 percent of population in these Jewish villages and towns in the disputed territories were built on lands originally inhabited by Jews prior to the 1948 -1949 War of Independence for Israel.

In 1979-1980 there was a flurry of  UN Security Council resolutions  seeking to  declare  these disputed territories  part of a future Palestinian State and Jewish  ‘settlements’ illegal.  However,  Eugene Rostow, former  President Johnson era State Department official and  co-author of Resolution 242 with British Foreign Minister Lord Carrington, affirmed Israel’s legal right to the lands under the original British Palestine Mandate in 1922 that also declared the Kingdom of Jordan.   Professor Rostow noted this in an article published in The Yale Journal of International Law, “Palestinian Self-Determination: Possible Futures for the Unallocated Parts of the British Mandate.”  Rostow’s arguments presage what is now occurring at the UN Security and at the Paris meeting, as if this was “deja vu all over again,” as baseball legend Yoga Berra might  say in one of his famous malapropisms.

Rostow cited the precedent of the Palestine Mandate:

The Palestine Mandate was established under the authority of paragraph 8 of Article 22 of the Covenant, which authorized the League Council explicitly to define the terms of a Mandate when the broad general statement of paragraph 1 was insufficient.

The purpose of the Palestine Mandate was “the establishment in Palestine of a national home for the Jewish people, it being clearly understood that nothing should be done which might prejudice the civil and religious rights of existing non-Jewish communities in Palestine, or the rights and political status enjoyed by Jews in any other country.” The Mandatory government was required to facilitate Jewish immigration and “close settlement” in Palestine, subject to the proviso that the Mandatory government could “postpone or withhold” the application of these (and related) articles of the Mandate in the area of Palestine east of the Jordan River. This was done when Britain established Transjordan as an autonomous province of the Mandate in 1922. But Jewish rights of immigration and close settlement in the West Bank and the Gaza Strip, established by the Mandate, have never been qualified.”

Trump Obligations to Israel

During the U.S. Senate confirmation hearing of Trump nominee for Secretary of State, Lax Tillerson, retiring Chief Executive Officer of Exxon Mobil, responded on questions regarding his views of US support for Israel. He said;

Israel is, has always been and remains our most important ally in the region. The UN resolution that was passed, in my view, is not helpful. It actually undermines a good set of conditions for talks to continue. As an attempt to ‘coerce’ Israel to change course that will not lead to a solution. The president-elect has already made it clear that we’re going to meet our obligations to Israel as the most important ally in the region.

One of the expressed obligations of President – elect Trump is the movement of the U.S. Embassy from Tel Aviv to Jerusalem.  While there have been US laws passed in 1990 and 1995 to implement this, waiver provisions were passed by the Clinton, Bush and Obama Administration every six months.  There appears to be momentum to finally achieve the move.  Sites have already been picked out. There is even a compromise solution to make the existing US consulate in Jerusalem as the seat for the US Ambassador effectively making two US consulates one in Jerusalem and the current Embassy in Tel Aviv. Objections to the prospective move of the US Embassy to Jerusalem were reflected in incitement preached at mosques in the Palestinian Territories and East Jerusalem.  That may have motivated a Salafist terrorist to mount a truck ramming in Jerusalem’s Amona killing 4 young IDF officers, injuring 17 alighting from a bus. The perpetrator was killed by an armed guide with the group.

Against this background, Northwest Florida’s Talk Radio Station, 1330amWEBY host, Mike Bates and co-host Jerry Gordon, Senior editor of the New English Review, convened another Middle East Roundtable discussion with Shoshana Bryen, senior director of the Washington, DC-based Jewish Policy Center.

LISTEN to the Podcast of the January 10, 2017 broadcast.  Read the Transcript in two separate posts: Part 1 and 2.

EDITORS NOTE: This column originally appeared in the New English Review.

