Who Rules Israel – Shir Hever pt2

Paul Jay

Hi, I’m Paul Jay. Welcome to theAnalysis.news. I’m continuing my conversation with Shir Hever about Palestine, the situation in Israel, and not just the current conflict, but some of the context that you don’t usually hear. We’ll be back in a second.

So again, now joining us to discuss the situation in Palestine, particularly in Israel, is Shir Hever. He’s a political economist living in Heidelberg, Germany. He was born and raised in Jerusalem. And his recent book is The Privatization of Israeli Security. Thanks for joining me.

Shir Hever

Thanks for having me, Paul.

Paul Jay

So when you get beyond public opinion and the factions of Israeli society, the thing that rarely gets talked about is the oligarchy of Israel. There’s a lot of conversation even about the oligarchy of the United States. Bernie Sanders talks about it. We talk about the oligarchy and Russia and some other places. But the oligarchs of Israel rarely get talked about. And also what’s rarely talked about is the state of not just militarization of Israel, in terms of the IDF and the suppression of Palestine, but the importance of that to the Israeli economy. So give us a sense of who actually owns the preponderance of Israel and where the real power lies?

Shir Hever

The Israeli economic system is very centralized. There is a very, very small group of billionaires who control a very large proportion of the stock market of large companies. But very interestingly, they don’t necessarily control a lot of influence politically. And I think in that sense, Israel is very different from the United States, for example. And the reason is that Israel is rather small. You can have one billionaire from the United States who dwarfs all of these Israeli billionaires and decides to support his favorite candidate. And the name of that billionaire was Sheldon Adelson, who passed away recently. And he decided to give so much money to create a newspaper in Israel which is free. So it’s distributed all over. And this is a pro-Netanyahu newspaper that crushed the chances of all the other political opponents, even if they had some backing of this or that local Israeli billionaire to compete with Netanyahu.

So these Israeli billionaires, it’s a very interesting phenomenon. A lot of them, especially the bigger and more successful ones, dedicate their time to try to get out. And they’re looking for investments outside of Israel and they’re leveraging their investments in foreign companies, like in Switzerland or in Russia or in Canada, which they don’t fully explore and study all the way. And sometimes they make the wrong gamble. And so we had, especially with the economic crisis of 2008, but not only then, a series of very heavy, crashing bankruptcies of Israel’s biggest billionaires. One after the other, creating a lot of impact on the Israeli market. And I think that is a very interesting feature of the Israeli economic system, where sometimes you have local Israeli billionaires saying, “We really want to see peace. We want to see a two-state solution. We want to see the end of the occupation because it’s not good for business”, but it doesn’t help them to say that. They could pour as much money as they want on leftist candidates and it’s not going to change the election results because in the end, the right wing populism, even though it doesn’t have as many billionaires supporting it, is still going to win. Netanyahu has been very, very clever, understanding that he just has to appeal to the very naked economic interests of the billionaires. And that’s the reason that he’s standing trial right now. Because he made deals with them, with owners of newspapers and other media channels to say “You’re only going to report positive news about me and in exchange, I’m going to make sure that you’re not regulated by the government.” Some of his cronies recorded those conversations and they’re now out. And of course, it’s illegal and it’s bribery and it’s a big problem. And some of these billionaires are also facing jail time. It’s not just him. But all of that doesn’t include the arms sector, the security industry, because, in fact, the security industry in Israel is not quite as big as people believe. You call it a military economic complex.

Paul Jay

Military industrial complex is the term here.

Shir Hever

Yeah, Eisenhower coined the term in the 50s to refer to the United States military industrial complex, which was completely comprised of private companies. Private companies that make profit from war. And he said that in his very famous speech that is available on YouTube. But, what we see in Israel is actually that most of the arms companies and security companies were owned by the government. And so they were not motivated necessarily by making profits. They were motivated by their relationship with the political elite. The biggest arms company until recently was called IAI, Israeli aerospace industries. And now it’s the second biggest. Still, it employs tens of thousands of workers. And all of these tens of thousands of workers are registered union members. And their union votes for the Likud. I don’t mean that they vote in the national elections for the Likud, I don’t know what they vote in the national elections. But they are registered members of the Likud Party, so they vote in the primaries of the Likud.

Paul Jay

Which is Netanyahu’s party for people that don’t know.

Shir Hever

There was a war between Azerbaijan and Armenia last year over the Nagorno-Karabakh area, which is part of Armenia, an enclave within Azerbaijan. And the Azerbaijan military used suicide drones produced by IAI, by the Israeli company, which cost them billions and billions. I think, I don’t have proof for this, but I think that they got a major discount from the Netanyahu government on these suicide drones because it makes no strategic sense to use this weapon.

