Finance Minister Yuval Steinitz 311.
(photo credit: Courtesy: Ministry of Finance spokesperson)
BRUSSELS - Israel is sitting on at least $150 billion in future revenues
following the discovery of vast offshore gas deposits, Finance Minister
Yuval Steinitz said on Wednesday, and hinted that the final figure
could be much higher.
Israel rejects demand for higher Egyptian gas price
Energy leaders advocate export plan for gas, oil
The discovery of the Tamar and Leviathan
fields in the eastern Mediterranean over the past years promises to
transform an economy that is already growing rapidly thanks to a booming
high-tech sector and strong private sector investment.
while Jerusalem may be relishing the prospect of running sovereign
wealth investment like Middle East contemporaries Abu Dhabi, Qatar or
Kuwait, officials are quick to emphasize that they are not about to
abandon their high-tech, export-driven growth model.
"What is the
value already discovered in the gas fields? In today's prices, Israel
has $150 billion," Steinitz told Reuters in an interview in Brussels,
where he was on his way to Paris for a meeting of the OECD, the club of
wealthy nations that Israel recently joined.
That figure --
equivalent to 75 percent of Israel's gross domestic product -- may be
vast, but it could easily be exceeded, with drilling having so far only
taken place in 20-25 percent of the country's economic waters, Steinitz
"I don't know, I don't want to make a profit," he joked.
"But there might be some other discoveries as well." In March, the
Knesset approved a law sharply increasing the government's tax on
profits from the fields, with the maximum threshold raised to just over
60 percent, meaning future government income could soar.
again, Steinitz was cautious, emphasizing that while 60 percent of what
could be several hundred billion dollars is a vast amount of money, the
income will not come on stream for up to a decade and will be spread
over 30-40 years.
An additional "two to three billion dollars" a
year is expected to accrue to government revenues, but only in 8 or 9
years' time. That should help keep the budget deficit in check, but the
broader impact is likely to be on investment.'I assume we'll put the money in a sovereign wealth fund'
this year, Prime Minister Binyamin Netanyahu will appoint a committee
to advise on how to invest the income, including possibly establishing a
sovereign wealth fund.
"I assume that we will decide to put a
lot of the money in some kind of sovereign wealth fund, an Israeli fund
that will invest elsewhere," Steinitz said, adding that a portion would
also pay down government debt of around 75 percent of GDP.
economy that grew over 4.5 percent last year and is forecast to maintain
that level this year and next, such a fund -- if successful -- might be
in danger of causing overheating and further driving up the value of
the shekel .
That is why officials are eager to emphasize that
they have learned lessons from others who have suddenly discovered vast
energy resources in the past, and are focused on ensuring that Israel
does not loose its competitive advantage in the high-tech sector,
biotechnology and research and development.
"I have said very
clearly, we won't let those very good [oil and gas] discoveries kill our
exporting industries, we are not Kuwait, we are not Abu Dhabi," said
"Human capital is still the most important capital for
this country. The gas is just a nice addition, it's not the main
thing... It's really for the people's benefit."
For Steinitz, the
long-term goal is to meet the European Union's Maastrict criteria -- a
budget deficit of less than 3 percent of GDP and a debt-to-GDP ratio of
less than 60 percent -- and to find ways of supporting the export
industry despite a currency that has appreciated nearly 20 percent
against the dollar over the past two years.
One initiative that
has shown some results on that front is tax cuts for exporting
industries, with most exporters benefiting from a corporate tax rate of
12 percent and those in the far north and south of the country, the
least developed areas, having to pay just 6 percent tax.