Israel Update Week Ending March 11
Israel and Ukraine,Herzog in Turkey,Lapid in Jordan,Nuclear Talks with Iran on Hold, Zim has a banner year and more
The week began with a surprise trip to Moscow by Prime Minister Bennett to meet Russian President Vladamir Putin. When I first heard the visit was scheduled to take place, I must admit, I was angry. My general feeling is that Putin is pure evil, and meeting him is like meeting with the likes of Italy's Mussolini; a step below meeting Hitler. However, ultimately, while I think the meet up may have been a mistake, I accept the argument that Bennett considered even the most slim chance of saving lives, is worth the effort. Bennett, who flew on Shabbat to meet Putin, went to Germany to report on his discussion with Putin to Germany Chancellor Olaf Scholz. Bennet had several calls with Ukrainian President Zelensky, as a follow-up to his meeting with Putin.
As I stated last week, I believe we should be doing more to help the Ukrainians — both those in Ukraine, and those who are refugees. I was disappointed last Saturday night, when only a few thousand showed up to demonstrate against Putin’s war at the Russian Embassy in Tel Aviv. After Bennett’s meeting, Foreign Minister Yair Lapid flew to Latvia, to have a quick meeting with US Secretary of State Blinken. Their meeting we devoted to the ongoing discussions between Bennett, Putin, and Zelenski, along with an update on the Iran Nuclear Talks.
On Wednesday evening, two of the leading Israeli TV news stations continued to run segments about the Ukrainians stuck at Ben Gurion Airport, until the government decided to let them in. In my opinion, there is no excuse to refuse their entry. When the Israeli public saw pictures of children sleeping on the airport floor, an immediate outcry developed. Minister of Interior Ayelet Shaked, a leading advocate for limiting the number of non-Jewish refugees we allow entry (her plan called for just 2,000 people), immediately ordered to move all those waiting into hotels. There is growing support throughout the country to allow a much larger number of non-Jewish refugees into the country, especially those with relatives here, as well as those who work for Israeli companies.
Although I believe Israel is not doing enough, in general, there are several cases of Israelis going above and beyond. One such instance, is the story of 12 pediatric cancer patients evacuated from a Ukrainian Hospital, and brought — together with their families — to Israel’s Schneider Children's Hospital to continue their care. In addition, both Tel Aviv University and Hebrew University have offered special fellowships to Ukrainian Graduate students to continue their studies and research here in Israel.
DIPLOMACY & FOREIGN AFFAIRS
While Israeli diplomatic efforts this week focused primarily on Ukraine, there were several other important developments. The most important development took place on Wednesday, when President Herzog conducted an official state visit to Turkey to meet with Turkish President Recep Tayyip Erdoğan. Israeli relations with Turkey have gone steadily downhill, since Erdoğan became President. However, the Turkish economy has been in a tailspin, and Erdoğan concluded that one way to improve the economy would be by improving relations with Israel.
Thus, ever since Herzog became President, we have seen slow warming of those relations, culminating in this latest visit. A visit the Turks went out of their way to ensure was enveloped in all of the pomp and ceremony they could muster. At the joint press conference at the end of the one-on-one meeting, Erdoğan stated:
“I am very happy to host President Herzog. This visit will be a turning point in our relations. It's our goal to improve the dialogue between our two countries based on shared interests with a recognition of our respective sensitivities. If we can work together in areas of shared interest, it will be easier to work through those issues that divide us. We need to deepen our commercial relations; despite the pandemic, our combined trade has risen to 8.5 billion. Our goal is to reach $10 billion.”
On Thursday morning, Herzog went on the meet with the Jewish community. While there are no expectations that Israeli Turkish relations will return to what they were two decades ago, the warming of connections is an essential improvement in Israel's regional position.
Foreign Minister Lapid visited Jordan's King Abdullah II in Amman, to round off a hectic week for Israeli diplomacy and Foreign Affairs. The main goal of this meeting was to discuss the upcoming Ramadan season and problem-solve ways to maintain the peace in Jerusalem during this period. This week’s court decision to put the evictions of Palestinians from homes in the Sheik Jarrah neighborhood on hold, should contribute to lowering tensions in the holy city.