Paul Jay

Why do you call them suicide drones? Why suicide?

Shir Hever

The official name is Loitering Munition, which is a hybrid between a drone and a missile. It can hover in the air for hours and hours and then drop on a target and blow up when the drone operator presses a button.

Paul Jay

All right, so the drone blows up. There’s no person in there committing suicide.

Shir Hever

Exactly. But they’re called suicide drones because of some fantasy of Western generals who wanted to have suicide bombers like ISIS has and like Hamas has. So these are our suicide bombers, the suicide drones. But of course, it’s a marketing ploy by these companies to apply to the psychological need of Western generals to have everything. And they also want to have suicide bombers. But these suicide drones are not a very effective weapon. If you have a small surveillance drone in combination with artillery, you can be just as accurate and cause a lot more damage for a lot less money. But Azerbaijan still decided to use suicide drones, probably because they made a very good deal with the Israeli government. And as a result, the company, IAI, votes in the Likud primaries and they get a list from Netanyahu regarding which candidate he wants to see because every worker gets a bonus for selling those drones. It used to be that after every attack on Gaza, the Israeli arms companies would hold a big trade fair and show how their technologies have been tested on Palestinians in Gaza. And they’re still having the fairs. They still have them. But it used to be that each invasion of Gaza would immediately cause a stock price hike for these companies and they would make big profits because they would show “Here’s a new missile that we just developed. We used it on Gaza. It’s excellent”. And then countries like Brazil and India would make a big order of those missiles and they would make a big profit. And you could see after every invasion of Gaza what happens to the profits of these companies. That ended in 2014 because there was a 51 day war with Gaza, which the Israeli army didn’t really win. And the economic damage to the Israeli side was enormous, even though, of course, it was much worse on the Palestinian side. And the customers of Israeli weapons started to ask the question, “what’s the point of all this technology? If you cannot pacify Palestinians with these missiles, why should we buy them? If they don’t deter Palestinians from rising up again and again, what are these missiles really supposed to achieve?” And you can see that actually in the last six, seven years or so, there was a decline in Israeli arms sales. At least a stagnation. I mentioned this war between Azerbaijan and Armenia, as an exception that happened last year, but most of the biggest customers of the Israeli army are really starting to become skeptical about these weapons. And now I’ve been following the stock prices of Israeli arms companies during the last two weeks of fighting between Israel and Hamas and they’re not going up.

Paul Jay

What percentage of the arms sector is government owned versus private and how important is it in terms of the overall Israeli economy?

Shir Hever

It used to be almost completely government owned, but now the biggest arms company is private. So now actually we can say for the first time, one out of the three biggest companies, and in fact the biggest, is privately owned. The next two are government owned. In terms of percentages, I cannot really say. But in addition to the arms companies you also have the homeland security sector and you have the security companies and you have the cyber companies, especially the offensive cyber companies. All of that is completely private. So I would say, if you include that, overwhelmingly, it has become a private sector, very much like the U.S. military industrial complex. But overall, the high point of Israeli arms exports was 11 percent of total exports. Eleven percent. It is bigger than any other country in the world. No country exports 11 percent of their exports in the form of weapons, but eighty nine percent, which is still more, are the civilian products. So it has never been the dominant sector of the Israeli economy.

Paul Jay

And ownership is concentrated among these billionaires?

Shir Hever

Yeah, but most of the billionaires actually don’t want to invest in those security companies because they see it as a kind of conflict of strategy. They prefer to invest in energy and banking and in retail because they believe these three sectors benefit from peace and investing in a sector that benefits from war would turn their strategy against themselves. You don’t become a billionaire by diversifying. You become a billionaire by going after a very clear goal and staying on it. So billionaires who want to have war would invest everything in war and billionaires who want to invest in infrastructure, for example, would not invest in war profiting companies.

Paul Jay

Well, two questions come out of that. One is the billionaires who profit from the war industry certainly seem to have the upper hand politically and two, at least in the United States and Canada and much of the West, the biggest investor in the arms industry now is the financial sector, the big banks, the hedge funds. Is that not the case in Israel?

Shir Hever

It used to be the case in Israel, but there have been a lot of big changes in the Israeli banking sector and many of them pulled out of that sector. Especially in the late 90s when they thought that Prime Minister Netanyahu, who was already serving his first term as prime minister, was taking the country into dangerous adventurism. The banks thought that it’s too risky of an investment for them. But when we are thinking about those billionaires who are supposed to be profiting from war and on the side of the right wing in Israel, actually there is a very strong animosity between those billionaires and the government right now because those billionaires, those who are owning the arms industry and coming from there, are ex generals. They are from the military and they see with great dismay and anger how Netanyahu has been starving the military for budgets and starving specifically the military from local suppliers. So Netanyahu has been shifting the budget out of the hands of Elbit Systems, this is Israel’s biggest arms company, and into the hands of German arms companies, Lockheed Martin, Raytheon and Boeing, the U.S. arms companies.

