DECEMBER 2005

Mr Peretz heads Israel's main trade union organisation , Histadrut, since his appointment in 1995

HISTADRUT The framework Agreement for Cooperation signed on March 5, 1995 between the PGFTU and the Histadrut leans heavily on the support that both organizations gave to what was then an unfolding Peace Process.  They also agreed that efforts to achieve a just, comprehensive and lasting peace would be based on UN Security Council Resolutions 242 and 338 to help secure the well being of Israelis and Palestinians. The Agreement also dealt with fund transferences from the Histadrut, with specific goals to help support PGFTU trade union activities.  The PGFTU and the Histadrut agreed to the direct transfer of funds from the Israeli Occupational Services Office to PGFTU.  These funds were to come from the organizational dues of the Palestinian workers in Israel, with 50% to be transferred to the Histadrut and the other 50% to the PGFTU.  According to the Histadrut, the PGFTU received US$ 2,287,518 between 1995 and 2001, an amount the PGFTU claims is much too low.  A recent rupture in relations has prevented accurate adjudication of the issue. .................................................................................Virtually all union activities and contacts have been halted, following the deterioration in relations between Israel and the Palestine Authority.  Formal meetings were prohibited either in Israel or in the Authority.  Furthermore, workers covered by the arrangement between the Histadrut and the PGFTU could no longer be employed in Israel. It remains unclear what the future will bring, and whether Israel and the Palestine Authority will soon return to the negotiating table.  In the meantime the Histadrut recognizes that meaningful links with the PGFTU are unlikely to resume until peace and cooperation are restored in the region.(PERETZ has been leader of Histadrut since 1995 and what has he achieved for the PALESTINIANS as an advocate for Peace ?! JB editor)

Born in Morocco, he is a populist, known for his walrus moustache, and at 53 comes from a different generation to Mr Peres.

"This can truly be Israel's most important hour," said Mr Peretz, as his supporters acclaimed his victory with chants of "the next prime minister".

"I expected a better evening," said Mr Peres, currently deputy prime minister in Mr Sharon's government.

The newly-elected leader of Israel's Labour Party, Amir Peretz, has said he plans to meet Prime Minister Ariel Sharon to discuss early elections.

Mr Peretz ousted veteran Shimon Peres, currently vice-prime minister in Mr Sharon's coalition, in a party vote.

The trade union leader, 53, has said he wants to pull Labour out of Mr Sharon's ruling coalition and contest elections.

Mr Peres, 82, complained of voting irregularities, but a Labour committee said the result would stand.

Mr Peretz won 42% of the vote compared with 40% for Mr Peres, prompting appeals from the former Nobel peace prize winner. Mr Peres' camp called the results "unreasonable, largely disproportionate", but there appears little chance of overturning the result.

WHITE HOPES, DARK FEARS
by Raymond Deane

Those who wish to see justice in the Middle East are all too prone to
grasp at straws. For decades western liberals touted the unspecified virtues of Shimon Peres, a stance that somehow survived that charlatan's involvement in Israel's clandestine nuclear weapons programme and his stewardship of "Operation Grapes of Wrath" with its massacre at Qana.

Another false Messiah was Ehud Barak, whose status as a protegé of Ariel Sharon was never held
against him, even when he revealed himself a more enthusiastic coloniser than any Likudnik. Then there was his successor Amram Mitzna, whose villainous record of repression during the unarmed first Intifada was forgotten as soon as it became politic to tout him as the new Rabin (whose own crimes and preposterous injunctions to "break the bones" of Palestinian children were equally disregarded). Ariel Sharon himself is now regarded in some quarters as "the new DeKlerk" and the latest political party he has founded to nourish his expansionist bulimia supposedly signals a "move to the centre" - an index, if one were needed, of how far to the right the political centre has moved.

Whenever one of these white hopes is revealed as illusory, the resultant sense of disappointment and betrayal seems to provoke a more violent abreaction. For this reason it is vitally important to distance oneself from the chorus of approbation that has greeted the election of Amir Peretz as head of the Israeli Labor Party, and examine the premises commonly adduced to justify such optimism and the language used to characterise the new leader. While one must continue to hope against hope, it is imperative that pro-Palestinian activists should adopt a stance of principled scepticism in the face of all putative saviours.