IRAN AGREEMENT
This morning it was announced that the talks in Vienna on reinstated the JCOPA agreement with Iran have been put on hold due to external factors. Supposedly the agreement is ready( I will withhold judgment until I have seen the agreement) but the external factor is Putins war in Ukraine. The Russians are demanding that their trade with Iran be exempted from the sanctions that the West has imposed on Iran, a non starter for the Americans and others. It was naive to think that with a war raging in Ukraine that an agreement could be reached that included the Russians relating to the Iran nuclear program. It also is not in Russian interest to reach an agreement at the moment that will bring additional oil to market, and remove the Iranian issue at least temporarily from the West’s agenda.
DEFENSE
This week, the Israeli Air Force announced that a pair of its F-35s intercepted two Iranian drones headed toward Israel, last year. It was hinted that the drones were intercepted soon after the Iranian leaving air space — indicating these F-35s executed their mission deep inside Iraq.
It was reported that Israeli jets attacked targets in Syria this week. Purportedly, two officers of the Iranian Revolutionary Guard were killed in the attack. Iran has vowed revenge.
POLITICS
As the current session of the Knesset is about to recess for the extended Passover break, the coalition managed to pass several laws it deems important. First, it extended mandatory military service for men from 32 to 34 months. The government changed the policy after the IDF complained that 32 months was simply not long enough to train soldiers, and then put that training to use. The Arab Ra’am party voted with other coalition members to pass the law.
Then, on Thursday night, the much more controversial “Citizenship Law” was passed. That law denies citizenship to Palestinians who marry Israeli mates. Ra’am and Meretz opposed the law. However, the Likud abstained, which ensured a majority for the law’s passage. Those who support the law claim it is important to ensure that terrorists do not marry an Israeli, and thus with Israeli citizenship, they would be freer to move about — and potentially commit an act of terror. In reality, there are other ways to meet this challenge. The “Citizenship Law” is problematic, and reflects an obsession with changing demographics held by some Israeli politicians; while at the same time, opposing any solution to the conflict that would solve the problem.
ECONOMY
The Israeli Tax Authority released its annual report. It showed that total income from taxation in 2021 was NIS 496 billion, up from 416.6 in 2020. Taxes represent approximately 30% of the GNP in the last few years, and this is down from 35% in the 1990s. In addition, the country has other income of approximately NIS 100 billion, a sum that aggregates both foreign aid income and sale of property and most consequential sale of land for buildings. One of the significant problems in the Israeli tax system is that regressive indirect tax — such as VAT — represents 40.6% of the state's income, while the OECD average is 34.7%. As a result, the lowest income bracket in Israel spends 37% of their income on indirect taxes, while the highest income bracket spends 8% of their income on indirect taxes. The numbers reversed when it comes to direct taxes, with the highest percentile pay 40% to taxes, while 50% of workers pay no direct taxes.
Zim reported its year-end results, and the company made an almost obscene amount of money:
Net Income of $4.65 billion, Adjusted EBITDA of $6.60 billion, and Adjusted EBIT of $5.82 billion. The world shipping crisis has been good to Zim. It is distributing half the income as dividends, and the rest will expand its fleet of ships. Zim President Eli Glickman stated:
“Given our outstanding cash generation in 2021, we decisively allotted capital to support our customers as we strive to provide best-in-class service. Importantly, we made sizable investments in equipment to facilitate the movement of cargoes for customers, as well as meaningfully expanded our operating fleet capacity and launched 17 new lines since June 2020, resulting in ZIM's year-over-year carried volume tripling the global volume growth rate. We also returned substantial capital to shareholders, highlighted by a full-year dividend of $19.50 per share, reflecting 50% of our 2021 net income. In total, including our special dividend paid in September 2021, we will return to shareholders approximately $2.6 billion or $21.50 per share since our IPO, which represents approximately 30% of our current market cap and, incredibly, approximately 50%. Higher than our IPO market cap."
Israeli banks had a banner year. The total net income of the banks was NIS 18.3 billion, an increase of 144% from 2020. Moreover, the average return on equity rose to 14.2% from 6.8% in 2020. Leading the pack in absolute numbers was Bank Leumi, which registered a net income of NIS 6 billion. Bank Mizrahi-Tefahot, on the other hand, reported the highest return on equity of 15.8%.
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