Budget fears wag Israeli war
dogs By Victor Kotsev
The Israeli media and blogosphere are
awash with a new wave of speculation about the
chances of war in the Middle East. Left-wing
sources such as the +972 Magazine and the Tikun
Olam blog have zeroed in on reports that top
serving Israeli security officials have joined
some of their former colleagues - such as the
(in)famous former head of the Israeli spy agency
Mossad, Meir Dagan - who oppose an Israeli strike
on the Iranian nuclear program at this time.
"It's over - there will be no Israeli
attack on Iran," wrote in +972 Larry Derfner. [1]
For the Tikun Olam report on a related video that
was recently deleted from the Israeli Channel 10
website; click here.
On the other side of the spectrum, Debka
File, a source with the
reputation of a
right-wing rumor mill but which nevertheless
occasionally publishes valid intelligence leaks,
recently went into overdrive. Almost at the same
time as +972, it reported that Iranian Supreme
Leader Ayatollah Ali Khamenei had held a "last war
council" last Friday, telling his top security
chiefs that "we'll be at war within weeks".
There is a certain amount of irony in this
indirect exchange: the left is traditionally more
prone to suspect violent intentions on the part of
the Israeli leadership, while the right is likely
to cover up any such designs. The Israeli military
doctrine relies heavily on surprise, and anybody
who truly expects and wishes to see an Israeli
attack on the Iranian nuclear program generally
keeps quiet about it.
To be sure, other
sources, both on the left and on the right, are
more cautious. Shir Hever from the left-wing
Israeli-Palestinian organization Alternative
Information Center, for example, told Asia Times
Online that "I respect Larry Derfner's blogs and
am inclined to agree with him, although he is
making a bold statement. If an attack will be
launched anyway, Derfner will lose much
credibility."
On the other hand, the
prominent Israeli military analyst Ron Ben-Yishai,
who is widely perceived as right-leaning,
published an article on Tuesday suggesting that
the Iranians had not yet crossed the Israeli red
line.
"It's safe to assume that Israel is
currently focusing its efforts on creating a
viable and available military option, but
Jerusalem has not reached the point where it has
to decide whether or not to strike," he wrote.
"Israel may reach this point by the end of the
year or the middle of 2013 - depending on
Khamenei's actions." [2]
There are several
other pivots in the intrigue, including the visit
of United States Secretary of Defense Leon Panetta
to Israel and the ongoing debates about the new
Israeli budget. Last week, for example, Debka
fired off what was probably the opening volley of
the exchange, publishing a report titled "New
Israeli taxes are steps towards a $25-30bn war
budget".
Disentangling facts from fiction
in the report proved a difficult task despite
Debka offering a considerable amount of specific
details. [3] A few pieces of information could be
easily confirmed, but others could not. Adding to
the complications, the general take of the report
is rather intuitive. As a prominent Israeli
analyst wrote in an email, "I haven't heard
anything but it makes sense - if Israel is
planning a possible war it has to also plan how it
is going to pay for it."
Still, for the
most part Debka's arguments could not be verified.
An Israeli journalist specializing in business and
economic affairs told Asia Times Onlline that,
"the general notion in Israel is that the talk
about war is a spin by the government to justify
the tax raises and the oversized security budget,
and not vise versa".
Hever, an economist
himself, wrote that "Indeed the Debka numbers are
completely bogus, although in an attempt to play
devil's advocate, it may be that they simply
forgot that the two-year budget has been
cancelled. Their numbers are actually quite
reasonable if they were talking about the
2013-2014 budget put together." (Israel is
currently implementing a two-year budget, but a
proposal for another such budget next year was
shelved recently.)
It's worth taking a
quick look at the new economic measures, not all
of which have been finalized. The official
justification for an austerity program - voiced,
for example, by the governor of the Bank of
Israel, Stanley Fischer - is the global economic
slowdown, which is expected to negatively affect
Israel's exports. If no measures are taken,
Fischer told a committee of the Israeli Knesset
(parliament) on Wednesday, the Israeli deficit
would reach 4.5% next year, and 6% in subsequent
years.
Ostensibly in order to avoid this
situation, taxes on alcohol and tobacco went up
last week, and various other steps are being
discussed. Value-added tax will be increased to
17% from 16% starting September 1; this is
expected to bring an additional US$3.5-$4 billion
in revenue next year, according to a Jerusalem
Post report. Furthermore, various income tax
increases and budget cuts are expected, though the
haggling between the different ministries
continues.
According to Hever, "The
planned cuts are NIS 14 billion [Israeli new
shekel, around US$3.5 billion], although the
overall 2013 budget will be bigger than the 2012
budget because of the increases to the defense
budget and other large expenses."
He
estimates that next year's defense budget will be
anywhere between $15 billion and $20 billion, up
from around $16 billion in 2010 (a final figure
for 2011 is not yet available).