Regarding Peretz, the word "firebrand" frequently crops up in British and Irish newspapers, particularly in reference to his role as head of the Histadrut trade union federation since 1995. The excellent Wikipedia article on Peretz tells us that "During his early years at the helm of the Histadrut, Peretz was regarded as a militant firebrand, with an easy hand on the trigger of general strikes." However, the author concludes that, with a view to possible leadership of the Labor party, Peretz has more recently been "fairly cooperative with the government in a swathe of structural
and financial reforms, which have moved Israel towards a more market oriented economy" (code for de-regulation, privatisation, and downsizing). Significantly, his reputation as a "firebrand" was earned during the prime ministership of the ultra-rightist, ultra-neo-liberal Binyamin Netanyahu (1996-1999), while his new "moderate" reputation has also been earned under Netanyahu, during the latter's disastrous spell as finance minister (2003-2005). This suggests a level of opportunism and indeed cynicism that bodes ill for Peretz's will to push through a peace deal with the Palestinians in the face of right-wing and settler opposition.

The very fact of Peretz's trade unionism is held to signal the Labor Party's "return to the left". None of the terms in this equation holds up, since the Israeli Labor Party never stood on the left in the first place. Had the much-vaunted "socialism" of Israel's early years meant anything other than a ruse to invoke Soviet support, the United States would never have embraced the Jewish state and its Labor elite with such passion. Was there anything more farcical than the spectacle of Shimon Perez prancing around as vice-president of the Socialist International while preaching economic policies well to the right of von Hayek?

As for the Histadrut, it is no ordinary trade union but has been one of the mightiest arms of the Zionist state since the union's foundation in 1920. At that time its aim was described as being "to promote land settlement, to involve itself in all economic and cultural issues effecting labor in Palestine, and to build a Jewish workers' society there." In other words, to participate in disinheriting those described in the Balfour Declaration (1917) as "existing non-Jewish communities in Palestine". Nothing much has changed in the Histadrut's profile. It owns banks and businesses, and is the second-largest employer in the Israeli state. Indeed its employment policies, notoriously, are no better than those of the enterprises against which it supposedly defends its members' interests. None of this has changed under Peretz.

It would apear that if Peretz were to become prime minister, his election could only be welcomed were he to break with traditional Labor policies both in the economic sphere and in relation to the Palestinians.

However, his post-election speech to the Labor central committee gives no cause for optimism. He referred to "the disputed Palestinian territories", the standard code used by those who deny that these territories are illegally occupied. He claimed to "see terror as the number one enemy of peace" and warned that "the war on terror will be uncompromising". Again, there is a disheartening denial here that the Occupation is "the number one enemy of peace", while talk of "the war on terror" suggests that under Peretz the USA would continue to have a stalwart ally in its neo-imperial
adventures.

Peretz's Moroccan origins are also adduced as evidence that he is breaking the mould, and from the point of view of Labor there is no doubt that this is the case. It may well be that his leadership will break the perverse hold Likud has exerted over the poorest of the poor in Israeli society, disproportionately Eastern Jews (and Arabs). This would only be a cause for rejoicing if the Labor party possessed any credibility.

The hope that Peretz's origins might deepen his sympathy for the rights of Palestinian Arabs - within or outside "sovereign" Israel - has no basis in reality, and is analogous to the belief that Condoleeza Rice's power is necessarily good for women and blacks. Histadrut under Peretz has continued to favour Israeli state policy over the rights of Arab (and other) workers. There is no reason to believe that the Labor Party or indeed the Israeli state under Peretz would be any different.

I conclude with two sentences from a report that has just reached me (22 November) from Palestine Monitor. Further comment is unneccessary:

Yesterday the Israeli Housing Ministry announced its plan to build 350 additional illegal housing units in the Ma'ale Adumim settlement east of Jerusalem.

