Israel Update Week Ending February 11
Terror Cell Killed, Police/NSO Scandal Continues, Iran Talks, Economy and Business
MILITARY
Israeli forces entered Nablus on Tuesday, in the middle of the day, to attack and kill three members of the Al-Aqsa Martyrs Brigades (including groups associated with the Palestinian Authority’s ruling Fatah party). Members of this cell are said to be responsible for a number of armed attacks on Israeli civilians and military during the past few weeks. The Shin Bet and the Border Police issued a Joint statement in which they stated: “A terrorist cell from the Nablus area was eliminated. The cell is responsible for a series of shooting attacks in the area against the Israel Defense Forces and Israeli civilians in recent weeks.” Conducting a mission in the middle of Nablus in broad daylight was a bold move which, in this case, paid off. Palestinians have vowed revenge, but the event is more likely to be soon forgotten. These were not innocent civilians who were killed.
On Wednesday night, citizens in Northern Israel awoke to the shrill blare of air raid sirens, when an errant Syrian anti-aircraft missile crossed the border before detonating. This was not the first time such an error has happened in recent years. Indeed, over the past few years, the Syrians are estimated to have fired thousands of missiles at what they believed to be Israeli aircraft — to date, only one of those missiles hit its target; a strike that occurred over Israel.
POLICE ON TRIAL
Reverberations continue over the question of police usage of NSO’s Pegasus software. Police deny its use of the comprehensive spyware tool was nearly as extensive as was reported by the Calcalist news site. However, no one believes the police — and that’s part of the problem. Israelis have always had a poor opinion of the police, and that assessment has hit new lows over this latest scandal.
However, the public embarrassment to law enforcement is not restricted to use of NSO software. The far-sweeping offense is fact Israel’s police have been using multiple methods to access citizen information over the past decade — many times without judicial approval. Moreover, even in cases when police received judicial approval, they almost never fully explained the extent of what they sought to the judge reviewing their request. Still, most concerning, is that when police exceed whatever legal limits have been placed on them, there is no penalty, and whatever evidence they discovered is routinely used at trial, regardless. No doubt, it is time for a fundamental overhaul of the Israeli police, and justice system, as a whole.
FOREIGN AFFAIRS
Another round of talks with Iran is scheduled to begin next week in Vienna. There’s a sense we are in “the money time,” when an agreement will either be reached in the next two weeks, or the talks will fail. On Sunday, Prime Minister Bennett spoke by phone with President Biden. Iran was a major part of their conversation. Bennett also invited Biden to visit Israel, an invitation which Biden accepted. On Thursday, Bennett met with the new German Foreign Minister Annalena Baerbock. Iran was high on their agenda, as well.
While not publicly saying so, Israel would prefer an agreement with Iran over no agreement, as any negotiated arrangement will delay Iran’s nuclear program. However, ultimately, Israel is counting on what it perceives as the widening technological gap between Israel and Iran to protect its population in the future. Defensive measures, like development of a laser intercept system, will be able to provide Israel with a near impenetrable shield in 5-10 years. When it comes to military technology, Israel’s technology, in many areas, is the best in the world and evolving all the time. One thing is clear, the current government has no intention of getting into a public fight with the United States over any agreement with Iran. This government understands that maintaining good relations with the US is more important than anything else.
COVID–19
Like other places in the world, the Omicron wave is beginning to recede here in Israel, but slower than many would like — certainly slower than would be expected based on how Israelis, both in government and regular citizens are currently acting. Almost all Covid restrictions have been lifted.
Israel reached its peak of serious Covid cases early this past week. Severe illness is now slowly decreasing, in part, because the death rate from Covid-19 remains high. I think both in Israel and the world, peoples’ desire for Covid to be over has gotten a bit ahead of reality. If current trends continue, the case load should be low enough to resume normal life in a few weeks, but not yet!
ECONOMY
A strange development occurred in Israel over the past few weeks. Many of the food producers and importers announced they planned to raise prices. Most of these proposed price hikes were totally unjustified. As although the cost of many items in the world have increased due to Covid and other supply chain problems, the strengthening of the Shekel should have counterbalanced the upsurge. Ultimately, a combination of the threat of a consumer boycott, coupled with governmental pressure, convinced almost all those projecting price increases to roll back their proposed increases.
Public outcry finally created momentum to deal with a perception of continually rising prices. Some price increases are very real, including a tax on sweetened beverages, such as Coke, as well as a tax on single use cutlery. A tax on beverages was put in place to cut down consumption of sugar laden drinks. This policy seems to be working, with consumption of sugary drinks down 30% in January. The tax on single use plastic goods was instituted for environmental reasons, as Israel uses 4 times the OECD average of single-use plastic plates and cutlery.
