WarSclerotic

Leading economists say an attack by Israel will cause a sharp jump in oil prices, and a severe worldwide recession.

12 August 12 19:45, Adrian Filut

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As the likelihood of an Israeli attack on Iran grows, the need to assess the probable economic consequences to the Israeli economy grows as well. In an extraordinary move, compared with security events in the past decade, such as the 2006 Second Lebanon War, Operation Defensive Shield during the second intifada in 2002, and Operation Cast Lead in Gaza in January 2009, this time, most experts believe that an Israeli attack on Iran would not only have a massive impact on the domestic economy, but most of all, it would affect the global economy, through oil prices.

The experts say that such an attack would cause a sharp reduction in oil production, resulting in a jump in prices, which will affect manufacturing costs, reduce disposable income, and worsen the global slowdown and recession. Prof. Nuriel Roubini, for example, says that oil prices would jump by at least 50%. other economists add that an attack at a time of economic slowdown and falling business product would likely further worsen the situation and its effect on the economy.

Former Bank of Israel deputy governor Prof. Zvi Eckstein and Bank Leumi VP Prof. Daniel Tsiddon have written one of the most serious analyses of the economic impacts of Israel’s wars. They compared with the economic consequences of the 1973 Yom Kippur War and the second intifada and found that both conflicts were accompanied by severe external shocks to the Israeli economy: the oil crisis in 1973-74, and the dot.com bubble 2001-02. They also found that the economic damage in both times was severe, and included a fall in GDP by several percent.

The Bank of Israel and Ministry of Finance refused outright to requests by “Globes” for estimates and assessments about the expected blow to GDP in the event of an Israel-Iran war.

Another question is how would an Israeli attack on Iran affect defense spending, which already accounts for a substantial proportion of the state budget, especially at a time of huge fiscal challenges for the Israeli economy. Tsiddon and Eckstein say that the Yom Kippur War caused a permanent surge in defense spending as a proportion of GDP in general and in government spending, which resulted in huge deficits and jump in Israel’s debt-to-GDP ratio.

As for the second intifada, Tsiddon and Eckstein say that the defense budget rose by NIS 5 billion in 2003, which they describe as “relatively modest”. It should be noted in this context that the Brodet Committee, which was written in the aftermath of the Second Lebanon War, advised increasing defense spending by NIS 100 billion over ten years, from 2007 through 2017.

“The defense establishment has been riding the Iran wave for three years now, in order to ask for budget supplements. If an attack takes place in 2012, at least there is a chance for a drastic cut in defense spending in 2013,” a top economist, who has been involved in defense budget discussions for years, told “Globes” with a smile. “But, from what I know about the defense establishment, they have already found another reason why the budget must not be cut, but supplemented,” he added.

Governor of the Bank of Israel Prof. Stanley Fischer is leading the assessments of the effect of an Israel-Iran war. For years, the Bank of Israel has been holding discussions and scenarios about it.

The Bank of Israel assessments operated at two levels: technical and financial. The technical assessment is more related to its activities and functions in the event of a counterattack on Israel, including specific scenarios. At the financial level, “We have $76 billion in foreign currency reserves, which says it all,” a top Bank of Israel official told “Globes”. It does not conceal the fact that some of the reasons for its accumulation of foreign currencies over the past four years, from $27 billion to $76 billion, have been due to Israel’s geopolitical challenges.

One scenario in an Israel-Iran war is massive foreign investor flight, causing a sharp depreciation of the shekel against the dollar. The Bank of Israel’s large foreign currency reserves give it flexibility to deal with such a scenario.

Published by Globes [online], Israel business news – http://www.globes-online.com – on August 12, 2012

© Copyright of Globes Publisher

via Experts: Attack on Iran will cause global recession – Globes.

Morsi orders Tantawi’s retirement – Israel News, Ynetnews.

In dramatic move, Egypt’s new president sacks man who served as Mubarak’s defense minister for over two decades, cancels military declared constitutional amendments

Roi Kais and AP

Major jolt to Egypt’s political echelons: A government spokesman said Sunday that Egypt’s president has ordered the defense minister and chief of staff to retire and has canceled the military-declared constitutional amendments that gave top generals wide powers.

President Mohammed Morsi also ordered the retirement of Egyptian Air Defense Commander Lt. General Abd El Aziz Seif-Eldeen, and Chief of the Navy, Vice Admiral Mohab Mamish. In addition, Morsi appointed a senior judge, Mahmoud Mekki, as vice president.