The decision was made by Chaim Herzog, the Israeli Labor Minister, a member of Israel's Labor party. It was approved by new Labor party leader Amir Peretz
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                        PERETZ IS NOT PERES
 By Uri Avnery
w w w . g u s h . s h a l o m - o r g
  5.11.05

"Thus saith the Lord: For three transgressions of the Labor Party, and for four, I will not turn away the punishment thereof…" If the prophet Amos were living today, one of the chapters of his book would probably have begun with these words.

But the transgressions of the party since the 1967 Six Day War are more than three or four. They could fill several chapters of the book of the prophet from Tekoa. Here is a partial list:

Immediately after the 1967 war, Labor Prime Minister Levy Eshkol missed the historic opportunity to offer the Palestinians the opportunity to establish their state and  to make peace for generations  to come (as I suggested to him at the time in private conversation and a public letter.) Territory was more important to him than peace

In 1974, Shimon Peres set up the first settlement in the heart of the West Bank - Kedumim, which has been terrorizing its Palestinian neighbors to this day.

In the early 70s, Labor Prime Minister Golda Meir ignored the peace overtures of Egyptian President Anwat Sadat. 2000 Israeli youngsters paid for this with their lives, together with thousands of Egyptians. It was she who declared: "There is no such thing as a Palestinian people".

In 1982, both Peres and Yitzhak Rabin supported the onslaught of Menachem Begin and Ariel Sharon on Lebanon, and a year later they supported the stupid decision to set up the "Security Zone", which prolonged the war for 27 more years. At the same time, the occupation of the Palestinian territories became more brutal and the number of settlements increased, leading to the outbreak of the first intifada.

After Rabin and Peres at long last drew the conclusion from the intifada, recognized the Palestine Liberation Organization and accepted the 1993 Oslo agreements, they soon violated them by not opening the promised ”safe passages" between the Gaza Strip and the West Bank, and not carrying out the third and main withdrawal. The establishment of new settlements continued.

In order to assure his election after the murder of Rabin, Peres started a small war in Lebanon in 1996, which ended with the slaughter of dozens of refugees at Kana. Also, he approved the killing of the "engineer" Yikhye Ayash. As could have been foreseen, the result was a series of suicide attacks and Peres' election defeat.

After Yasser Arafat refused to accept Labor Party Prime Minister Ehud Barak's ultimatum-like offers at the 2000 Camp David summit, Barak declared that the Palestinians wanted to destroy Israel and that "there is nobody to talk with". The result was the collapse of the peace camp, the rout of the labor Party and the ascent of Sharon to power.

All this time, the party conducted an economic policy that widened the abyss between rich and poor, nearly destroyed the Histadrut labor union federation and created a ticking social bomb that may explode at any time.

The main representative of this line was Shimon Peres, whose spirit has been hovering over the party for decades. This week he wants to be reelected chairman of the party. The only real candidate who can prevent this is Histadrut leader Amir Peretz.(He has been leader of Histadrut since 1995 and what has he achieved for them?!JB editor)

It is being said that the Labor Party is in a state of stagnation. That is an understatement. It is at an advanced stage of decomposition.

It may well be asked: What has that got to do with a person like me, who has not been - nor ever will be - a member of the Labor Party? It has got a lot to do with me. Because the two big parties - Labor and Likud - are the pillars of our parliamentary-party system, the basis of Israeli democracy. The breakup of one of them, not to mention both, without viable substitutes, undermines the foundations of our democratic existence. It brings back hideous memories from the collapse of the Weimar republic in Germany.

For almost five years now the Labor Party has been the hostage of Shimon Peres. Under his leadership, it has lost any remnant of an independent world view, national or social. When Sharon came to power, Peres became his world-wide spin-doctor and spokesman. Until then, the world associated Sharon with the Kibia massacre of 1953, the 1982 assault on Lebanon and the Sabra-Shatila slaughter. It was Shimon Peres, the Nobel Peace Prize laureate, who gained him world-wide acceptance as a respectable statesman.

After the half-comic intermezzo of leaving the government for election purposes, Peres delivered his party again to the second Sharon government, where it became the main supporter of the "disengagement".  He did not put up any conditions: neither that the withdrawal should be carried out in agreement with the Palestinians, nor that the territory should really be liberated, nor that the withdrawal should lead to negotiations for the withdrawal from the West Bank.

