Flareup reminds that extended conflict could shut down Israel’s economy

In the next conflict, a total of 150,000 missiles – some 2,000 daily – could be fired into Israel by Hezbollah.

February 10, 2018 21:42
3 minute read.
Flareup reminds that extended conflict could shut down Israel’s economy

File photo of an EL AL Boeing 777 aircraft at Ben Gurion International Airport near Tel Aviv, Israel July 14, 2015. REUTERS/Nir Elias/File Photo. (photo credit: REUTERS/NIR ELIAS)


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Although Saturday’s contretemps on the northern border suspended flights to Ben-Gurion Airport for less than an hour, it was a reminder of the great damage to the economy that could be caused by an extended conflict with Hezbollah.

In the next conflict, a total of 150,000 missiles – some 2,000 daily – could be fired into Israel by Hezbollah.

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In the 2006 war, Hezbollah launched 130-180 rockets daily into Israel. And unlike the haphazard rockets then, today’s arsenal is much more precise and GPS-guided.

That could put infrastructure – such as power plants and transportation – in harm’s way, possibly shutting down the economy.
Ben-Gurion Airport – which handles more than 90% of passengers entering and exiting the Jewish state – could also be shuttered.

An airport closure and a glut of bloody news would dissuade tourists from coming, jeopardizing an industry that provides jobs to 200,000 people in Israel, according to the Tourism Ministry.

In 2017 a record-breaking 3.6 million tourists visited Israel, but it took three years since the Gaza war – Operation Protective Edge – for the tourism numbers to bounce back to their regular growth rate.

In the 2014 Gaza war, the US Federal Aviation Administration issued a 48-hour ban on flights heading to Ben-Gurion. Hezbollah’s rockets in 2006 did not extend far enough south to affect the airport’s operations.

“Until now, the experience in limited conflict – even one-month conflict – was a quite temporary effect on the economy,” Alex Zabezhinsky, chief economist at Meitav Dash investment house, told The Jerusalem Post.

“If you have a war with Hezbollah, it will shut down the entire economy. If it’s extended for a few weeks or months or even more, and it’s a big budget and military expense, it could be a major impact,” Zabezhinsky said, adding that it could lead to annual GDP contraction.

Neither the 2006 Lebanon war nor the 2009, 2012 and 2014 bouts of fighting with Hamas led to an annual GDP decrease, but rather a quarterly contraction.

The country’s economy hasn’t shrunk on an annual basis since 2002, as Israel faced the worst violence of the Second Intifada and the after-effects of the Dot-Com bubble burst.

And unlike previous conflicts, policy-makers have fewer monetary-policy tools to stimulate the economy, with interest rates near zero around the world for the past decade.

On a somewhat more positive note, hi-tech should be mostly unaffected by conflict, Zabezhinsky added, as it’s difficult to physically destroy offices and tarnish human capital.

“Israeli firms are highly-global in their orientation, operations and sales/revenue,” Steven Schoenfeld, founder and chief investment officer of New York-based BlueStar Global Investors, told the Post. “Deterioration of local economic conditions – even during relatively long operations such as 2006’s Second Lebanon War – mainly impacts companies with heavy exposure to the domestic economy, such as banks, retailers and real estate firms.”

Hezbollah has also threatened to target Israel’s offshore natural-gas platforms, which were not operating in the last war.

It is unclear how Israel can fully defend expensive and explosive gas rigs and platforms dozens of miles offshore, even with maritime deployment of the Iron Dome missile-defense shield.

When the Post asked National Infrastructure, Water and Energy Minister Yuval Steinitz about security measures in November, he insisted on system redundancy and avoided giving specifics.

“We will take measures to protect them, and I won’t get into details.... We have very good defense. And you know, a rig, especially if it’s close to the shore, can be defended with weapons,” Steinitz said, adding that: “In a few years from now, we’ll be in a much better situation.”

Domestic natural gas provides around 70% of Israel’s electricity, although the Israel Electric Corporation has stockpiled alternative fuels in case of emergency shutdown, as seen during last Rosh Hashana’s brief pipe repair.

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