Related stories:

The decisions announced Sunday are effective immediately. Spokesman Yasser Ali said in a news conference aired on state TV that Morsi appointed a new defense minister, Abdel-Fattah el-Sissi.

Morsi with Tantawi (Photo: EPA)

He replaces Field Marshal Hussein Tantawi, who headed the military council that ruled Egypt for 17 months after Hosni Mubarak’s ouster in February 2011. Tantawi was defense minister for nearly two decades under Mubarak.

The military council’s No. 2, Chief of Staff Sami Annan, was also ordered to retire.

The surprise moves comes less than a week after Morsi appointed a new national intelligence chief and dismissed the governor of the increasingly lawless north Sinai region after gunmen killed 16 border guards there.

Morsi also fired the commander of the presidential guards and named new chiefs for security in Cairo and the police’s large central security, a large paramilitary force often deployed to deal with riots.

The intelligence chief that Morsi fired, Murad Muwafi, was quoted in Wednesday’s newspapers as saying his agency was aware of the Israeli warning regarding the border attack but did not think that Muslims would attack Muslims while they were breaking their fast during Ramadan.

Muslim Brotherhood anti-army coup in Cairo. Tanks move up to Israel border.

DEBKAfile Special Report August 12, 2012, 7:20 PM (GMT+02:00)

President Morsi fires generals

Having gained control of the Egyptian parliament, government and presidency, the Muslim Brotherhood has made itself the unchallenged ruler of Egypt. Demoting the heads of the military leaves the MB in control of the biggest army in the Arab world.

Two months after assuming the presidency, the Muslim Brotherhood’s President Mohamed Morsi swept away the powerful pro-American Supreme Military Council heads ruling Egypt since Hosni Mubarak’s overthrow.  Sunday. Aug. 12, he fired the Egyptian Defense Minister, Field Marshal Mohamed Tantawi, the Egyptian chief of staff Gen. Hafez Sami Annan and three more generals and appointed Field Marshall Abd al-Fatah Sissi defense minister and Gen. Sidki Sobhi chief of staff in their place.
The three generals also sacked were Air Force chief Rezza Abd al-Megid, Navy commander Mahab Muhamed Mamish and Air Defense chief Abd Al-Aziz Muhamed Seif.
President Morsi also annulled the law amendments endowing the military with broad powers.
debkafile reports: Field Marshal Tantawi and Gen. Annan were regarded as the last major impediments to the Muslim Brotherhood’s complete takeover of Egypt. Morsi’s action has cast Egypt’s military caste out into uncertain territory with regard to its future status in government.

Morsi’s actions in the last month have aroused serious concern in the United States and Israel. His coup Sunday will give them more unsavory food for thought. They will not have missed the sudden arrival of Egyptian army M-60 tanks (made in the US) right up to the Israeli border of Sinai while the new appointments were announced in Cairo.

It is still not yet clear whether the Israeli government and army were caught off guard or gave permission for this extreme exception to the demilitarized clauses of their 1979 peace treaty. However, last week, the Egyptian president said that treaty clauses not deemed beneficial to Egyptian interests by the new regime would have to go. Israel did not respond to this statement.

In another new departure, he appointed a former senior judge Mohamed Mahmud Makki vice president, a new office in Egyptian government.
debkafile was the only publication to report that the Muslim Brotherhood and Morsi were exploiting the terrorist attack in Sinai to rid Cairo of the pro-Western military control of the Egyptian government.
debkafile was the only publication to report that the Muslim Brotherhood and Morsi were exploiting the terrorist attack in Sinai to rid Cairo of the pro-Western military control of the Egyptian government. A faster worker, Morsi has achieved this in exactly seven days.

24-48 Hours to Open Tel Aviv Bomb Shelters – Defense/Security – News – Israel National News.

Public shelter

Flash 90

It will take 24 hours to get all the bomb shelters in Tel Aviv open in the event of a missile strike, according to an official quoted on an Israeli radio station. But Home Front Command differs on the estimate.

The first statement was made by city councilman Moshe Tiomkin, who was quoted Sunday by Army Radio while discussing what might happen  in the early hours of such an attack. Within a day, he was quoted as saying, all of the city’s 400 public shelters would be open and ready for use. Tiomkin is in charge of defense and emergency management for the city.

However, Home Front Command is not as confident: the closest estimate from the defense agency, in the event of a missile strike on Tel Aviv, is that it may take up to 48 hours to get all the public shelters in the coastal city open.

There are bomb shelters located in every neighborhood in Tel Aviv, but they are widely scattered and it will take some time for officials to get to them to open them up, Home Front Command said. There are 240 bomb shelters in public areas. In addition, there are 60 more shelters in underground parking garages – and another 100 shelters in schools.