We see the result now: the Gaza Strip has turned into a big prison, the occupation there continues by other means (isolation from the West Bank and the entire world), living conditions there have become even worse (who thought that this was possible?) The result: the bloodshed goes on, and will probably get more terrible.

We see and read every day how the Labor Party enables Sharon to carry out his design - to annex to Israel 58% of the West Bank, turning the rest into enclaves cut off from each other, and the building of the Separation Wall, which was a brainchild of the Labor Party to start with, and which annexes great swathes of the West Bank to Israel. The roadblocks. The enlargement of the settlements at a frantic pace. The dismantling of the "outposts" is not even up for discussion. The assassinations and arrests continue even after the Palestinians have declared a cease-fire, which Sharon refused to join. There is no peace negotiation, and the Minister of Defense has asserted that peace must wait "for the next generation". Without any political achievements at all, the position of Mahmoud Abbas is undermined, creating again the desired situation where "there is nobody to talk with".

On the social level, the government, with the support of the Labor Party, is widening the income gap and deepening poverty. Regarding this Thatcherite policy, there is no real difference between Sharon, Netanyahu and Peres, empty slogans notwithstanding.

No wonder that in this situation, the party itself is degenerating. People are fed up not only with Peres, but with the whole bunch of politicians that surround him - indeed with the entire democratic system. There is no life in the party, no debate, no activity at all.

ISRAELI democracy needs an opposition party, with an alternative world view and corresponding policies. The Labor Party will not be such, as long as Peres & Co. are smothering it. Therefore, the removal of Peres from the party leadership is a necessary precondition for any renewal. It seems that in the present circumstances, only Amir Peretz can achieve that.

I don't know Peretz from close up and I cannot judge whether he has the ability to lead the party and the nation. But he has several political advantages which no other party leader possesses: he has a clear social agenda, he has been consistent in his support of peace with the Palestinians, he is an authentic representative of the Oriental Jewish public, without being an "ethnic" politician. He radiates activism, has direct contact with the public and has proved his ability as the leader of the Histadrut. Now he must be given a chance to stand the test as a party and national leader. I hope that he will succeed.

But even if he turns out to be disappointing as a Labor leader, a victory for him in the party primaries, this week, would be a blessing. An interim period under Peretz would clear the terrain of the failed old politicians, open the gates for new, young forces and return to the party the ability to act as a fighting opposition.

In Hebrew, Peretz happens to mean "breakthrough".

Tens of thousands of people have been attending a rally in Tel Aviv at the spot where Israeli Prime Minister Yitzhak Rabin was killed 10 years ago.

Among them was Orna Shir, 54, a life-long supporter of the former prime minister. "That night," she said, "they murdered Rabin and they murdered peace. The leaders who followed Rabin have been terrible." Musing on what the characteristically reserved Rabin would have made of tonight, a tearful Orna said he "would have been touched because during his lifetime he didn't get much love".

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The case of Amir Peretz
by Gilad Atzmon

http://www.gilad.co.uk/html%20files/peretz.html

The recent election of Amir Peretz as the Chairman of the Israeli Labour Party is far more significant than many commentators would seem to admit. For the first time, the Israeli Labour party is led by a real fiery working class leader. Peretz is a relatively young man who grew up in a council estate in Sderot, a southern Israeli shantytown that was built especially for Arab Jews back in the 1950’s. At the time, the Jewish Ashkenazi elite couldn’t tolerate the idea of Arab Jews flooding into their newly erected European metropolises. Arab Jews were not part of the Israeli demographic landscape until after the foundation of the Jewish state. Many were brought to Israel en mass in a massive exodus operation, which often times was forced. The idea behind the operation was the necessity to beef up the majority of the Jewish population by outnumbering that of the Palestinians who had refused to flee in 1948. Once in Israel, the Arab Jews were treated rather badly. Immediately upon their arrival they felt the heavy hand of Ashkenazi supremacist discrimination. The majority of the new immigrants were dumped in council estates in the Negev desert and other unpopular regions. They were there to serve the Zionist cause either as a cheap labour force or just as a human shield between the emerging European Jewish cities and the hostile Arabs on the other side.

