Aims and Means. No. 2
Archival records, now declassified at Akevot’s request, tell the story of the financial safety net Israeli government provided for commercial companies and settlement agencies beyond the Green Line. Referred to as a “political guarantee” or “political insurance”, it protected settlers and investors in the occupied territories against such “political risks” as Israel’s evacuation from the occupied territories, policy changes or boycotts. As use of the government guarantees gradually expanded, a government insurance corporation was created, to sell insurance policies against these political risks. This is the story of the political guarantee in the occupied territories and the Yanai insurance corporation.
As Israeli economic activity in the occupied territories grew, and with it the number of political guarantees handed out, a governmental insurance corporation was set up specifically for this purpose. The Yanai Insurance Corporation was established in the early 1970s, and was funded and ran by the government. In its early days, Yanai insured investments only. Later, it began offering loan insurance for development beyond the Green Line as well. During that decade, Yanai insured hundreds of loans and investments, worth hundreds of millions of Israel pounds, in dozens of settlements and industrial areas in the occupied territories. The guarantees were provided for a variety of projects ranging from energy infrastructure and industrial and farming businesses, to insuring loans taken by settlements. The company’s financial reports note that according to the agreement between Yanai and the Government of Israel, the government undertook to pay the company “… any amount it would be required to pay out according to the policies” (document 11).
The story of the “political guarantee” that turned into insurance sold by a dedicated governmental insurance corporation, Yanai, is the story of the safety net the State of Israel provided to settlers and Israeli entrepreneurs in the territories – a governmental guarantee that they will be compensated for financial losses even in the event that Israel has to evacuate the occupied territories. This story was first revealed through the meeting minutes of the Committee of Directors-General on Civilian Matters in the Territories, recently uploaded online by Akevot Institute, and through several hundreds of documents, recently declassified for the first time by the Israel State Archive at the request of Akevot Institute.
Political guarantees in the occupied territories, establishment and institutionalization: July 1967 to 1968
The government of Israel began encouraging Israeli investment in the occupied territories by providing guarantees against political risk as early as a month after the war ended. In a discussion at the Committee of Directors-General on Civilian Matters in the Territories on July 10, 1967, the committee was briefed that Israeli banks were demanding the government provide them with full political and commercial coverage for all operations in the occupied territories. The committee decided to grant general approval for “the provision of a [full] guarantee for political risk and a partial guarantee for commercial risk…” The recommendation was transmitted as a directive to the Ministry of Finance (document 1). On August 14, 1967, a month after the first Israeli settlers took to the Golan Heights, the Ministerial Committee for Economic Affairs approved the provision of “insurance against political risk to Israelis engaged in land cultivation in the Golan Heights” (document 2).
The governmental guarantee against “political risk” was also used as part of the military government’s efforts to operate businesses in its possession. And so, on November 6, 1967, the Directors General Committee decided that if Hotel Kalia, which was seized by the military government, were to be leased to an Israeli resident or company, the lessees would be given a guarantee against political risk. Similarly, on December 25, 1967, the committee decided to hand over a castor oil factory in al-Arish, which had been declared abandoned property, to an Israeli company, stating that “the supervisor of abandoned property will cover the company for political risk” (document 3).
Growing use of political guarantees in the territories led to governmental action to regulate the field. The accountant general clarified that such guarantees required the approval of the Knesset Finance Committee, and determined the Directors General Committee would be able to approve such guarantees up to a maximum of 10 million Israel pounds (document 4), political insurance was included in the list of waivers extended to enterprenours (Israeli and foreign) in the territories (document 5); and later the Directors General Committee established a framework for the provision of political guarantees, according to which they would come into effect in case of a “change in the political status of the land”, “a shift in the policy of the [military] government which prevents normal commercial activity”, and for damage incurred due to Palestinian resistance, such as political boycotts” (document 6). ). The Ministerial Committee on the Territories approved in June 1969 a decision saying “Israelis’ investments in the Territories will be given, among other things, a 100% political guarantee” (document 18).
On July 3, 1969, after about a year during which it regularly approved political guarantees, the Directors General Committee adopted the recommendation of the attorney general (document 20) to institute a governmental insurance corporation that would “insure political risks for investors in the territories”. The government would guarantee the policies issued by the company and the Knesset Finance Committee would oversee its operations” (document 8).