Meanwhile, speaking at the start of the weekly cabinet meeting, Prime Minister Binyamin Netanyahu noted that Sunday was the launch of a week-long trial of the new SMS text missile alert system. The drill begins in the final week before Home Front Minister Matan Vilna’i leaves to take up his new post as Israel’s Ambassador to China, and the prime minister took the time to list Vilnai’s accomplishments during his term.

“We are investing billions in home front defense, in Iron Dome, in the Arrow, and in other systems that are under development. We are investing a lot of money in defending facilities, institutions and homes. We are holding preparedness exercises for various scenarios regarding home front defense; such an exercise is being held today,” Netanyahu pointed out.

“There has been a significant improvement in our Home Front defense capabilities, in Iron Dome, in the Arrow, in structural reinforcements and shelters, in warnings and in other areas,” he added.

Admitting that there are many areas in which improvements are still needed, Netanyahu nevertheless zeroed in on Iran as the number one threat upon which to focus Israel’s concerns.

“One cannot say that there are no problems in this field because there always are — but all of the threats that are currently being directed against the Israeli home front pale against a particular threat, different in scope, different in substance, and therefore I reiterate that Iran cannot be allowed to have nuclear weapons,”  he said.

Revised gov’t protocol gives PM unprecedented powers – Israel News, Ynetnews.

Ministers approve dramatic amendments to government protocol which enable Netanyahu to root out opposition to fateful decisions, delay implementation of approved decisions

Attila Somfalvi

The government on Sunday approved amendments to its protocol which expand Prime Minister Benjamin Netanyahu‘s powers in an unprecedented manner in the backdrop of the Iran strike debate. Under the new protocol, the prime minister will have the power to delay motions passed by ministerial committees and the option to decide government voting orders.

The prime minister’s bureau explained that the move is meant to “improve governance.” In effect, the amendments mean that Netanyahu would be able to easily secure a majority for fateful decisions.

The move sparked widespread criticism. MK Amir Peretz (Labor) said in response that the move supports the claim that “the prime minister will do anything to avoid comprehensive and transparent discussions.” He described the amendments as “undemocratic.” Peretz also criticized the ministers for approving the revised protocol.

Peretz added that if Netanyahu wants to prove that the decision is not related to “the pressing matters of the hour” he should announce that the changes take effect with the election of the next government.

Earlier, Opposition chairman Shaul Mofaz said the plan further undermines the prime minister’s decision making process. “We are facing critical decisions and the attempt to weaken opposition only increases concern over the lack of judgment in those decisions,” he said.

Labor Party Chairwoman Shelly Yachimovich claimed the move jeopardizes the State of Israel’s democratic nature.

“Fateful decisions on political, security-related and socio-economic issues could be reached without meaningful discussion in the government,” she warned.

“Netanyahu is forgetting that in Israel issues of this nature are not decided by just one person or even two,” she added.

Netanyahu at cabinet meeting (Photo: AFP)

Under the revised protocol, the prime minister is able to delay the implementation of ministerial committee decisions and schedule further discussion on those decisions.

Seeing as the PM controls the cabinet’s agenda, he will be able to run his proposals repeatedly until they are approved or conversely “bury” decisions made by ministers, pending further discussion.

Legal concerns

The Prime Minister’s Office’s legal advisor Attorney Shlomit Barnea Fargo expressed reservations over the clause which she said enables the PM to undermine the decisions of government-appointed committees.

She also raised concerns over the uncertainty created by the fact that no time limit was given to the option of scheduling additional discussions on ministerial committee decisions.

The revised protocol stipulates that decisions can be reached through phone voting – 12 hours after the first call is made. The PM will also have the power to shorten or extend this timeframe.

The PM’s aides explained this amendment is meant to prevent a situation where ministers change their positions days after a decision is made. Until now, ministers were given a week to respond to proposed resolutions not discussed at the meetings.

The new protocol will grant the PM virtually unprecedented power. The PM will be able to restrict voting to present participants only, thus ending the practice of voting in absentia. Only ministers on overseas trips who appointed replacements will be able to vote in absentia.

The PM will also be able to attend any ministerial committee meeting and have the same voting power as any other member. This could affect the ministers’ voting patterns.

‘All other threats shrink in comparison’

Meanwhile, Netanyahu addressed the Iranian threat at the weekly cabinet meeting. “All of the threats on the home front shrink in the face of another threat – Iran cannot be allowed to obtain nuclear weapons,” he said.