Peretz grew up in Sderot and in the 1980s he became the town’s mayor. In 1995 he was elected as the head of the Histadrut, the major Israeli trade union. A few days ago, Mr. Peretz made it to the very centre of the Israeli political stage. He had managed to oust Shimon Peres, the never dying and yet the most defeated politician in modern history.

Amir Peretz’s appearance is such a big revolution that Sharon and the Likud party are in a real state of panic. But the Likud isn’t alone, Shas, the Orthodox Sepharadic party is mighty concerned as well. For the first time, a secular Sepharadic man is leading one of the two biggest parties. Moreover, the man is an ordinary human being, he isn’t an heroic veteran IDF general. He isn’t an ex Mossad assassin, he doesn’t have Arab blood on his hands. He didn’t adopt the Ashkenazi’s pretentious jargon. He wasn’t appointed by an Ashkenazi politician as political bait to pull in Arab Jews. He is a simple Israeli man who managed to take over the second biggest Israeli party, he did it on his own right and he is an Arab Jew.

Mr Peretz was born in Morocco. He immigrated to Israel at the age of four. He has never denied his origin or tried to assimilate into the Ashkenazi Israeli world. I would allow myself to argue that if there is any remote hope for the integration of Jews into the region, it is a man like Peretz who may deliver the goods. It is a man like Peretz, himself an Arab, who can treat his neighbours with respect. Rather than Shimon Peres’s global dream of ‘new Middle East’ in which Israel delivers wealth to the ‘inferior’ Arabs, Amir Peretz’s message to the Israeli people is rather simple and far less pompous: once we address our social problems we will be ready to talk peace with our neighbours. This message is actually deeper than any other Israeli political manifesto I can think of. To start with, it is genuine. For the first time an Israeli politician considers peace as a meaningful signifier rather than an empty slogan. For the first time an Israeli politician refuses to drop the word ‘shalom’ just for the sake of dropping it. But not only is Peretz’s message authentic, it may as well be a message to the European community: No more global capitalism. Rather than serving big business politics you better look into your back garden. This message may help the confused French left address their current crisis. Unless some social justice is introduced into our national discourse, Europe would turn into hell. Don’t you forget, for many it is hell already.

It isn’t a coincidence that Peretz came with such a message. Israel is ahead of Europe in terms of moral deterioration. Being an Americanised state, it has been suffering the impact of global politics for many years. Israel is but a mere microcosm of a ferocious cultural battle. Being at the forefront of the so-called ‘cultural clash’, Israel is the place where East meets West. Where the colonial meets the oppressed colonized. Where black meets white. Israel is the pain Western colonialism dispersed to the Arab world. The Israelis are the occupiers but at the same time they themselves are the first to suffer from being the carrier of those doomed policies.

Israeli society is falling apart under the burden of many conflicting interests. On the one hand we can trace the liberal Western footprints of hard capitalism and privatisation. Israeli economy is run by big companies, that itself has led to a society obsessed with consumerism. On the other hand, we can see a rapidly growing economic gap between the rich and the poor, something that evolved into some serious social unrest. The rise of Peretz is a direct reaction to global capitalism. The Local grass-roots hero is apparently the best answer to the faceless Global enemy.

It is hard capitalism and global interests that may make Amir Peretz into Israel’s next Prime Minister. It becomes clear that the only way to confront global capitalism is to fight it locally and socially. This is what the Israeli Labour party has decided to do. Wisely, they dumped their old globalist Peres in favour of a man of the people. In the next election the Israeli people will have to choose between the hard capitalistic vision of the notorious Netanyahu and the call for social transformation and equality led by Mr Peretz.