There has also been an increase of about 8% in property tax, and a scheduled 6% increase in electricity rates, due to the increase in coal prices on the world market. But as one commentator stated, it’s not the percentage of the increase, but the fact that this price boost is coming on top of already high prices. The government felt it had to do something, so, on Wednesday night it announced several measures. They included a child tax credit for those working, which will benefit the middle class more than anything else; (since low-wage earners do not pay any significant income tax). They also included a 20% increase in the earned income credit which will aid lower-income workers. The hike in electricity prices will be cut in half, which the government will achieve by cutting the tax on imported coal. Finally, tariffs will be cut or eliminated on a range of goods. The Treasury can afford these steps, since tax receipts have been running significantly above projections.
There is criticism of the plan from two main sectors — the self-employed, who do not gain anything from the new program, and ultra-Orthodox, of whom 52% live below the poverty line (compared to 9% of the rest of Jewish Israelis). However, the reality is that prices are high in Israel for two reasons: the stranglehold of monopolies on a small country, who remain largely unregulated (in any significant way), and a government that bears direct responsibility for many of the high prices — both by maintaining VAT on food, and by selling land at the highest price possible, thereby helping cause the very high cost of housing in the country.
MEDICINE & TECHNOLOGY
Scientists from Tel Aviv University have developed a 3D-spinal-tissue-implant, which might constitute a breakthrough to allow individuals who suffered spinal injuries to walk. It’s a little early to get as excited as some in the media have suggested, since the new method has only been conducted on mice. However, the potential could be miraculous.
For the first time ever, the Civil Aviation Authority of the State of Israel (CAAI), which operates under the Israeli Ministry of Transport and Road Safety, has certified an Unmanned Aircraft System (UAS) for civil aviation, approving that craft to fly in civilian airspace, like any other civilian airplane, without restricting its flight to unsegregated airspace. Receipt of the Type Certificate from the CAAI completes the compliance of Elbit Systems’ Hermes Starliner UAS with the NATO standardization for approving UAS for integration in civilian unsegregated airspace.
For safety reasons, international aviation regulations prohibit uncertified aircraft from flying in civilian airspace, limiting the operation of UAS' to unsegregated airspace, until now. The certification issued by the CAAI to the Hermes Starliner UAS changes this fact.
CAAI has supervised the design and manufacturing of the Hermes Starliner UAS, and led a rigorous six-year certification process that included extensive ground and flight tests. The tests were conducted in compliance with air navigation rules, airworthiness basis and aviation standards regulated by the International Civil Aviation Organization (ICAO).
BUSINESS
Sidelines raised $25 million. Formed in 2017, Sidelines has developed a social platform for sports gambling. Sidelines’ main market is the United States, where sports gambling is often a social event.
Deepdub raised $20 million in Series-A funding led by Insight Partners to bring AI-based dubbing global. Tel Aviv-based Deepdub aims to bridge the language barrier and cultural gap of entertainment through high-quality localization. Deepdub's platform leverages cutting-edge AI technology with a human touch to allow content creators, owners, and distributors to extend their international reach and scale their offerings while maintaining the highest level of quality. For audiences, this means watching their favorite film and TV programs dubbed in native languages without losing any aspect of the original experience.
Prisma Photonics, which monitors large scale infrastructure, announced it raised $20M in a Series-B round, led by New York-based global private equity and venture capital firm Insight Partners, with participation from SE Ventures (Schneider Electric's venture capital arm) and Future Energy Ventures, the venture capital investment and collaboration platform of E.ON. The investment will accelerate the Prisma Photonics' growth and support new customers and projects. This round brings the total funding raised by Prisma Photonics to over $30 million. The company's earlier investors include i3 Equity Partners and Chione Switzerland.
While much is written about money raised and innovations created by start-ups, some of the more established Israeli companies have also seen excellent results. Camtek, maker of equipment to inspect semi-conductor manufacturing, reported record annual revenues of $269.7 million; a 73% increase year-over-year. Operating cash flow of $61.1 million in 2021, which, along with the successful convertible notes transaction in November 2021, led to a year-end total cash, short-term and long-term deposits balance of $430 million.
Meanwhile, Inmode, manufacturer of ground-breaking surgical equipment, recorded full year revenues of $357.6 million, an increase of 73% as compared to 2020; 72% of revenues derived from our proprietary surgical technology platforms engaged in minimally invasive and sub-dermal ablative treatments, 20% from their recently introduced hands-free platforms, and 8% from our traditional laser and non-invasive RF platforms. The company recorded GAAP net income of $165.0 million, compared to $75.0 million in 2020; *non-GAAP net income of $176.3 million, compared to $89.1 million in 2020.
Finally, ZIM, which benefited from the highest shipping rates in history, is adding to its fleet. ZIM will charter a total of thirteen container vessels, composed of five second-hand vessels and eight new-build vessels, for total charter hire consideration of approximately $870 million. The five second-hand vessels which range from 3,500-4,360 TEUs and are expected to be delivered in the first and second quarters of 2022, will be deployed across ZIM’s global network. The eight 5,300 TEU wide beam new builds scheduled to be delivered during the third quarter of 2023 through the fourth quarter of 2024, are expected to be deployed in trades between Asia and Africa.