Israel Update Week Ending February 18th
Bennett Visits Bahrain, Hezbollah Drone Penetrate Israeli Airspace, GNP Grows 8.1%, Intel Buys Tower and more.
FOREIGN AFFAIRS
This week, Prime Minister Naftali Bennett made an official visit to Bahrain, one week after Defense Minister Gantz visited there. By all accounts, Bennett’s visit was very successful — both publicly, and in closed rooms. Bennett was received with full pomp and circumstance, including the playing of Israel’s National Anthem when Bennett arrived to meet the Crown Prince. This arrival ceremony was carried live on Bahraini Television. Bennett’s later meeting with King Hamad bin Isa Al Khalifa was also widely covered by Bahraini media. In private, the two sides reportedly spent most of their time discussing the Iranian threat.
Israel’s relationship with the Gulf States is markedly different from its earlier peace agreements with Egypt and Jordan. This is the warm peace Israelis have always craved. There are three reasons why the peace agreements with the Gulf States are different from earlier peace agreements. First, Israel has not fought a war with either of these countries. Thus, there are no veterans with bitter memories. Second, it was reported that Gulf States’ leaders conducted public opinion surveys which showed their citizens were willing to normalize relations with Israel, despite the lack of a resolution on the Palestinian issue. This shift in attitude regarding the Palestinian-Israel conflict opened the door for the third difference. Israel of 2022 is far from the Israel that signed a peace agreement with Egypt in 1978. Today, Israel is a wealthy country with some of the most advanced technologies in the world … and all of Israel’s new friends would like to benefit from those leading-edge technologies.
This brings us to the second interesting diplomatic development this week — i.e. arrival of a high-level Turkish delegation to plan President Herzog’s visit to Turkey next month. After years of a very rocky relationship between Turkey and Israel, Erdoğan seems to have made the strategic decision to warm ties between the two countries. Israel is proceeding carefully in its engagements with Turkey, keeping in mind the sensitivities of Greece and Cyprus, with both of whom Israel now enjoys very close relations.
This week, Israel saw separate visits of Republican US Senator Lindsey Graham, as well as, a delegation of Democratic members of the US House of Representatives, led by House Speaker Nancy Pelosi. Both Graham and the Democratic delegation met with all our government leaders. Speaker Pelosi addressed the Knesset. Once upon a time, such delegations would have been bi-partisan, but alas, that was then, this is now.
DEFENSE
On Friday morning, sirens went off throughout the North as a drone from Lebanon successfully penetrated Israeli air space. The Air Force tried to intercept the drone, and failed; the drone returned to Lebanon. Today’s drone infiltration comes a day after the IDF shot down a different Hezbollah-operated drone, flown near the Lebanese border. Earlier in the week, Hezbollah’s leader Hassan Nasrallah delivered a speech in which he bragged about the capabilities of Hezbollah to develop its own UAVs that transform dumb missiles into smart missiles.
It was reported that targets in the area of Damascus were attacked on Wednesday night.
Israel joined the large U.S. Navy drill together with dozens of the world’s navies, including some countries with whom Israel does not have official relations. This multi-national exercise marks the deepening relationship being forged between the Israeli and U.S. Navies. In a first-ever move, an Israeli Naval officer will be billeted to Bahrain to serve as liaison with the U.S. Navy Fifth Fleet headquartered there.
Lastly, the Israeli Ministry of Defense announced it has allocated NIS 100 million to develop a Quantum Computer.
POLITICS
The Likud held a rally in Tel Aviv this week, ostensibly to demand that a national commission of Inquiry look into alleged illegal use of spyware on Israeli citizens. Former Prime Minister Netanyahu spoke at the rally, which swiftly morphed into a protest attacking the fact the former Prime Minister is being put on trial.
In the meantime, a minor coalition crisis developed, when Ra’am failed to support the government on several unimportant votes, in retaliation for the government’s failure to support some of the tax benefit laws Ra’am backed. You can hear my views on the crisis below.
COVID—19
The Israeli government officially announced that the Omicron Wave has ended. If wishing were enough to cure Covid, many people who are no longer with us would still be alive. The number of Covid cases have indeed dropped, and the number of seriously/critically ill from Covid is now under 1,000, once again. However, Israel continues to report 20,000 cases of new Covid infections each day, with a positive test rate running around 20%. Neither of these statistics suggest that the Pandemic is over. Moreover, during the last ten days, 530 Israelis died from Covid. The Pandemic may be over soon, but I wish the government was just a little more patient, and would wait for the numbers to truly reflect the end of this wave before heralding its demise.
ECONOMY
The Israeli economy grew an astonishing 8.1% in 2021, eclipsing all forecasts. This growth level is the strongest in the OECD, and comes after Israel’s growth in Q4 2021 was 16.1%. The two engines of this exceptional growth have been consumer spending, and increased export of high-tech products and services.
Along with rapid economic growth has come the first signs of inflation. In January, the Consumer Price index rose .2% above the previous month. This brought the year-over-year rate to 3.1% — the first time in nearly a decade the inflation rate has exceeded the Central Bank’s goal.
Prices of the following items increased: Fresh fruit and vegetables +2.1%; food +1.3%; furniture and household equipment +0.7%; and transport +0.5%.
Prices of the following items decreased: Clothing and footwear –5.0%; as well as, Culture and Entertainment –0.9%.
Housing prices continue to rise, increasing 11%, on average, over the course of the past year. Israel is in the midst of construction on the most significant number of new homes begun in recent years. However, even this appreciably larger number of new homes is insufficient to keep up with demand.
BUSINESS
Intel announced it has agreed to purchase Tower Semiconductor, an independent semiconductor foundry, which produces custom analog chips. Intel will pay $5.4 billion to the highly profitable company, based in Migdal HaEmek in the Galil (northern Israel). While the deal is undoubtedly good for the shareholders (since Intel will buy the company at a 40% premium from the value of the publicly traded stock on the day before the announcement was made), it remains unclear whether this deal is in Israel’s national interest. Having an independent chip foundry in the country is one of Israel's strategic advantages.
Classic, a Tel Aviv-based company, which specializes in software development for Quantum computers, has received a $33 million investment. The company, founded in 2020, hopes to be one of the leaders in quantum computing software.
WSC Sports, the global leader in AI-driven sports highlights, announced it had closed a $100 million Series-D funding round, led by ION Crossover Partners (ICP). Existing investors, including Intel Capital, O.G. Tech, and Detroit Venture Partners (Dan Gilbert) all participated in the round. The company plans to use the new funding to support its aggressive growth plans for 2022 and beyond, continuing its expansion into new geographies, sports, and platforms such as OTT, NFTs, sports betting, and more. In addition, WSC Sports is set to recruit more than 150 new employees this year, to expand its staff roster in Israel, and at its regional offices in New York, Sydney, and London.
Allot Ltd., a global provider of security solutions and network intelligence for enterprise and mobile, fixed, and cloud service providers, announced today it had entered into a $40 million private financing arrangement with Lynrock Lake Master Fund LP, a fund managed by Lynrock Lake L.P. (“Lynrock Lake”).