I allow myself to assume that this is where Europe is aiming. The turbulence within the Labour backbenches that led to Blair’s defeat in the House of Commons less than a week ago, points out that it is the local concerns that will eventually topple Blair rather than his numerous war crimes in Iraq. Unless France endorses a sincere social attitude, it is aiming towards civil war. If the European parliamentary left is interested in rescuing itself as well as Europe from a complete defeat to American values of greed and radical egotism, it may want to explore Peretz’s moves in the coming months. The only way for the European left to survive this doomed era is to detach itself immediately from big business politics. To address a particular social strategy that addresses the unique local discourse and circumstances of what is left of the national state.
gilad@gilad.co.uk

UPDATE:After about a week for capturing the headlines Amir Peretz' taking over Labor and forcing it to leave the government was sidelined  by Sharon's "to leave or not to leave the Likud" game; meanwhile candidates for replacing him as Likud head are popping up like mushrooms, as do the "Likud-doves" and Labor hawks who want to join the PM's already legendary 'new party'. All in all: the pre-election paralysis of any diplomatic Middle-East moves was shortened by more than half a year, with a quite unpredictable race starting.TOI Billboard.
And from the Knesset....It is clear that the new developments in the Labor Party will strengthen those parts of the Likud that oppose further withdrawals and uprooting, along with any renewed partnership between their party and those on the left. Amir Peretz's extreme leftist declarations have made it clear to Likud members - certainly those who opposed the steps taken by Sharon - that they must stand guard not only to not lose control of the government, but also to preserve all that they hold dear in the state.

In order to accomplish that, they must return to the Likud's original path, i.e. to once again support settlement, and renew the Likud's political partnership with those whom Sharon threw out of the cabinet (in order to pave the way for his unholy alliance with Labor). A large, national party to the right of Likud, one that the surveys give about 25 Knesset seats, would no doubt have a positive effect on the state of mind in the country and among the Jewish people in the Diaspora. The current despondent mood and doubts regarding the future of the country would be replaced by a spirit of new faith in Zionism, the Jewish people and the State of Israel - yet another good reason for the establishment of such a list.

The tests now facing our country are among the most difficult we have ever known. The terror that continues to strike out at us is weakening the public's resolve, and with it that of the government too. Signs of weakness can be seen in the army and the other security forces, which out of a sense of identification with the "commander's spirit" have adopted a policy of defensiveness. The Americans, as just proved by Condoleezza Rice's brutal diktat, sense this weakness and are exploiting it, in order to advance their position among the Arabs.In order to restore the public's trust in our ability to overcome terror, and so that we can return to the path of a Jewish and Zionist state but without the cynicism of Sharon and his supporters from the left, over 20 percent of the voting public, say the surveys, want a new, large party, one that they can trust, one that can serve as an alternative to the Likud, one part of which is corrupt morally, and another, the part led by
Sharon, is corrupt both morally and politically. by Israel Harel, Haaretz Newspaper
UPDATE Nov.22:Mr Peretz announced plans to withdraw from the coalition government soon after being elected as Labour leader earlier this month. This precipitated Mr Sharon's decision to seek new elections. Mr Sharon would not be drawn on whether veteran Labour party politician Shimon Peres would join his new party. Sources close to Mr Peres have reportedly said he will not leave Labour. BBC
NOV28 By Corinne Heller JERUSALEM, Nov 12 (Reuters) - New Labour party chief Amir Peretz threatened on Sunday to bring down Ariel Sharon's coalition government next week unless the prime minister meets him quickly to agree on a date for an early election. "If a meeting with Sharon does not take place at the beginning of the week, we may act to topple the government on Wednesday," said Peretz, surprise winner over elder statesman Shimon Peres of Labour's leadership election on Thursday. Israel's parliament is expected to vote on several no-confidence motions on Wednesday. Support from Labour, Sharon's biggest coalition partners, is crucial if the government is to survive the votes. An election must be held within 90 days if parliament passes a no-confidence vote.

Peretz's camp originally said he and Sharon would meet on Sunday. The prime minister's office offered a meeting for Thursday. "Sharon acted irresponsibly when he delayed the meeting. I also know political tricks, and intend on keeping my cards close to my chest," Peretz told Israel's Channel Two television. Peretz has said he would propose to Sharon an election in March or in May, advancing a vote not due until November 2006. Sharon's spokesmen were not immediate available for comment.

In a major show of strength by Israel's left, tens of thousands of Israelis gathered in Tel Aviv to mark the 10th anniversary of the killing of Prime Minister Yitzhak Rabin - Peretz, in his first major public appearance since becoming Labour leader, told the crowd that Israel needed to leave West Bank land it occupied in the 1967 Middle East Ear and move towards a permanent peace agreement to carry on Rabin's legacy.