The proposal submitted by the Governmental Corporations Authority for the establishment of the company, which was referred to the justice, defense and finance ministries on October 10, 1969, noted that the company would “encourage investment in the administered territories”, and to that end, would insure investors against: “A. Possible changes in territorial status; B. Damage incurred due to changes in government policies (for example, curfew); C. Hostile behavior by the population” (document 9). In response, the Deputy Attorney General, Ze’ev Sher, cautioned that “at the it was agreed that for obvious reasons, the name of the company and description of its activities will not be too revealing on the documents themselves (document 19). Following Sher’s comment the description of the companies’ principle activities was amended in the decision draft put by the Minister of Finance on table of the Mnistrial Committee for Economic Affairs (document 21).
The Yanai corporation for political insurance in the occupied territories – expansion 1970-1979
Establishment of Yanai was approved in a session of the Ministerial Committee for Economic Affairs held during the Jewish holiday of Purim, on Sunday, March 22, 1970. The first board of directors meeting was held nearly a year later on February 8, 1971. The minutes from that meeting indicate that the funding for the company would come from the Ministry of Finance Budget Department, its accounts would be managed under the professional supervision of the income and property tax departments and eligibility for its services would be determined by the director general of the finance ministry, who also served as the chair of the Directors General Committee (document 10). However, when the ministers of finance and defence approved the basic insurance policy the company would offer [document 07], their instructions to finalize the conditions under which the company would operate “on behalf of the government and at its expense” were immediately followed by a statement emphasizing that “it has been agreed not to include a section in
the policy that notes the corporation acts on behalf of the government and at its expense” (document 11).
Yanai was granted exclusivity in providing political insurance in the occupied territories, including over guarantees issued before its establishment. After a slow first year, the company took off. As indicated in its financial reports, in 1974/5, Yanai received authorization to sell insurance policies for loans taken out for financial projects in the settlements (document 12). As such, political insurance transformed from a safety net for existing investments in the territories into a development tool for encouraging new investments.
In the eight years following its establishment, Yanai sold more than 600 political insurance policies (document 13). The powers to approve new insurance policies remained at the hands of the Direcotrs-General Committee, who appointed a deidcated sub-committee. As the minute details contained in the files show, Yanai insurance policies covered projects in a variety of fields: beginning with infrastructure (for instance, insuring gas stations, the electric corporation), and both large and small industrial and farming projects. (document 15). Put together, the records show that the governmental insurance against political risks was granted to properties, projects and loans in the vast majority of settlements and industrial zones in the territories at the time.
The dissolution of Yanai: 1980-1984
Yanai’s operations took a dramatic shift after the Government of Israel decided to compensate all Israelis evacuated from Sinai after the peace deal with Egypt, regardless of whether they had taken out political insurance or not. This precedent made political guarantee a pre-existing undertaking on the part of the government toward any Israeli investment in the occupied territories, and as such, investors and settlers saw no reason to purchase special insurance for this purpose. This led the board of directors to wonder, in 1981, whether “there is, in fact, any justification for insuring assets in the territories” (document 16). When the Golan Heights Law, which formally annexed the area to Israel, was passed, political insurance was no longer provided for that area either, and Yanai’s operations shrank even further.
Given the developments in the early 1980s, the question of continued operations was discussed by Yanai’s board of directors, and between the company and the government as well. At the same time, the number of entities insured by the company dropped below ten. The possibility of winding down the corporation began taking shape. On January 24, 1981, a decision was made to merge Yanai with the Inbal governmental insurance corporation. During its 47th meeting, held in the offices of Inbal, the Yanai board of directors approved the transfer of operations to Inbal, beginning April 1, 1984 (document 17).
The Israel government policy of providing a financial safety net for investments made by Israeli civilians in the occupied territories was a major factor in encouraging settlement in the territories and their financial exploitation. Given the uncertainty associated with the then new situation of occupation, and the intense public, political and diplomatic debate over the future of these territories during the first decade of the occupation, an evacuation scenario was considered a real possibility, and political guarantees provided an exclusive and essential response to this risk. The importance of government insurance against political risks can be seen in the sheer number of assets and projects that were insured, the wide geographic distribution of the insurance policies and the fact that ultimately, it changed from a limited tool to a government standard, given for free to any Israeli settlement and investment in the occupied territories.