Israeli Populist Protest Against Offshore Gas Development Deal Misguided

Last week, Israeli PM Netanyahu effectively declared offshore gas deal with Delek Partners and US Noble Energy, Inc. a national security issue. This was the conclusion reached after discussions with the development partners and economic analysis of other major gas developments resulting in a proposed framework to replace a series of bust deals with the Israel Antitrust Authority. He and his Energy Minister Yuval Steinitz may have a daunting task ahead next week contending with coalition partner, Economics Minister Aryeh Deri of Shas and Populist/Green opponents of the new deal. They support the position of the outgoing General Director of the Israel Antitrust Authority, Dr. David Gilo who resigned on May 26th objecting to the new deal saying he would not leave until August 2015. We have written about the offshore gas developments in several New English Review (NER) articles andIconoclast posts.  See: “Could Israel Lose the Energy Prize in the Eastern Mediterranean” NER (Jan. 2015). We specifically pointed out the radical populist actions by Dr.  David Gilo, who didn’t appear to have the requisite understanding of   energy market dynamics, let alone geo-political realities, or the risk capital requirements to develop and distribute gas.

Last December Gilo reneged on a March 2014 comprise deal with the Delek-Noble development partners instead accusing them of being a duopoly operating  in restraint of trade. Instead he sent the development partners a consent decree forcing sale of interests in the offshore gas deals for which they provided the risk capital to bring to develop them. Thus began the unraveling of a potentially important development of significant natural gas reservoirs in Israel’s offshore Exclusive Economic Zone in the Eastern Mediterranean Levant Basin.  Delek and  Houston based Noble Energy  had spent  over $6 billion before bringing  in the  9  trillion cubic feet tcf Tamir field in 2009 and  the 21 tcf  Leviathan field in 2011. Delivery of gas from the Tamar field began in 2013, while the significant larger Leviathan field might be brought on stream in 2018.  When the Knesset adopted revised   royalty and tax scheme proposed by the Sheshinski Committee in 2013, Israel looked like it might be on the path to a bright economic future.  That included the possibility of earning upwards of $70 billion in future revenues funding an authorized Sovereign Wealth Fund. The tax revenues from the gas sold for domestic use and export would substantively alleviate social program and national security budgetary burdens. That was also evident to former Reagan National Security aide, Prof. Norman Bailey of Haifa U and, Caroline Glick, deputy managing editor of the Jerusalem Post in an op-ed published on Thursday, July 2, 2015, Israel’s  Populist Energy Crisis.  

Saturday night, July Fourth, the Jerusalem Post reported, thousands from the student Green Course movement protesting the new gas deal from Netanyahu in Tel Aviv’s Rabin Square, Jerusalem, Beersheba and at the PM’s home in Caesarea.  According to the Post, “The activists demanded lower gas prices and increased use of gas in domestic factories, accusing the government of bending to foreign interests.”

The new proposal that Netanyahu is poised to secure cabinet approval on Monday, July 6th had the following terms according to the Post:

Under the government’s gas outline, Delek subsidiaries Delek Drilling and Avner Oil Exploration would have to exit the 282-b.cu.m, Tamar reservoir, whose gas began flowing to Israel in March 2013, selling their assets there within six years.

Houston-based Noble Energy could remain the basin’s operator, needing to dilute its ownership from the current 36 percent share to 25 percent within the same time frame.

The Delek subsidiaries and Noble Energy would be required to sell their holdings in two much smaller offshore reservoirs, Karish and Tanin, within 14 months. Because the buyer would be required to sell gas only to Israel, export allocations intended for these reservoirs would be transferred to Leviathan, according to the outline.

In 2013, the cabinet decided to cap exports at 40% of production, and pipelines designated for export will not be entitled to tax benefits guaranteed to local pipelines, as mandated by the Sheshinski Committee, whose recommendations on hydrocarbon taxation became law in 2013.

