Israel’s 100 most influential: A force for no change at all

Tycoons, politicians and much of the media work together to make sure they are on TheMarker’s list for next year as well.

By Eytan Avriel, Avi Bar-Eli, Asher Schechter, Yossi Verter, Moti Bassok and Shuki Sadeh, HAARETZ

Who are the most influential people in the Israeli economy? One shared interest among those on TheMarker Magazine’s “100 Most Influential” list, compiled for the 14th year in a row, leaps out: They want to preserve the status quo. That is the source of their power and status.

If for the year 5774 we presented the list in the form of cliques – the Big Money clique, the Big Union clique, the defense establishment clique – for 5775 TheMarker has returned to its traditional format, of a list.

That doesn’t mean the cliques disappeared. Israel remains controlled by a handful of special-interest groups, and the list of the 100 “most influential” people is like a map of these groups that control us, our pockets and our future.

What is the status quo? The haves want to continue having, and to preserve the concentrated structure of the economy, where competition is feeble, taxes (as applying to them) are low, bank loans are cheap and access to the public’s money, painfully built up shekel by shekel, is easy.

The politicians want to keep their seats and keep a beady eye on a possible cushy job in the business scene one day. The legal counsels and consultants want to continue making money hand over fist. Career soldiers want the public to continue paying for their retirement, setting aside not a single shekel themselves, and then, when “retiring” in middle age, to get a plum job. The big unions want to continue getting raises for their people and for nepotism to reign forever.

To achieve all this, the interest groups work closely together, and to distract from their actions and motives, they hide behind smokescreens – for instance, statements about “concern for the workers” or “public welfare.”

Conflicting interests?

Superficially, certain interest groups would seem to harbor conflicting interests, such as unions versus employers. But when they do publicly clash, it’s a sham. They’ll find a way to cooperate because they share the same ultimate interest: to get the public’s money. To preserve the status quo.

Many of the 100 would do anything to preserve their status. Yitzhak Tshuva, the No. 1 name on the list, owns an energy empire and wants to control the biggest Israeli corporation in history. Haaretz correspondent Avi Bar-Eli explains how Tshuva, who understands perfectly well that his fate lies in the hands of regulators, has been scooping up “retirees” out of government and paying them salaries in the millions. If things work out for him, within a decade he will have tripled his wealth and become a real danger to democracy – because who would dare stand up to him?

Also on the list is Yair Lapid, who seems perfectly happy to squander billions on his insane “zero-VAT” housing plan, as long as he has something to wave about in the next general election campaign. The Big Unions have absolutely no problem with the public getting robbed blind by monopolies that supply the basics from electricity to coffee at Ben-Gurion International Airport.

The pessimists among us might suspect that the power of the interest groups conflicts with the basics of democracy and majority rule.

Yet some people do care about the public interest. We call them the ones who “influence for the better.” There are hundreds of nonprofit associations helping the disadvantaged; hundreds who serve the public to make Israel a better place. And there are people who may not be saints but find common ground with the public interest. Two ministers come to mind: Moshe Kahlon in his reform of the cellular industry, Gilad Erdan with his work reforming the Israel Broadcasting Authority.

So while the list of 100 is no collection of saints, there is room for optimism. New elements have risen who help balance the rule of the interest groups: the social protest, for one, and Facebook. The 100 are less influential than before and many fear the new voices rising, the people who demand actual, measurable performance, not just spin, narrative and image.

If we seem to be in a transition period when nothing works, maybe we are, but that too shall pass. Involvement, protest and activism will influence for the better, and maybe make the 100 lists to come a more encouraging read.

TheMarker profiles the top five from the list on this page.

1. Most influential: Yitzhak Tshuva

Yitzhak Tshuva’s Delek group was one of the day’s gainers. Photo by Tomer Appelbaum.

From his lofty position at the top of the Israeli business scene, Yitzhak Tshuva could afford to relax. He owns seven natural gas discoveries, including Tamar and Leviathan; his debt arrangements in the property markets are behind him; the regulator hasn’t crushed his ambitions; and he has plenty of liquidity for philanthropy. Tshuva’s No. 1 position on TheMarker Magazine list of the 100 most influential people in the Israeli economy would be safe if he never lifted another finger.

