Buying out the country: How money from the US and abroad is distorting and corrupting Israel

By SETH J. FRANTZMAN

In recent weeks Israel has been rocked by numerous corruption scandals. It has also been rocked by historic disputes with diaspora Jews, particularly Americans, over such issues as prayer at the Western Wall. These disputes come in the context of a unique relationship between Israel and financial interests, particularly donors, abroad. Scarcely a day goes by without Israeli media reporting on this in some way or another. It might be the Prime Minister’s son attacking an NGO that receives foreign donations, or positive stories reporting on some summer camp funded from abroad, but it often involves money. In the show The Wire Lester Fraemon says “You follow drugs, you get drug addicts and drug dealers. But you start to follow the money, and you don’t know where it’s gonna take you.” When we start to pull a strand here and there in the tangled web of politicians, NGOs, companies, donors and friends abroad, we don’t know where it will take us.

Public reports in newspapers are just the tip of the iceberg. Even writing the names of the network of families and non-profits will probably result in trouble. So suffice to provide a link to an investigation of the details of one such network. To summarize, non-profit A is connected to family B and they are regular contributors to politician C in Israel. Money is funneled through non-profits and then into profitable ventures as “loans.” Tens of millions, in just one instance, flows from point X in America to point Y in Panama and then to Israel. These are not insignificant sums. “Millions” go to certain organizations in Israel which play a major role in policies in the capital city. Furthermore: “One US family is responsible for half of Netanyahu’s donations.” Israeli government watchdogs know about this but are powerless to stop it.

In the Panama papers are the names of groups connected to land deals in Jerusalem, former advisors to Prime Ministers. If all this was just about Israelis doing business abroad, then that’s their problem, or the problem of the countries they do business in. But the shadowy world links Israelis, including politicians, often with wealthy donors and NGOs and other organizations in the diaspora, particularly with America. One of the latest scandals with Netanyahu involves an Australian billionaire. But look more deeply and there are American-connected names as well.

It’s obvious that US donations are corrupting Israel. This isn’t to say that Israel was not corrupt beforehand. It is to say that the possibilities for corruption multiply when one adds in the dangling fruits of the diaspora, the enticements abroad. According to The Guardian, “Morris Talansky, a long-time supporter and friend of Olmert, said he gave at least $150,000 (£75,000) over 15 years, including the years when Olmert was a government minister and mayor of Jerusalem.” Then of course there are tapes alleging that “former Defense Minister _____ took huge bribes on arms sales and hid the money in offshore accounts.” This of course also involves a statement “There is no weapons deal Israel does…everyone is talking about it.” What is the “…”, well it has to do with the fact that according to this claim there is no weapons deal Israel does without bribery involved. New revelations about Israel’s submarine deal seems to confirm this problem.

Shmuel Rosner would have us believe that “Surely, no one here wants a corrupt government…We also live in Israel, a country of corner-cutting and informal practicality. Strict rules are not for us. This makes our bureaucracy much better than bureaucracies in other well-organized Western countries.” He claims that it may be about “uncompromising stiffness of its law enforcement agencies…tendency of investigators to lose perspective as they hunt for prey.” Really? $150,000 in cash-filled envelopes, that’s the “stiffness” of the agencies, or perhaps that’s actually money that should be reported and taxed and when it is given quietly to politicians it must be declared?

We are in denial about the scope and ramifications of how Israel has been bent and disfigured by foreign money. It involved private visits to military bases if you donate enough. It involves foreign ownership of Israel’s press. It involves major investments and donations to Jewish causes in east Jerusalem. Ariel University in the West Bank: “Gifts from overseas donors have also been instrumental to its rapid expansion.” There is nothing wrong with universities getting private donations of course, but it is worth considering how much influence donations have on Israel’s policies in the West Bank. How much is not always clear. It is clearly millions of dollars.