The prime minister also noted his conversation with UN chief Ban Ki-moon over the weekend in which he urged the secretary-general not to attend a conference in Tehran.

Also Sunday, ministers Yuval Steinitz and Daniel Hershkowitz said the debate surrounding the question of a strike on Iran should be restricted to closed forums and not be held in public.

israel today | Israel News | Israelis unsure they can trust US to stop Iran – israel today | Israel News.

Israeli Premier: Iran Threat Dwarfs All Others – ABC News.

The threat from Iran dwarfs all other challenges the Jewish state faces, Israel’s prime minister declared Sunday, as high-level hints of a possible Israeli attack on Iran’s suspect nuclear program mounted.

One indirect indication came Sunday, when Israel’s military began sending mock text messages to cellphones warning of incoming missiles, part of a nationwide experiment that is to continue through Thursday and reach hundreds of thousands of cellphone users. Last week, defense officials confirmed that Israel’s top-tier missile defense system has been upgraded.

“All threats directed at the Israeli home front are dwarfed by another threat, different in its magnitude and substance, and so I have repeated and shall repeat: Iran must not be allowed to obtain nuclear weapons,” Prime Minister Benjamin Netanyahu told his Cabinet on Sunday.

The prime minister’s opening statement at the Cabinet meeting is open to reporters, providing him with a channel for a weekly public message.

Skeptics say Israel is rattling its sabers as part of a diplomatic campaign but would hesitate to actually attack Iran, because of the real possibility that it could trigger an all-out war targeting Israel from several directions at once.

Tehran insists its nuclear program is peaceful and designed to produce energy and medical isotopes, but Israel, like much of the international community, thinks it could be a cover to build bombs.

Netanyahu said earlier this month that Israel has not decided whether to launch an attack. But he and other leading Israeli officials have noted that tough international sanctions have not pressured Iran to abandon its suspect uranium enrichment program — a process that has civilian uses but could also be used to build bombs.

Some senior officials have suggested in the past that Israel cannot wait beyond early fall to strike, as Iran moves key facilities into fortified underground bunkers out of the reach of Israeli bombs.

Over the weekend, a senior “decision-maker” widely identified as Defense Minister Ehud Barak was quoted by an Israeli newspaper as saying that “the sword hanging over our neck today is a lot sharper than the sword that hung over our neck” before the Jewish state went to war with three Arab nations in 1967.

Although Israeli leaders haven’t explicitly threatened to attack, they have been saying for years that they would not tolerate a nuclear Iran, and “all options are on the table.” The U.S. has a similar policy.

Standing beside U.S. Defense Secretary Leon Panetta earlier this month, Netanyahu warned that time was quickly running out to stop Iran from achieving nuclear capability.

The United States has said it would be prepared to use military force to prevent Iran from becoming a nuclear power. But with its superior firepower, it could wait longer than Israel could to strike at Iran’s underground facilities, and experts have judged Washington has more than a year to act.

Another factor in the timing could be the U.S. presidential election in November, where a Mideast flare-up sending oil prices soaring could harm President Barack Obama’s re-election chances.

White House spokesman Jay Carney said over the weekend that Obama “remains committed to preventing Iran from acquiring a nuclear weapon,” but that the U.S. still thinks there is time to persuade Iran through sanctions and diplomacy.

While Netanyahu and Barak have concentrated on the perceived nuclear threat, critics of an attack — including a recently retired spymaster and onetime internal security chief — have warned of its repercussions.

At best, they say, Israel could set back Iran’s nuclear development for two to three years, and at worst, trigger a harsh retaliation from Iran and its proxies in Lebanon and Gaza — and possibly set off a region-wide war.

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Israel Hayom | ‘Iran boosts ability to attach nuclear warheads on missiles’.

The rift between Israel and the U.S. has grown as the two countries remain at odds over the timetable for a possible military strike against Iran’s nuclear program.

The matter has become especially pressing with the release of a purported new U.S. National Intelligence Estimate report, presented to U.S. President Barack Obama last week, which states that Iran has made “substantial and surprising” progress and boosted its efforts to attach a nuclear warhead to ballistic missiles.

Both countries have stressed that they are sharing the same information, and agree about Iranian intentions, its progress and the fact that it has not abided by international obligations, but the difference remains which policy to employ to combat the nuclear program.

Israel says time is running out and that the window of opportunity to attack Iran will only be open for several more months. Israel believes that action must be taken, either by issuing an ultimatum to Iran or by hitting its nuclear sites.