Yet a thought disturbs his peace of mind: The possibility that the government will slap price controls on gas, which would reduce profits on this treasure bubbling from the bottom of the Mediterranean Sea.

Producing gas at the Tamar field costs 60 cents per energy unit. After exploration and drilling costs of $2 per unit and the cost of capital, the Israel Electric Corporation gets charged $6 per energy unit and industry pays $8.

Each extra dollar in profit on the gas detracts at least a billion shekels from disposable income in Israel. This is not a profit margin the regulator could ignore forever.

But the energy market would be hard-pressed to withstand another shock inside four years, after the state doubled its royalties on exploitation of natural resources, and Tshuva has been troubled by the possibility of a cap on prices that would diminish profits.

In July, rumors began to circle that he’d hired Dr. Guy Rotkopf to advance development of the Leviathan field. Six months ago, Rotkopf was director general at the Justice Ministry, and he knows the ministries’ corridors well. And now the rumor had Tshuva seeking to hire him ahead of a possible legal tussle with government.

Influence isn’t measured only in direct economic or political influence through one’s business; it’s also acquiring the influence of others. Tshuva has always been generous with his managers, and in recent years he’s hired a long list of former regulators and public officers. We do not hint at impropriety when noting the recruitment of many excellent and worthy people. But Tshuva has indicated a pattern of stumbling into potholes and then hiring former regulators, acquiring a new potential influence.

Of course, other business leaders have chosen to increase their already wide circle of influence by acquiring further influence. Thus did Nochi Dankner, the Livnat family, Zadik Bino and, recently, Shlomo Eliahu. But Tshuva stands out for systematic conduct going back 14 years, strengthening his control over a national natural resource with strategic implications.

In the last three years Tshuva has shed his real estate holdings, is selling his finance holdings and has concentrated on energy. He diluted his holdings in private electricity production in Israel because of regulation, but retains the fuel companies Delek Israel and Delek Gas, and owns 50% of desalination company IDE.

He’s also agreed to sell holdings in smaller gas fields, but has obtained the Antitrust Authority’s essential consent to keep his holdings in Tamar and Leviathan, giving him vast influence over the entire Israeli economy. It matters to democracy itself if the former director general of the Justice Ministry joins his ranks. (Avi Bar-Eli)

2. Power of social media

Facebook has aggregated the relative powerlessness of the millions of Israelis who didn’t make TheMarker’s top 100 to lift them into the No. 2 spot.

Over the past year, social media have been a force for undercutting the powerful, whether it was the treasury’s plan to appoint PR man Motti Scharf as a highly-paid adviser despite his business ties with Bank Leumi, or the 1.5 million-shekel ($400,00) bonus Israel Discount Bank was due to give its chairman, Yossi Bachar.

Israel Discount Bank Chairman Yossi Bachar (Right). Photo by Tomer Appelbaum.

Facebook postings helped bring down the candidacies of two prospective Bank of Israel governors and embarrassed the government into cutting the ceiling on natural gas exports. They likewise disrupted the candidacies of Benjamin Ben-Eliezer, Dalia Itzik and Meir Sheetrit for president of Israel, and forced Lod municipality to rescind an offer to name a street after Mizrahi Tefahot Bank.

But it’s easy to overstate the power of social media. The fact remains that the victories are small, Facebook and Twitter posters rely on the traditional media for the information and their attention span is short. Bachar had to surrender his bonus, but the fact is that top executives in Israel’s financial services industry ended the year with big bonuses and natural gas remains a monopoly. (Asher Schechter)

3. PM on the wane

Israeli Prime Minister Benjamin Netanyahu speaking at the United Nations, September 29, 2014. Photo by AP.

A prime minister is a natural for TheMarker’s most influential, even though he has largely ceded control over economic policy that was once so dear to him to Finance Minster Yair Lapid, Economy Minister Naftali Bennett and Housing Minister Uri Ariel – none of them from his Likud Party, much less allies. The prime minister has concentrated his energies on the security-diplomatic sphere.

Will Netanyahu be so high up the list next year? Conventional wisdom these days holds that 5745, the current Jewish year, will be an election year, with polling coming as early as this winter.