A pledge to leave Sharon's government over what Peretz has called its neglect of Israel's poor, was a centrepiece of the 53-year-old trade union leader's campaign to oust Peres, 82. Peres took Labour into the government last year to support Sharon's plan to pull Israeli troops and settlers out of the Gaza Strip, a withdrawal completed in September.

In the television interview, Peretz said centre-left Labour under his leadership would support any subsequent move by Sharon to hand over to the Palestinians territory in the occupied West Bank. "I will not be part of (Sharon's) government, but ... if he wants to give back parts of Judea and Samaria, he will receive my support," Peretz said, using Israel's terms for the West Bank. Sharon has vowed to hold on to large West Bank settlement blocs under a final peace deal creating a Palestinian state, raising a question mark over the future of smaller, isolated Israeli-held enclaves in the territory.

Russian Jewish Oligarchs Under Siege

By Yehezkel  Laing
Jerusalem Post (http://www.jpost.com/)
Nov. 6, 2005


The  rise and fall of Russia's Jewish tycoons

He lives in a $3.7 million home in Herzliya Pituah and his  net worth was recently estimated at $4.1 billion. He was just crowned  "the richest person in Israel" by the Israeli press. No, it's not Steff  Wertheimer, not Lev Leviev and not even Sammy Ofer. Try Leonid  Nevzlin. If the name is unfamiliar, you're not alone. Only a  little over a year in Israel, Nevzlin recently became the major  shareholder in Russia's biggest oil company, Yukos, after its principal  shareholder Mikhail Khodorkovsky, who is in trouble with the Russian  authorities, gave him his 60 percent share.

To understand the  size of Yukos, consider that in 2002 alone it posted annual revenues of  $11 billion and a net profit of $3b.

But the title of richest  Israeli may be premature, as Nevzlin's wealth is only on paper. The  assets of the company he controls have been seized by the government,  which is seeking more than $27 billion in back taxes. Some say that  Yukos's strength was the source of its weakness. By becoming so wealthy  and so powerful, the Yukos group posed a threat to the powers that  be.

Nevzlin claims that Putin is taking revenge on him and  Khodorkovsky for supporting Putin's opponents in the last elections. To  escape an arrest warrant, Nevzlin fled to Israel in October 2003. He  came with two other Jewish heads of Yukos, Vladimir Duvdov and Michail  Brodno, who together own 22% of the company, or $7 billion worth. Yukos  head Khodorkovsky, also Jewish, wasn't as lucky. Once considered  Russia's richest man, worth an estimated $15 billion, he
has sat for the  past year in a Russian jail. According to the Russian press, Nevzlin  took control of Khodorkovsky's stake in Bank Menatep under a shareholder  agreement foreseeing a transfer of ownership if Yukos were stripped of  substantial assets. To recover punitive tax claims against Yukos,  the Russian government recently sold Yukos's daughter company Yugensk at  what many believe was a rigged auction. Yugensk pumps one million  barrels a day, accounting for 60% of Yukos's total output. The winner of  the auction was Baikal Finans, an unknown outfit registered in a  provincial Russian town. It paid $9.4b. for the company. Only a few  weeks later the state oil firm, OAO Rosneft, took over Baikal Finans and  installed its own management team, so Yugensk is now back in the hands  of the Russian state.

Some have expressed fears that the  re-nationalization of Yukos represents a reversal of the privatization  of Russian industry and could lead to lower GDP growth. Economists say  that if the fall of Yukos was an anomaly, then the Russian economy need  not be overly concerned, but if it is part of a grander political plan,  then trouble lies ahead.

THE FAIRYTALE story of how Nevzlin and  other Jews became Russian oligarchs starts almost 20 years ago. In 1987,  Nevzlin and Brodno were simple computer programmers working for the  government. One day Nevzlin saw a small ad ­ a marketing company was  offering its services to computer firms. He called and Khodorkovsky  answered. The two men eventually became friends, and together  established Bank Menatep.

