Israel Week Ending November 19
Crisis Avoided with Turkey,Spy in Gantz's Home,Shekel Reaches New Highs as do Housing Prices
FOREIGN AFFAIRS
This week, the major news item in Israel was the random seizure of an Israeli couple in Istanbul. The pair were arrested while on tour, for taking photos of Erdoğan’s Palace. All sorts of conspiracies and explanations were given for their detention. As of Wednesday night, the Israeli media had reported a breakdown in negotiations. Then, surprise! In the middle of the night, the Prime Minister’s Office issued a joint statement, together with the Foreign Minister’s office, announcing that the pair were on their way home. As, at that moment, a private jet sent by the Foreign Ministry, was taking off from Istanbul with the unlucky, but now fortunate couple aboard.
For the past week, the Israeli Foreign Ministry had been working behind the scenes to ensure the couple's release. Foreign Minister Lapid quietly canceled a trip to Europe, and he and the Prime Minister, the President, and the Head of the Mossad worked in harmony. Mostly, they let the professional diplomats do the work. It turned out that the arrest was not some plot by Turkey's President Recep Tayyip Erdoğan to create a crisis with Israel, but a lower-level official acting on his own. Erdoğan needed time to work out the matter. Since he was not interested in a crisis, just the opposite.
As hard as this is to believe, Erdoğan is interested in improving relations with Israel. If Netanyahu had kept his agreement with Defense Minister Gantz, Miri Regev would have been Minister of Foreign Affairs today. In response to this crisis, Regev tweeted a call for a boycott of Turkey. President Herzog, in contrast, was also involved in ending the affair. Herzog had a warm conversation with Erdogan a few weeks ago. In the end, Erdoğan had only one condition for the couple’s release, which was that he have a phone call with Bennett. After the couple had returned home, both Herzog and Bennett called Erdoğan to thank him.
Israeli commentators remarked how different all of this would have been if Netanyahu was still Prime Minister. Leaving aside any personal animosity that might exist between Netanyahu and Erdoğan, Netanyahu would have insisted on being the center of events. He would have sent his special envoy, and, of course, been at the airport to greet the returning couple. Instead, Israel’s Foreign Ministry professional accompanied the couple on the plane, and it was the couple’s family who welcomed them at the airport. A final point … one of the conditions of the couple’s release was agreement the matter would be kept quiet until the pair left the country. Even though the family was informed earlier on Wednesday, they and everyone in the government who knew, kept the secret.
President Herzog had another important diplomatic role this week. Herzog conducted a thirty-minute conversation with Chinese President Xi Jinping. With excellent relations between Herzog and the new government’s leadership, Herzog can bring his many years of diplomatic experience to good use, working along with the government, as needed. Next week, Herzog is off the UK for a visit, including a meeting with British PM Boris Johnson.
The government seems to have successfully brokered a significant diplomatic/economic agreement. On Monday, it is expected that an accord will be announced between Israel, Jordan, and UAE, to build a vast solar field in the Jordanian desert, and a water desalination plant for Jordan in Israel. Jordan will supply Israel with electricity, in return for water from the desalination plant, all funded by the UAE.
DEFENSE
It was announced on Thursday that an indictment had been handed down against Omri Goren for espionage. Goren, who had worked in the home of Defense Minister Gantz as a cleaner, had been in touch with Iranian hackers, and offered his services to spy on Gantz. The affair is a major black eye for the Shin Bet, who is responsible for Gantz’s safety. They failed to flag Goren, who has a significant criminal record, and was nevertheless allowed to work in Gantz's home.
There were reports this week that Israel attacked Syria, once again.
EDUCATION
Education Minister Yifat Shasha Biton announced she would block the nomination of Professor Oded Goldreich as an Israel Prize candidate, for his work in computer science. Biton stated it was inappropriate to give the prize to someone who advocates boycotting the University of Ariel (in the West Bank).
COVID–19
The news regarding Covid from Israel remains primarily good, with the number of severe cases continuing to decline. However, the number of daily cases seems to have plateaued and seem to be going up slightly. Yesterday, there were 467 cases. The positive rate of tests remains a very low .6%. I personally remain more cautious than most people. While I remain unwilling to attend any sizable indoor gathering, I have, however, agreed to give my first public speech since Covid began, next month.
ECONOMY
Housing prices continue to rise quickly, with the price increase expected to reach 10% for the year. While the government is testing several new policies, they admit these will not be enough to slow the rise next year. For complex reasons, I believe the government does not want to do what is needed. Keep in mind that almost all the land in the country is owned either by the government Land Authority, or the JNF — and that land costs constitute the largest cost component of building new apartments. Israel currently has the third-highest cost of housing as a ratio of wages, in the world.
Meanwhile, the Shekel continues to strengthen against all the world’s major currencies— with the Shekel-Dollar ratio now nearing 3 shekels/1 dollar. The Shekel-Dollar ratio was 4:1 a decade ago. Israel exporters and crying out for help, as the Shekel’s appreciation makes it harder for Israeli exporters to compete. There is little that the government or the Bank of Israel can do. The Shekel’s appreciation is somewhat unique, in that, exchange rates are determined, to a large degree, by trade balances.
While Israel has been running a small trade surplus, the cause of the rise of the Shekel is a combination of the massive investments that have been made in Israeli companies over the course of the past few years, together with the tens of thousands of salaries that large multinationals that have extensive R&D facilities in Israel. Companies such as Google, Apple, Amazon, and Microsoft are just some of the 350+ companies that employ Israelis to do R&D. These companies are using their dollars to pay workers in Shekels. This results in a massive influx of dollars into the economy that need to be converted to Shekels, thereby strengthening the Shekel. Furthermore, as a result of this shift, the cost of Israeli engineers goes up. So far, that has not dissuaded anyone from investing in Israel, or from increasing their local R&D workforce.
While much of the interest in Israeli business is in high tech, the regular economy can also surprise. Zim, Israel’s flag carrier announced it had made a whopping $1.46 billion in the third quarter. Fueled by a worldwide increase in shipping costs, Zim is probably the most profitable Israeli company, at the moment.
Imagindairy, Ltd., a FoodTech company, which creates milk proteins identical to those from cows, announced the completion of a $13 million seed round. MoreVC led the funding. Also joining this round were: Strauss Group, Entrée Capital, S2G Ventures, Collaborative Fund, New Climate Ventures, Green Circle Foodtech Ventures; Emerald Technology Ventures and Pierre Besnainou. In addition, this funding round includes a pre-seed investment by Strauss Group, FoodSparks by PeakBridge, CPT Capital, and Entrée Capital, earlier this year.
Imagindairy has created new milking technology, aimed at removing the cow from the dairy equation. The company creates true milk proteins that are indistinguishable from the real thing, using natural precision fermentation. Imagindairy’s proprietary technology, based on systems and synthetic biology platform, allows manufacturers to offer cow-free, sustainable milk, and dairy products, with all the nutritional values of dairy milk.
Other funds raised this week include:
Overwolf, which helps companies monetize in-game apps, raised $75 million in series D led by Andreessen Horowitz
Justt came out of stealth mode and announced it raised $70 million to help fight false chargebacks.
Nexar and Ai computer vision company raised $53 million in a D round led by Qumra Capital
StarkWare, which develops blockchain technology, raised $50 million in a C round led by Sequoia Capital. The raise brings the company’s value to $2 Billion, adding another unicorn to Israel's growing heard. Israel now has more unicorns than all of Europe.