The U.S. contends there is still time before a military strike is necessary. White House Spokesman Jay Carney said Friday that the U.S. would know whether Iran was close to building a nuclear weapon.

“I would also say that we have eyes — we have visibility into the program, and we would know if and when Iran made what’s called a breakout move toward acquiring a weapon,” said Carney.

Carney later clarified that he was referring to International Atomic Energy Agency officials mandated to inspect Iran’s nuclear installations.

During his recent visit to Israel, U.S. Secretary of Defense Leon Panetta outlined a problematic red line for Israel. According to Panetta, the red line for the U.S. is an Iranian decision to make a bomb. Israel’s red line is preventing Iran from becoming a “threshold state” — a country that is capable of making a nuclear weapon but has yet to decide to do so.

Senior Israeli officials have expressed themselves anonymously, but harshly, against the Obama administration, saying that it is clear to everyone involved that the desired decisions could be made but are not because of the presidential elections in November.

Furthermore, Jerusalem is trying to downplay the potential damage facing Israel if it attacks Iran, claiming that an attack against Iran will not necessarily lead to a regional war. Prime Minister Benjamin Netanyahu and Defense Minister Ehud Barak have repeatedly said that Israel can, and must, depend only on itself, and that Iran’s Supreme Leader Ayatollah Ali Khamenei is acting tactically and rationally to achieve fanatic objectives.

During the weekly cabinet meeting on Sunday, Netanyahu attempted to calm the storm surrounding a possible upcoming military strike against Iran and said there have been significant improvements in Israel’s ability to defend its homefront.

He cautioned, however, that the improvements “do not mean there are no problems” and that “the country is investing millions” to strengthen Israel’s defenses.

Netanyahu stressed that all the threats facing Israel’s homefront are dwarfed by the biggest threat, the Iranian threat, and reiterated, “Iran must not possess nuclear weapons.”

Also speaking during the cabinet meeting, Finance Minister Yuval Steinitz said recent reports in the media about an impending attack on Iran posed risks to national security.

“One day, we’ll look back and see how much the situation has deteriorated to the point that such a sensitive topic is being discussed so openly in the public,” he said.

Former Mossad chief Shabtai Shavit, speaking to Channel 2’s “Meet the Press” on Friday, called on Israel not to trust the U.S. in matters related to Iran’s nuclear program.

“I don’t believe my friends, my allies or even my greatest friends. At hand is [Israel’s] own fate, [its] own existence; I’m not letting [anybody else] take care of this issue for me. The U.S. can live with a nuclear Iran,” said Shavit. The former spy chief concurred that the damage estimations faced by Israel if it attacks Iran are exaggerated.

However, Vice Premier Silvan Shalom on Sunday voiced a position opposite to the government, telling Army Radio that more time should be given for sanctions against Iran to have an effect.

“Seeing as how Israel cannot come to terms with an Iranian nuclear weapon, Israel needs to make its own decisions. In the meantime we can bring the U.S. along to make the right decisions, and that is to impose even harsher sanctions, which could subdue the Iranian regime – to topple it and maybe lead it to abandon the nuclear program,” said Shalom.

Bank of Israel Governor Professor Stanley Fischer said Friday that the Bank of Israel had drafted a plan to deal with the possible economic fallout following an attack against Iran. Fischer told Channel 2 that the country’s primary responsibility was to protect its security.

“If there is a need to spend more money for the security of the state, then we’ll simply need to do so and pay for it later,” Fischer said.

Fischer did not detail what measures were being taken, but said the bank was examining a number of possible scenarios to deal with the aftermath of an attack against Iran.

Meanwhile, the Prime Minister’s Office on Friday said that U.N. Secretary-General Ban Ki-moon should cancel his plans to participate in a conference of the Non-Aligned Movement, scheduled to take place in Tehran in late August.

“This decision by the secretary-general is a mistake. This is involuntarily giving legitimacy to the regime in Tehran, a government which is sanctioned by the U.N. Security Council for its aggressive nuclear weapons program, a regime that supports terrorism, a regime that is openly anti-Semitic, that says my country (Israel) should be wiped of the face of the earth,” Israeli government spokesman Mark Regev told Reuters.

In a written statement, Netanyahu said that Ban had “acted fairly” during his years leading the U.N., adding, “I was so disappointed to hear about your trip to the Non-Aligned Movement conference in Tehran.”

Founded in 1961, the Non-Aligned Movement was created by developing countries seeking to steer a middle course during the Cold War. While the organization has 120 member states and 21 observer countries, only some 31 heads of state are scheduled to attend the Tehran conference, according to Iranian media reports.