Glick in her Post op Ed  suggested that the hit that Israel had taken in foreign direct investment had a lot to do with misguided populist economic doctrine that pervades the Zionist Union, Yesh Atid, some coalition partners and Knesset opposition.  From my own investment banking exposure in Israel these populist economic views are a reflection of the founding Labor Socialist parties and the Histadrut. The latter owns enterprises that have never been effectively privatized.  It is also a poor reflection on a country that prides itself on the law, that doesn’t extend to honoring contractual obligations. She argues that is reflected in downward trends in Foreign Direct Investment cited in the most recent UN Council on Trade and Development report:

In 2014 Foreign Direct Investment in Israel was 46 percent below levels in 2013, dropping from $11.8 billion to $6.4bn. During the same period worldwide direct foreign investment dropped a mere 16%, meaning the drop in investment in Israel was nearly three times the global average.

Israel also had demonstrated that it was okay for foreign partners like Noble Energy to invest billions in offshore energy development, just as long if it came through, that the terms could change denying appropriate returns to risk investors.  Moreover, the hue and cry in Israel that the duopoly of the Delek –Noble gas partnership could result in price gouging was false.   When in fact since the Tamir field came on stream average gas prices dropped in Israel resulting in both lower energy and manufacturing costs.

The Israel Noble Energy manager Binyamin Zomer reinforced Glick’s observations with these comments cited in Globes Israel Business:

Let’s make it clear. We didn’t break the law, and we didn’t prevent competition. What we did do was to succeed beyond the expectations of the government that invited us to invest in Israel. Israel was happy, it seems, for Noble Energy to risk its money in Israel, as long as it was unsuccessful. There is a monopoly – that’s not a crime. Let’s understand why this happened. The company agreed to invest its money where other companies refused (and we won’t apologize for that); the supply of gas from Egypt ended in 2011 (and that was not our fault); other companies with no experience found no gas (again, not our fault); and the incessant interference by regulators with no background in oil and gas drove every gas company away, except for Noble Energy.

Glick offered the following proposals to rectify the impasse:

If we are to correct the damage – to our energy market specifically and to the Israeli economy overall – there is only one path to take. The Knesset must abrogate the 2011 windfall profits law and end all attempts to define the Delek-Noble partnership as a monopoly while seeking new, creative ways to seize their profits.

Then, the Knesset must pass a law that will protect investors from attempts to retroactively change the terms of operating licenses they receive from the State of Israel.

Israel has enough problems with the anti-Semitic boycott movement that is growing by leaps and bounds. We need to curb our populist tendencies and stop making those who want to invest in Israel feel that they are fools to do so.

As the late Hollywood and radio personality of my youth Bill Bendix might opine, “this is a rotten development.” Israel’s obsessive democracy  makes  the country  prone  to  divisive squabbles and in this case  possibly resulting in losing  a glittering economic future.  This latest Knesset speed bump doesn’t bode well  for Israel  achieving first world economic preeminence.  As we have written innumerable times these Israeli populists are economically uniformed  genetic socialists who have no understanding of both geo-political resource realities and commodity market dynamics or the risk reward relationships undergirding energy development. We blame Dr. Gilo whose dictatorial arrogance reneging the original compromise deal with both Delek Group and Noble Energy was nothing but political grandstanding . He was awaiting the victory of Zionist Union and populist parties like Yesh Atid that didn’t occur on March 17, 2015.  He should never have been permitted to remain as the radical leftist Antitrust Authority General Director until his departure in August after he rejected the Netanyahu government’s replacement deal on May 26th. No self respecting energy development group will invest a shekel in Israel’s energy resources because it is no better than a third world country that doesn’t honor agreements. Israel may have just screwed itself out of the future source of wealth that would alleviate social disparities and the budgetary burdens of national defense. Prime Minister Netanyahu is now caught in a nearly impossible task to  push through this new agreement on July 6th given the makeup of his ruling coalition. The fictional book and film character Forest Gump has the last word on those populist protesters in Israel, “stupid is as stupid does”.

EDITORS NOTE: This column originally appeared in the New English Review. The featured image is of Tel Aviv offshore gas deal protesters, July 4, 2015. Source: Jerusalem Post.