More
precise projections are hard to come by, and every
year there are last-minute adjustments to the
budget. This is especially true about the defense
sector: according to blogger Yossi Gurvitz, the
Israeli military regularly overextends its
original allotment by roughly 20%.
To make
things even more complicated, there is the issue
of the so-called "trapped profits" of
multinational companies, which were given a
generous tax break, paying only 3% as long as they
agreed to reinvest their profits in Israel.
"Debka is not being very realistic when
they expect a 100% tax on those profits," Hever
said. "If the companies pay 20% instead of 3%, it
would still net a nice 20 billion [Israeli
shekels] to the government (probably to be paid
over a long time, and the companies can always
manipulate their financial reports to show losses
and therefore pay even less)."
Though the
precise numbers are highly speculative, it is
clear that the Israeli government is trying to
stash away a considerable money reserve. This is
all the more impressive amidst unprecedented
social upheaval in the Jewish state, which has
recently claimed two lives through self-immolation
in protest of the economic inequalities. Of
course, it is remotely possible that the Israeli
leaders are worried solely about the global
financial and economic crisis, as they claim - but
given the situation in the Middle East, this is
unlikely.
Another piece of the puzzle is
provided by the much-publicized exchange between
the US Secretary of Defense and his hosts. On
Wednesday, Panetta reportedly asked the Israeli
leaders to allow a little longer for the sanctions
against Iran to work, promising that the US was
prepared to use "other options" if needed. Derfner
also picked up on this scenario, writing in his
article that "the Obama administration has as much
as promised Israel that if Iran gets within reach
of nuclear capability - which it isn't now - the
US military will smash it up to an extent that
Israel can't."
Israeli Prime Minister
Benjamin Netanyahu told Panetta that while the
sanctions were hurting the Iranian economy, they
had not yet had a significant impact on the
Iranian nuclear program. Surprisingly, his words
were met with a statement of support by the White
House spokesman, as well as with the announcement
that new rounds of even harsher sanctions against
the Islamic Republic were being prepared. [4]
According to a separate article by
Ben-Yishai, the Iranian currency has lost around
60-70% of its value in the past year and a half as
a result of the sanctions, its oil production and
exports have gone down (resulting in losses of
around $10 billion so far this year), and prices
of basic goods have risen by as much as 100%.
Nevertheless, Ben-Yishai writes that
"Senior Israeli officials, for their part, claim
that at least a year will pass before the
sanctions begin to significantly decrease Iran's
foreign exchange reserves and endanger its oil
industry." [5]
The new sanctions could
change this calculus by further increasing the
economic pressure on Iran. It is conceivable,
therefore, that Israel will postpone any military
operation against the Islamic Republic, at least
until it can verify their efficacy. It is also
possible that the Debka reports are red herrings
aimed at the hawks among the Israeli constituency,
who would be greatly disappointed by such a deal.
On the other hand, there is little
certainty of peace, even if Israel holds back. If
pressed hard enough, for example, Iran could start
the hostilities itself - if not directly, then
through a proxy such as Hezbollah or by unleashing
a campaign of terror against Israeli and American
targets. Alternatively, the situation in Syria
could spin out of control and ignite the region.
Finally, regardless of how things look and
sound right now, it is hardly guaranteed that
Israel will abstain from action in the next
months. As the domestic political intrigue there
picks up, the scales could easily tip in a
different direction.
The possibility of
early elections in a few months adds pressure on
both Netanyahu and his influential defense
minister, Ehud Barak, to keep their promises to
stop the Iranian nuclear program. Barak, whose
party is projected to take a beating in the
elections, and whose clout hinges largely on his
security credentials in the context of the Iranian
stand-off, is believed to be a particularly
fervent proponent of an attack. On Wednesday, his
subordinates fired off a volley of their own,
claiming that "only" 200 or 300 Israeli civilians
would be killed in a war against Iran.
A
day earlier, Netanyahu seemingly acted
pre-emptively to allay Barak's fears, vowing to
complete their term in office and to hold the next
elections in October 2013 as planned. This would
allow both men to postpone the decision to strike
without taking outsized political risks.
Whether such a strategy would work remains
to be seen. An important indicator of the state of
affairs in the US-Israeli relationship will be the
course of the ongoing spat between the Israeli and
American intelligence communities. Several days
ago, Associated Press ran a story describing
Israel as a perceived counter-intelligence threat
to the US, [6] while a right-wing Israeli lawmaker
called on his government to "unmask" Americans
spying on Israel. Ostensibly, the exchange, as
well as the heightened spy activity, has
everything to do with their disagreements over
Iran.
Overall, these most recent exchanges
suggest that the likelihood of an Israeli strike
on Iran this year has gone down somewhat. However,
despite the positive development, anything
resembling lasting stability in the Middle East
remains elusive.
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