Paul Jay

Why is he doing that?

For two reasons. One, Netanyahu is very corrupt and he’s getting a percentage of those deals. But second, Netanyahu has calculated politically, and I think he calculated correctly, that the political support from foreign countries is worth more to him than political support from those local arms industries. And in fact, the memorandum of understanding that Netanyahu signed with Obama in 2016, as Obama was ending his second term as president, was hailed as a kind of boost to the U.S. aid to Israel, but in fact, there is a clause there that says Israel will no longer be allowed to use 20 percent of U.S. aid to buy from its own companies. And the Israeli arms companies were furious at Netanyahu for signing the agreement. And his excuse was, “well, Obama doesn’t like me. If you remember anything, I went to Congress against Obama’s wishes to talk against the Iran nuclear deal.” So Obama put that as a kind of revenge against Netanyahu. But actually, it changes the power structure and just before the Israeli elections in March, Netanyahu passed two very large arms deals with the US to buy F-35 planes and to replace the entire fleet of Israeli attack helicopters, which cost billions and billions. And it’s a very problematic deal from a legal perspective from Israel because there is no approved budget. Netanyahu does not have a majority and didn’t pass the budget through the Knesset, but he took heavy loans in order to buy that because that changes the whole relationship with the Biden administration. Biden, I don’t know what his personal ideas about Israel are, but certainly the Pentagon is telling him, “please don’t be on the bad side of our best customer.”

Paul Jay

I think it’s a very important point you’re making, because there’s generally an impression that Israel just buys American arms with American money and you were telling me that’s actually not the case. This arms deal is way bigger than the three billion or whatever it is a year that is given to Israel.

Shir Hever

I mean, the U.S. aid to Israel was three billion dollars in 1973. Back then, it was almost 30 percent of the Israeli GDP. It was unthinkable, at the time, how many weapons the U.S. gave to Israel for free. But today it’s 3.8 dollars billion. 40 years later, and it’s less than one percent of the Israeli GDP. So by now, for every dollar that US taxpayers pay in order to send weapons to Israel for free, Israeli taxpayers are spending another five dollars. It’s not something that U.S. taxpayers should be too happy about, but certainly the owners of Boeing and Raytheon and Lockheed Martin are happy about that.

Paul Jay

When there’s talk about Israel being a strategic asset of the United States, it sounds like it’s a strategic asset of Boeing and Raytheon and these guys. The importance of it as a customer is underrated, I think, in this whole conversation.

Shir Hever

There is one country in the Middle East that has overtaken Israel as an even bigger customer of weapons, and that is the United Arab Emirates. The UAE around 2004 has started to buy more weapons from the United States than Israel. 

Paul Jay

More than the Saudis?

Shir Hever

Yeah, the Saudis also buy from other countries, but the UAE are very targeted. They want to buy especially from the United States. The Saudis buy from Canada a lot. But the UAE, they understand that if they buy more weapons than Israel, then they could try to replace Israel as the proxy of U.S. imperialism in the Middle East. And I think that the Abraham accords, the so-called peace treaty between Israel and the UAE, is the moment in which they needed that very much in order to be able to step into that role and to push Israel aside.

Paul Jay

And so when Netanyahu makes this American deal for all the new airplanes and such, it’s not so much because Israel needs all this stuff. He’s buying the support and loyalty of the American military industrial complex. And you should include much of Congress, because most of Congress is to some extent in the pocket of the arms manufacturers.

Shir Hever

The last minister of defense in Israel who still thought that he could make requests based on what the military needs, was Moshe Ya’alon. And he protested when Netanyahu bought nine submarines from Germany that the Israeli navy doesn’t need and doesn’t want. And so Netanyahu fired him and that was the end of it. And now all the ministers of defense, one after the other, they understand that they’re not going to get what they want. They’re going to get what Netanyahu gives them because he thinks politically and not militarily.

Paul Jay

But given that they just took this American deal, how much did you say it was? 20 billion?

Shir Hever

It’s about 50 million, but part of it is the deals that were already made before. Altogether, we’re talking about 15 billion, which is five and a half billion to Raytheon for the helicopters and about nine billion for Lockheed Martin for the F-35s.