Netanyahu has been prime minister five-and-a-half years this time around, and eight-and-a-half years counting his first government. There are no obvious candidates to replace him, but after so many years the public is tiring of their leader. Moreover, unlike the 2009 and 2013 campaigns, Netanyahu has no obvious allies, as he had in the past with the ultra-Orthodox parties and Yisrael Beiteinu head Avigdor Lieberman.

Netanyahu dropped the ideological flag that inspired his party as he accepted the principle of a Palestinian state, and agreed to briefly freeze settlement construction and exchange prisoners. His vow to fight Hamas to the finish wasn’t fulfilled this summer during Operation Protective Edge.

Netanyahu could try reinventing himself, but don’t count on it: He is by nature conservative, ideological and now in the seventh decade of life. (Yossi Verter)

4. Military financial muscle

Defense Minister Moshe Ya’alon, left, and IDF Chief of Staff Benny Gantz. Photo by Eliyahu Hershkowitz.

Defense Minister Moshe Ya’alon and the top military brass – Chief of Staff Benny Gantz, Deputy Chief of Staff Gadi Eizenkot, Defense Ministry Director General Dan Harel, head of IDF planning Nimrod Sheffer and the army’s budget director Re’em Aminoach – find their elevated place in the top 100 by virtue of the vast and growing budget they control.

In 2014, spending on security, not counting the Mossad, Shin Bet security service and other defense-related bodies, reached 70.5 billion shekels ($18.9 billion), equal to 18% of the government’s total budget. For 2015, the budget allocated 65 billion shekels, including an extra 6 billion shekels not originally envisaged in the spending plan. But the army wants more to deal with the effects of Operation Protective Edge over the summer and emerging security threats in the region. Last year it won.

In fact, the army’s money needs are so big and the government’s resources these days so constrained, that every shekel spent on arms inevitably comes at the expense of budgets for health, education and social welfare. Israel’s massive defense budget goes a long way to explaining why we place so low in Organization for Economic Cooperation and Development rankings for spending on civilian needs.

Is Israel safer for all those billions of shekels? This year, IDF spending on weapons declined to 26 billion shekels from 30 billion in each of the two previous years. The big increase in spending has gone to things like pensions and aid for disabled veterans.

The idea of a lean army focused on intelligence, cyber warfare and air power seems to have died during Protective Edge. The fighting taught that the army does indeed need to invest more in tanks and troop carriers, and in technology for finding tunnels – and money to pay for it. (Moti Bassok)

5. Those who changed sides

Conference goers evacuate the plenum of the Israel Conference for Peace during a rocket alert siren, Tel Aviv, July 8, 2014. Only former head of the Shin Bet Yuval Diskin remains seated. Photo by Tomer Appelbaum.

It takes a great deal of courage to change sides and expose the misdeeds of the people who were once your bosses, clients and allies. But five people did just that this past year, having an important impact on Israel’s political and economic life. Some were inspired by seeing reform, advancing a political career or fear of jail time, but no matter what they had an impact.

Eldad Yaniv, an attorney whose clients once included some of Israel’s most powerful politicians, exposed the multiple homes owned by Dalia Itzik and Benjamin Ben-Eliezer’s luxury Jaffa apartment, putting an end to their candidacies for president. A founder of the Eretz Hadasha political party, which failed to garner enough votes to enter the Knesset in 2013, Yaniv may have be looking for a political career but for now he has contributed a lot to justifiably ending the careers of others.

Former Shin Bet head Yuval Diskin may also have political aspirations, but he was certainly acting courageously when he defied the line of his former bosses, Prime Minister Benjamin Netanyahu and then-Defense Minister Ehud Barak, and called the Palestinian problem a bigger threat than Iran. He attacked the two personally for their mistaken values and accused Netanyahu of being “fearful, indecisive and irresponsible.”

Shula Zaken, the long-serving bureau chief of former Prime Minister Ehud Olmert, turned state’s evidence against him in the Holyland affair and helped to bring about his conviction. Boaz Harpaz, a reserve intelligence officer, accused former IDF Chief of Staff Gabi Askenazi of being behind a smear campaign to block Yoav Galant from being named his successor. Adi Sheleg, a stockbroker, revealed to the state prosecutor what he knew about tycoon Nochi Dankner’s manipulation of IDB Holdings’ share price, for which he is now being tried. (Shuki Sadeh)