The more you search, the more you find. Google “Israeli politician US businessman” and voila, “In the past, _____ had been dubbed by the Israeli media as the prime minister’s ‘air taxi’ for allegedly regularly flying Netanyahu around the US while he served as finance minister a decade ago.” Then of course there are the huge US investors in Israel’s economy.

You simply cannot even begin to quantify the role that all this plays. Whether it is the organization that flies youth to Israel or the one relating to the trees. And these organizations are not neutral, they are part of ideological battles for Israel and religious battles. Where the right wing donors give to settlements or partner with prime ministers, other foundations and funders give to social justice and more progressive or left leanings causes, including progressive religious lobbying, coexistence schools, and civil equality. In just one year we are talking millions of dollars.

Have they bought out Israel?

When one starts to quantify the depth of these donations, across the political spectrum, one gets the feeling that Israel has been bought up. It’s strategy and policy are a kind of financial playground for wealthy donors from abroad to put their ideological imprint on Israel. Many of these donors and “friends” of various politicians think they are doing good. They want to help Israel, not ruin it. But have they caused a major disruption in a market? Have they perverted the country’s natural growth, by making it so top heavy and dependent on foreign donors, rather than weaning it over time, it has become totally dependent. It’s like a bad example of a welfare case, where the person never gets a job because of hand outs. And this leads not only to a market inefficiency, but also to corruption.

This has also led to an outsized US financial role in Israeli elections, including the financing of specific groups that play a role in elections. It has led to changes in the Israeli media field also relating to elections. Certain types of Israeli corruption are not unique and occur in other third world countries. For instance the son of a president receives the right to a monopoly on imports of certain foreign technologies. But the multiple layers of how foreign money influences Israel is unique, from transparent charities to murky worlds involving “gifts” to politicians.

Quantifying the charities

In 2014 The Forward released its findings of a study into the US Jewish community’s network of charity’s and estimated it at $26 billion. “This analysis doesn’t include synagogues and other groups that avoid revealing their financial information by claiming a religious exemption. But even without this substantial sector, the Jewish community’s federations, schools, health care and social service organizations, Israel aid groups, cultural and communal organizations, and advocacy groups report net assets of $26 billion.” This relates to “net assets.” When it comes to Israel the finding showed $1,793,000,000 in net annual revenue. Israeli GDP is $318 billion, so that’s less than 1% of the Israeli economy. But think of it another way, Israel sells up to $6 billion in arms a year. Israel receives $3.8 billion annually as part of a military aid package from the US. So the billions in charity represent a third of the military sales and half of the US military aid. So is this one figure that the Forward discovered so small? No. It is as large as the GDP of some small countries such as The Gambia, Seychelles, Belize or Liberia. It’s about half the state budget of Delaware in the US. So just the transparent part of US giving is propping up a small country or a whole US state.

Donations from the US have doubled in the last decade and a half. “In 2007, various Israeli organizations received $2.1 billion from U.S. donors through the Jewish Agency and various ‘friendship’ associations, according to findings by professors Theodore Sasson and Eric Fleisch, of the Cohen Center of Modern Jewish Studies at Brandeis University in Massachusetts,” notes Haaretz. The number of organizations involved is massive, “the emergence of some 150 new pro-Israel groups in the United States in the 1990s, and some 280 emerging during the past decade.”

Let’s look inside the 2007 numbers, which are a decade old. “For 2007, this total is $1.976 billion. To this sum, we add the amount donated directly in Israel by foundations ($69.966 million) and federations ($14.674 million) for a total-raised of $2.059 billion.14 The total donated by these organizations in 2007, after fundraising expenses and endowment activity, was $1.646 billion.” The bulk of this goes to “religious” organizations” and another bulk to welfare. Some other amounts go to universities such as one $400 donation in 2016.