Shortly thereafter, Prime Minister  Boris Yeltsin began the privatization scheme which was to become the  source of wealth for many Jewish tycoons. His government began  distributing vouchers in public companies to Russian citizens. But to  the disappointment of the public, the vouchers turned out to be  practically worthless. Many citizens didn't even save  them.

Khodorkovsky and Nevzlin didn't mind that the vouchers were  considered worthless; they realized their true value, and via Menatep  began buying them up, often at laughable prices. Almost 10 years later,  in 1996, Yeltsin encountered big political problems and couldn't manage  more than 10% in the polls. Desperate for money, he turned to Menatep.  The bank reportedly gave him $200m. for his election campaign ­ $197  more than the law allowed. After his return to power, Yeltsin thanked  them by offering them their choice of shares in publicly owned natural  resource companies. It is believed that some 70%-control in Russia's  biggest public gas, oil and metals companies was distributed to a small  group of businessmen at that time.

Yukos, for all its problems  with the government, is considered the first major Russian company to  issue transparent financial statements. Just prior to its fall, there  was a plan to merge it with Sibneft Oil, owned by another Russian Jewish  tycoon, Roman Abramovitch. This would have made them the fourth-largest  oil company in world. "Khodorkovsky was so certain of his position,  especially thanks to his close connections to the US Democratic party,"  says Eli Krichevsky, business editor at Vesty, Israel's most popular  Russia newspaper.

But when the Democrats fell from power he lost  his overseas support and his star began to fall. Khodorkovsky has said  that Yukos would have been worth $50 billion today if not for the  persecution of the Russian authorities. Now its capitalization is a mere  $1.5b. according to Nevzlin.

ABRAMOVITCH, WHO lives safely in  England, is still the Kremlin's man, according to managing editor of  Vesty, Yevgeny Seltz. But Seltz believes it could also happen to  him. "There are rumors that the Russian State Ombudsman has  checked up on Abramovitch and found that he bought England's Chelsea  soccer team with the public funds of a Russian province he governs.  "Nevzlin hasn't taken the charges sitting down. He says he plans to sue  the Russian government for damages. "As shareholders, we intend  to demand compensation for damages in all available international  courts," he was quoted as saying by the Moscow business daily,  Vedomosti. Nevzlin expects cooperation from all shareholders "because in  the current circumstances a consolidated position and joint efforts in  safeguarding property are more important than ever."

But that  won't be easy. US investors have already filed a class action lawsuit in  an American court accusing Yukos's managers of failing to inform them of  the risk involved due to the government investigation of their tax break  schemes.

Nevzlin has two daughters from two marriages, one 20 and  one 26. Both live in London. Besides his business pursuits, Nevzlin was  a "lord" in Russia's upper house. He was also very active in Russian  education, and was rector of the Russian State University for Humanities  in Moscow.
Why Nevzlin chose to come to Israel is a good  question. Some would say it's because Israel is one of only two  countries that don't have a deportation agreement with Russia ; the  other being England. But there's more to it than that. Nevzlin has a  long connection with the Jewish community. He was former head of  Russia's Jewish Federation and a Zionist activist. Since he came to  Israel, he has become active in several philanthropic pursuits. He  established the Nevzlin Center for the Study of Jews of Russia and  Eastern Europe at The Hebrew University. He is also a big supporter of  the Diaspora Museum, which he thinks can eventually become the main  Jewish museum in the world. Nevzlin has connections to Israel's  politicians, including Finance Minister Binyamin Netanyahu. The two have  met several times, and reportedly like each other. Netanyahu even once  tried doing a business deal with Nevzlin, but nothing came of  it.

Since arriving here, he has invested in several Israeli  hi-tech companies on the advice of his financial advisers. He also sees  great potential in the local tourist industry. He believes Israel offers  the widest variety of attractions of any country and only lacks good  marketing. But a ll that depends on funds and Krichevsky says he doesn't  have any. "Most of Nevzlin's money is stuck in Yukos. He probably  came to Israel with only $10m," says Krichevsky. Krichevsky  believes it is unlikely that any of the Yukos heads will ever see their  money again. As they say; easy come, easy go.