Bezeq fails to dissuade Norwegian fund from disinvesting

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Norway's sovereign wealth fund sold its shares in Bezeq despite the company's argument that it operates in the West Bank under the Oslo Accords.

Israeli telecommunications company Bezeq tried for several months to prevent Norway’s sovereign wealth fund from disinvesting from it, with political and business arguments that in the end were not accepted. This week, the fund published its decision to sell its $24 million holding in the company (0.76% of it) because of ethical considerations, on the grounds that the company assists in the breach of international law through the services it provides to West Bank settlements and to the IDF.

The Norwegian fund still holds shares in 76 Israeli companies, worth almost $1.4 billion in aggregate. The value of the fund at the date of its last quarterly report was $1.8 trillion, and it has as one of its goals to manage an ethical investment portfolio in accordance with criteria set by a special Council on Ethics.

In the past, the Norwegian fund has disinvested from Israeli companies Shapir Engineering, Ashtrom, Electra, and Danya Cebus, because of their involvement in construction beyond the Green Line. Last year, the fund came under heavy pressure from politicians, human rights organizations and local media outlets to tighten its criteria in relation to Israel. The decision by the International Court of Justice that Israel’s occupation of the West Bank was illegal contributed to the pressure.

The stricter criteria were officially adopted last summer, raising the possibility that the fund would stop investing in US defense companies that supplied arms to Israel, but also broadening the legitimacy as far as Norwegians were concerned for disqualifying more Israeli companies.

The announcement of the decision to sell the holding in Bezeq by Norges Bank, the central bank of Norway, which manages the wealth fund, states: "The Norges Bank Executive Board has decided to exclude the company Bezeq The Israeli Telecommunication Corp Ltd due to an unacceptable risk that the company contributes to serious violations of the rights of individuals in situations of war and conflict."

According to the summary of the decision posted by Norges Bank, the fund approached Bezeq in February, and the company responded at the time that it cooperated with Palestinian telecommunications companies for the benefit of the entire population living in Area C of the West Bank.

In May 2024, according to the bank’s announcement, representatives of Bezeq met representatives of the wealth fund. At the meeting, Bezeq made clear that although it provided services to West Bank settlements, it did not do so to illegal outposts, that it operated under the terms of the Oslo Accords, and that it served Israelis and Palestinians equally in Area C. The company also made clear that it was not state-owned and did not serve as the long arm of the Israeli authorities.

In June, Bezeq wrote to the fund that it operated directly under section 36 of the third annex to the Oslo Accords, which determines that "telecommunications services in Area C to settlements and military bases… will be the responsibility of the Israeli side." It also made clear that it had a legal obligation to provide telecommunications services to West Bank settlements and could not avoid doing so.

All these clarifications were not enough for the Council on Ethics, which determined that, through the services that it provided to the settlements and to the IDF, the company assisted in a breach of international law. It found that telecommunications, like roads and water supplies, were part of the infrastructure of the Israeli occupation. It also ruled out the use of the Oslo Accords, and, in making clear why Bezeq was in breach of international law, rested its decision on the interpretation of the International Court of Justice concerning the illegality of the Israeli occupation in the territories. "The Council notes the company’s assertion that it also provides telecom services to Palestinian areas in the West Bank. However, the Council does not consider this to outweigh the fact that the company, through its physical presence and provision of telecom services to Israeli settlements in the West Bank, is helping to facilitate the maintenance and expansion of these settlements, which are illegal under international law. By doing so, the company is itself contributing to the violation of international law," the Council on Ethics states in its decision.

Up to now, analysts had estimated that the decision in the summer on tightening the criteria for investment by the Norwegian wealth fund, which holds 1.5% of the shares of all the companies traded on stock exchanges around the world would, mainly affect US corporations supplying arms to Israel. The fund has already liquidated its investments in most defense and weapons companies in the past few years. It now turns out that the decision served as a basis for divesting from Bezeq.

The decision raises fears over the fate of the Norwegian fund’s remaining investments in Israeli companies. Two years ago, it was reported that the fund’s Council on Ethics had discussed the sale of all investments in Israeli banks and financial institutions, because of their possible involvement in activity beyond the Green Line. After an examination lasting about six months, however, the Council on Ethics and the fund decided that there was no basis for such a decision at that stage. Now, however, it may be that the new criteria, together with the ruling of the International Court of Justice, will trigger a review of these investments.

Among the fund’s main investments in Israel at June 30, 2024 were Teva ($575 million), Nice ($127 million), Bank Hapoalim ($121 million), ICL ($100 million), Mizrahi Tefahot Bank ($60 million), and also Bank Leumi, First International Bank of Israel, Israel Discount Bank, The Phoenix Holdings, Enlight Renewable Energy, and other companies.

In response to the report, Bezeq stated: "No comment."

Published by Globes, Israel business news - en.globes.co.il - on December 5, 2024.

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