Historically this has meant that American donations are even credited with “building” Israel. $150 million in 1948-1949. The article at ejewishphilanthropy even notes; “U.S. donors provided more than a billion dollars to whisk a million Russian Jews to the Jewish state. Even U.S., Canadian, and U.K. Jews (including occupational specialists like doctors) are now offered easy paths to emigrate to Israel, thanks to a charity called Nefesh B’Nefesh that was created in 2001 and boosted by an $8 million endowment from Houston natural-gas tycoon and philanthropist Guma Aguiar in 2009.” And don’t forget the JDC: “American Jewish Joint Distribution Committee, which organized much of the original exodus to Israel, is still a thriving philanthropy today…Fully $119 million of that was spent in Israel.”

Yet Israelis worry this funding may be in danger if Israel alienates the diaspora. In one report at Times of Israel the article notes: “American Jews give NIS 8 billion in cash to Israel every year — that is 90 percent of all donations to the Jewish state, Oren said, citing the report. Together with the contributions they made through investments and venture capital, real estate holdings, exports and tourism, the amount US Jews put into the Israeli economy reaches nearly NIS 58 billion (about $14 billion), he explained, citing the report.”

IMG_7398

How about some indigenous giving?

The cost and the influence

So now we’ve gotten to the figure of nearly $14 billion which is approaching 5% of the economy. And these studies that were done about “charity” doesn’t uncover all the “grey” market that exists. That includes actual corrupt and other forms of corruption.

We also need to quantify influence. In many ways diaspora giving is not just about helping the poor. There is an agenda as well. Some give money to help buy property in East Jerusalem or the West Bank. Some give money to critical causes such as Breaking the Silence or rights groups that fight for minorities. Some give to larger funders such as the New Israel Fund. Yair Netanyahu is now being sued because of comments against an organization that is tied to all this. These organizations are often at war with one another, with right wing Jewish Americans funding one set of politicians or campaigns and the left funding another.

You could argue that they cancel eachother out, but another argument could be that they exert disproportionate influence on Israel, distorting its economy, its media and even its elite culture and the arguments in the Knesset. We often talk about third world countries or countries with “oligarchs,” but what is happening in Israel if we peek beneath the surface. Is there any country in the world in which foreign money exerts such an influence? Are there other countries with corruption in arms sales? Yes. But what about the totality of the costs? The cost to Israel’s economy of being dependent. The cost to the politics of having politicians always chasing after foreign money, the enticement of the fancy pens, the fancy cigars, the boat rides, the flights? What about the cost to Israel’s local culture of giving, which has been amputated and whose growth has been stunted because of the magnitude of the “rich uncle” from abroad? Israelis have no developed their own indigenous charity network enough, it has not become mature despite 70 years almost of “independence.”

After a “major US donor” said he might cut off giving over the Western Wall, there was shock in Israel. The question that should be asked is why can’t Israelis have their own campaigns about the western wall? Why is the whole discussion dominated so much by the diaspora, including the activists, the lobbies, the money, and the threats? Hasn’t it stunted Israel’s civil society? Israel outsources its discussion and even its politics to the Diaspora. It becomes a kind of colony, and a financial playground, for others. That isn’t because the donors are nefarious, Israel isn’t a “banana republic” but in some ways it is. You can only outsource so much of your welfare and giving and NGOs and debates to another country before you have to ask what is authentic.

The average Israeli votes with their feet. 800,000 came to the funeral of Rav Ovadia Yosef. Only tens of thousands, and 70 world leaders came to the funeral of President Shimon Peres. The diaspora would have thought the opposite. With the lavish birthday celebrations and annual conferences that read like something out of the “Dear Leader” manifesto one would have imagined Israelis to care more. But it’s like all the numerous conferences in Jerusalem and Israel, most of Israel doesn’t care. The same donors and luminaries come and network and it goes unnoticed.

Can Israel wean itself? The answer seems no. This is because Israel is addicted and the diaspora is addicted. No one wants the other to grow up. It’s a vicious cycle. Israel doesn’t want to “spurn” the diaspora. So the money keeps rolling in and growing and growing.

 

 

 

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