Paul Jay

So I kind of asked you this, but I’ll ask you again. So where the hell is the money coming from? You said he took loans, but who the hell would loan the Israeli state money for this when he doesn’t even have a budget?

Shir Hever

That is a very good question.

Paul Jay

Or is this smoke and mirrors? Maybe there actually are no loans?

Shir Hever

No, the thing is, of course, that they already have loans that they’ve taken many years before, but the loans are due. And then the Israeli government just says we’re going to extend the loans. And at that moment, the banks that are offering the loans have the option to increase the interest rate and they are increasing the interest rate. International ranking agencies like Moody’s and S&P, they keep buying into Netanyahu’s lies. That’s where the smoke and mirrors are. As if the Israeli political system is sustainable and as if there is no apartheid and that Israel will be able to keep paying up for these loans. Of course, that is not going to last forever. But the banks don’t know this because they read The New York Times.

Paul Jay

Bill Black has a good answer for that. I’m doing this series with Bill, who used to be a financial regulator. He wrote this book, The Best Way to Rob a Bank is to Own One. He says to understand why banks make loans that make no sense just look at the fees of the individual bankers who are making the loans. The real secret of it is they don’t give a shit how stupid these loans are for the banking institutions. The individuals are running off like they’re looting their own bank in a way.

Shir Hever

Even those bankers that approve the loans, they still have to follow a certain rule regarding the credit rating of the country that takes the loan and what would be the interest rate. And the problem here is not with the fact that the loans are approved. The problem is that the credit rating is detached from reality.

Paul Jay

That’s how it worked here during the whole 2007, 2008 crisis. The credit rating was all B.S.

Shir Hever

And the system that was used in the 2008 crisis was a system of repackaging those toxic mortgages together with other assets in order to make them seem  as if they are diverse. But the system that we’re seeing with the Israeli government is much less complicated. It is really about Netanyahu saying that the Israeli economy is strong and wonderful and everything is fine. And as long as people believe him, then he goes to the Israeli public and says “look, our credit rating hasn’t fallen.” And he uses that to justify the fact that the credit rating is not going to fall next year either. But eventually it will.

Paul Jay

Well, the underlying assumption here must be very similar to the underlying assumption of the big American banks. They think they’re too big to fail. No matter what they do, eventually, the state has to come rescue them. Netanyahu and his stratum of people that are in on it with him, they must think the same thing. That as long as the United States is convinced that Israel is such a critical strategic asset to maintain American dominance in the Middle East, the state is too important to fail. And even if it’s actually kind of unraveling, the Americans just can’t let it really unravel.

Shir Hever

Yeah, but your excellent guest Larry Wilkerson, said many times that the U.S. is not willing to send troops on the ground in order to guarantee that Israel doesn’t fall. And I think that’s something that we all know on some level. And I think maybe that’s a good point for me to mention an interview, a very famous interview, that Sara Netanyahu gave, the wife of Benjamin Netanyahu. And she gave that interview in 2002, shortly after Ariel Sharon went to the Al-Aqsa mosque, did a big provocation there, and used populism to become the prime minister. Netanyahu tried at the time to take over the Likud Party and be the prime minister instead and he failed. And then his wife gave an interview and said, “my husband is too smart for this country and Israel will never survive without him. But if they don’t want him as prime minister, that’s fine. We’ll just leave the country and the country can burn for all I care.” And the most interesting thing about this interview is how many times it’s been now shared and tweeted and repeated on Israeli social media and newspapers and so on, because people are saying, look, he’s burning the country. This is what happens now because he’s holding on to power and he’s afraid that he’s not going to be prime minister anymore. And of course, when this happens and all these institutions are collapsing, then there’s nothing the United States can do to sustain this zombie state beyond its lifespan.

Paul Jay

Now, I’ve had other interviews, we talk about how much in terms of American domestic politics it’s important for both corporate Democrats and Republicans to keep kissing the Israeli ring. I still think the Americans have the upper hand in this relationship. I don’t think it’s the tail wagging the dog. But still, Biden has to pledge allegiance to Israel over and over again. And I don’t think it’s mostly the Jewish vote. It’s a pretty small vote. There’s certainly big Jewish donors. There’s a big evangelical Christian pro-Israel vote. But set aside the domestic politics. Is Israel a geopolitical, military, strategic asset for the United States in the Middle East? Does it help, forget the arms sales and all the rest, purely in terms of the American elites’ perception that if you want to be a global hegemon, you’ve got to be a regional hegemon. And we lost Iran, but we got the Saudis and the Israelis. Do the Israelis really play that role or is it more psychological on the American side?

