Cairo protests 521.
(photo credit: Associated Press)
Prediction is very difficult, someone once said, especially if it’s about the
future. And there’s really no telling now precisely which long-range results
will be produced by Egypt’s current turmoil.
One thing is for sure,
however: Israel needs to prepare for a wide range of scenarios, including those
of the worst-case variety. It’s time for some urgent catching up. Because our
intelligence agencies failed to foresee the eruption of regional ferment, and
most especially the Egyptian upheaval and its possible strategic fallout, we
were caught unprepared, and not only in the military and diplomatic
Our economy will also be significantly affected by what
transpires south of the border in the coming months and years. The need to
institute new security measures on a newly unstable border, for a start, will
certainly require greater defense expenditures. But any injury to the peace with
Egypt would trigger an economic tidal wave. This could be a destabilizing factor
of critical proportions, and not merely because of the psychological insecurity
that would be injected into our economy.
Foreign investors may get cold
feet, as might the international currency speculators who have been causing the
shekel to artificially appreciate in value. De-escalating their assault on our
currency may do more to restore to realistic values than all the energetic Bank
of Israel efforts thus far. Yet such theoretical benefits would be more
than offset by the all-too-real deterioration in our security.
all the more so in our globalized circumstances, where distress in one country
soon affects others. Indeed the Arab world’s woes, so instrumental in prompting
the spontaneous wave of protests, were significantly exacerbated by the
worldwide recession that began in 2008. IMF chief Dominique Strauss-Kahn had
been warning about the potential impact well before the current spate of
WHEN MEASURED on the scales of international commerce, the
Egyptian market, as such, is a featherweight. Hence the few primary
outside victims of Egypt’s unrest will be firms doing direct business with the
country. Even in next-door Israel their number isn’t high, and it has been
falling due to the frigid nature of the peace with Cairo. Israeli exports
to Egypt are marginal in scope, netting between just $100 million-200m.
Egypt’s greatest importance to the global economy is via the
Suez Canal, but it’s likely that, whichever forces emerge triumphant from the
mayhem, Cairo would not have the remotest interest in cutting off the crucial
waterway, which is an income-engine for the country.
And yet revenue
considerations might not prevail in all cases. Egypt’s natural gas exports to
Israel also enrich its coffers, yet nobody can be absolutely confident that a
future regime wouldn’t opt to discontinue them.
During 2010, Israel
imported 2.1 billion cubic meters of Egyptian gas, contributing quite handsomely
to the Egyptian Treasury. This year forecasts were that the 3b.cu.m. mark
would be passed, and that we would eventually reach 8b.cu.m annually, as new
gas-fueled power-stations are constructed here.
New, substantial gas
import contracts were signed and other deals are near completion and pending.
Uncertainty in this sphere is another factor that cannot be easily downplayed,
even if Egypt’s new leadership should exude effusive affability. Odds are that
the intuitive inclination here will lead to greater reliance on local gas
discoveries, as in the Tamar Field off Haifa.
For Israeli consumers that
news could be both good and bad. It would boost state revenues and enhance our
collective welfare. Concomitantly, however, decreased competition for and
increased taxation of local energy providers would result in higher electricity
and gas bills for both households and industry.
WHETHER OR not Egyptian
gas supplies are threatened, there’s an imperative need now to cushion our
economy against potential future shock.
This primarily means speeding up
resolution of all remaining financial snarls – including tax wrangles – holding
up local gas production. The aim should be to pump Tamar gas into our pipelines
within the coming couple of years.
Instead of fantasying about
Norwegian-like gas bounties, it’s time to begin exploiting the probably more
modest resources discovered here.
Expecting Israeli self-sufficiency in
the energy sphere may be unrealistic, but any moves in that direction at this
juncture – when we can no longer complacently depend on Cairo’s goodwill – will
help shield Israel against more undesirable consequences accruing from Egypt’s
game-changing domestic cataclysm. Idly observing from the sidelines is no