Prime Minister Benjamin Netanyahu is resisting pressure from Israel Corporation (TASE: ILCO). Before going to the US, he refused to hold a discussion, or to promise to hold one later, on anything to do with Idan Ofer and Israel Corporation's interests, despite alleged hints to him by various parties that such readiness would lead to concessions by Israel Chemicals (TASE: ICL: NYSE: ICL) management, which would be presented as a victory for the workers and a retreat by management from its positions, thereby halting the workers' demonstrations and restoring quiet to the south. Two weeks before the elections, this could boost support for Netanyahu and the Likud.
Nir Gilad is representing Israel Corporation controlling shareholder Idan Ofer tothe government. Sources close to Netanyahu stated that before leaving for the US, given the battles leading to changes made by the past two governments to rectify several historic distortions that had created major advantages for Israel Corporation, and in view of the sensitivity on social issues on the part of the public, which would be aware of any underhanded action in favor of the wealthy, the prime ministersaid that he had no intention of granting favors to Israel Corporation and its leader in any matter or at any political price whatsoever.
This includes any oral promise that, if re-elected, he would consider the possibility of amending the Law for the Encouragement of Capital Investment. Ofer and Gilad believe that amendments to the law dating from Yuval Steinitz's term as Minister of Finance are harming Israel Chemicals and its subsidiaries. Netanyahu also refused to express any willingness to discuss the possibility of revisions in the level of royalties deviating from the exact formula included in the arbitration ruling given two years ago, even if recommended by the Sheshinki 2 Committee, although these have not yet reached the Knesset. Nor will he, if elected, intervene or expedite the proceedings for extending the license date or granting a new franchise on better terms ahead of the expiration of the current franchise in 2030.
At the office of the Ministry of Finance Accountant General and the Budget Director, staff work has already begun on setting the terms for the franchise termination date, due to the company's need to make long-term investments. Netanyahu, his confidants say, said this even though he is well aware of the enormous political price that the demonstrations in the south, which have also reached the central region, are liable to cause for the Likud.
Before his trip, Netanyahu charged Minister Silvan Shalom with coordinating efforts to bring about a solution and a lull in relations between Israel Chemicals management and the workers. Shalom held meetings with all the parties representatives of the Histadrut (General Federation of Labor in Israel) and the factory in the south all of whom he has known for many years, including Nir Gilad, appointed Accountant General by Avraham Shochat of the Labor Party, who was Minister of Finance in the government of Yitzhak Rabin. Gilad remained in his position after Shalom became Minister of Finance. As far as is known, Shalom repeated during his meeting with Gilad that no talks would take place beyond the matter itself, and that any matter that would have to be brought up for discussion concerning Israel Corporation would be dealt withat the proper time. According to Shalom's officials, Gilad accepted the position of the minister, who had been asked to mediate between the workers and management, and indeed refrained from mentioning other matters.
The efforts by Shalom, who formulated five principles accepted by the parties as a basis for meeting, did lead to the beginning of renewed negotiations between the parties, but yesterday these talks also fell apart. Nevertheless, Netanyahu, in his role as minister of finance, was a party to the matter, and led the discussions that were followed at the beginning of last week by a letter sent by Ministry of Finance legal advisor Yoel Briss to Israel Chemicals CEO Stefan Borgas. The letter contained legal wording asking for information "for the purpose of considering the use of the state's rights in Israel Chemicals conferred by the state's special share in the company."
This is a way to pressure the company by threatening to use the state's golden share in Israel Chemicals, according to which the company cannot independently make decisions to close production lines or detract from the production of chemicals from the Dead Sea. There is an internal dispute on this in the Ministry of Finance. Accountant General Michal Abadi-Boiangiu, Deputy Attorney General Avi Licht, and Briss support the use of the golden share to prevent Israel Chemicals management from closing production lines, a possibility resulting from layoffs at the Bromine Compounds subsidiary. Government Companies Authority director Ori Yogev and apparently also budget director Amir Levy oppose this option, while director general Yael Andorn, who led the Ministry of Finance's opposition to Israel Corporation's demand for cancelation of the golden share in Zim Integrated Shipping Services Ltd., including an appeal to the Supreme Court against the ruling by the Haifa Labor Tribunal, which accepted a significant proportion of the demand by Israel Chemicals and some of its workers to cancel the golden share, is undecided.
The main problem with carrying out the threat to use the golden share is that the company, according to its official statement, does not plan to close any production lines or detract from the production of products from the Dead Sea. It is aiming at introducing streamlining involving employees enjoying high salaries, who will be retired with good terms. The company is also maintaining the independence of its personnel decisions, particularly in view of the fact that it has already "paid" heavily for those decisions in previous negotiations with the workers and the Histadrut.
It is known that pressure is being exerted on Netanyahu simultaneously by senior people in Likud, party officials, local council heads in the south identified with Likud, and company workers, who are warning that if the government does not act quickly to intervene and end the crisis to the workers' benefit, it could have a very bad effect on voting for Likud in the south and among workers all over Israel. "You're burning the south," they threaten Netanyahu, "and the south will burn Likud." At the same time, Histadrut officials, headed by chairman Avi Nissenkorn, although they say they have no political motives, are busy trying to weaken Netanyahu in the elections and strengthen Isaac Herzog's Zionist Union party.
Israel Chemicals said in response, "The prime minister rightly rejects any involvement in the dispute during the election campaign. Israel Chemicals did not contact or ask anything from the prime minister or any other government body, and has no intention of holding a dialogue with the government on topics related to the election campaign."
Israel Chemicals views with concern improper exploitation of the election campaign on the matter of the work dispute in its factories either with the aim of exerting political and party pressure on decision makers or to achieve political gain from this or that decision on the matter."
Published by Globes [online], Israel business news - www.globes-online.com - on March 5, 2015
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