Shir Hever

I mean, the answer is simply no, they don’t play that role anymore. And the war of 73 was really a Cold War local eruption. And the Israeli military fought against the Syrian and Egyptian armies and would have probably failed if not for U.S. intervention, and the U.S. gave Israel lots of weapons in the middle of the war and saved the Israeli military. That was maybe the high point of the Israeli military projecting U.S. force in the Middle East. But since then, it’s a downward trend because the Israeli military became a colonial police and the soldiers are trained and used to chase 12 year-olds down an alley in Nablus or standing in the checkpoint all day. They’re not war fighters. They don’t know how to fight a war. They don’t care to fight a war. 2006, when Israel invaded Lebanon, Bush gave Israel ammunition in order to deter Israel from signing a cease fire. He tried to push Israel more into attacking Lebanon. The problem was the Israeli soldiers were not playing along. The Israeli soldiers, as soon as they got into a town that was controlled by the Hezbollah, they were surprised that somebody was firing at them. They’re not used to that. So they took cover and called for air support because they haven’t been in a gunfight. And all of the catering companies that were hired to bring in food for the soldiers because the soldiers didn’t want to take care of their food anymore. The catering companies ran away in 2006. So the soldiers, instead of fighting, were looting grocery stores in Lebanon so that they’ll have something to eat. It was a complete disaster from the Israeli point of view. And you haven’t seen the Israeli military being able to recuperate from that.

The Israeli government sends the Israeli military again and again against Gaza, which is like shooting fish in a barrel, except that they’re not fish, they’re human beings. But even the Hamas in Gaza are able to defend themselves to the point that the Israeli army starts to hesitate and soldiers are afraid and saying, “we don’t want to walk in there unless we have enough air support and cover.” It’s not a functioning military anymore. Military discipline is completely destroyed. You saw that with the great march of return on the fence around Gaza where Palestinians were marching and the Israeli snipers were told, please use non-lethal weapons. We have Israeli made non-lethal weapons and we can show our riot gear and how we use it and sell it in the world. And the snipers refused those orders and put aside the non-lethal weapons, took lethal ammunition to shoot Palestinians in the head. And we saw that happening again and again, they were killing unarmed demonstrators, shooting them in the head, shooting children, 250 over the whole period from March 2018 to the beginning of 2019, all because the soldiers were disobeying orders. There is no military discipline. And if you remember, in 2018, the Saudis tried to get Israel to invade Lebanon again. There was this whole crisis with Prime Minister Hariri from Lebanon who was held against his will in Saudi Arabia. And the Saudi Arabia state newspaper had an interview with the Israeli chief of police talking about the joint interests of Saudi Arabia and Lebanon. And the Israelis made it very clear that they have no intention of going into Lebanon again. So their ability to function as a kind of regional hegemon has been eroded very, very dramatically. And the only thing that we see is Netanyahu playing this kind of sabotage game with Iran, attacking civilian ships or sending cyber attacks to blow up nuclear facilities in Iran. This is not a war, of course. This is just trying to provoke some kind of crisis.

Paul Jay

Well, how important is that to the United States? The Israeli national cyber security intelligence operations. The Israelis can go in and assassinate Iranian scientists. Is Israel an important asset from the point of view that it can do a lot of dirty work for the Americans.

Shir Hever

Well, the Mossad has a very rich reputation as a very powerful intelligence organization, but it doesn’t hold a candle to the CIA. Not that I’m a big fan of what the CIA is doing, but the Americans don’t need Israelis to tell them how to do assassinations. But the cyber technology, that’s something very interesting because there is really a whole line of Israeli cyber technologies, like Black Cube, that represented Harvey Weinstein, like NSO group, that was involved in the murder of Jamal Khashoggi. And you have these companies concentrated in Israel. You have also Cellebrite that is helping Lukashenko in Belarus and China in Hong Kong. Why are these companies Israeli? It’s not because the Israelis have any kind of technology that the US doesn’t have. They don’t have any technological advantage. What they have is the willingness to do very risky things. To do industrial sabotage or industrial espionage even within the borders of the United States. And for that, NSO is now standing trial. Facebook, one of the world’s most powerful companies, has launched a lawsuit against NSO group because NSO group hacked WhatsApp, which is owned by Facebook. And it’s not that NSO group is the only company in the world that could hack WhatsApp, but they are the only company in the world that were willing to admit that they did. And that is part of this charade, as if the Israelis are allowed to do things that others are not. But I don’t think that they are and I don’t think that the United States needs that.

Paul Jay

OK, in the next segment of our interview, we’re going to talk about BDS and international public opinion and what strategies there are for ending the apartheid state. So please join us again with Shir Hever on theAnalysis.news. Also, don’t forget the donate button and the subscribe button and the share button and all the buttons.