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Israel has been profiting off the Dead Sea in more ways than one, but tourism and mineral harvesting significantly impact the long-term health of the sea and the future of businesses relying on it.

At Israel’s southern Dead Sea pools, where visitors bob in water so dense with salt they float, David Zvida gestures toward hotels lining the coast.

Standing at one of the world’s top tourist destinations, where travelers are told King David once took refuge from a vengeful King Saul, Zvida singles out a hotel close to being flooded. The spa industry is threatened because water levels have risen as companies extracting minerals leave salt deposits on the seabed, displacing millions of gallons of the Dead Sea.

“When these hotels were built here 30 years ago, they knew the water levels were slowly rising and the state took responsibility for protecting the hotels,” says Zvida, senior vice president at Dead Sea Works Ltd. The unit of Israel Chemicals Ltd. runs evaporation pools to extract minerals.

Since then, the state decided Israel Chemicals needed to chip in. ICL agreed, in a deal that also called for higher royalties, to pick up a $1 billion tab to remove salt that was accumulating on the sea floor from its evaporation pools, elevating water levels in the basin lying between Israel and Jordan. Collecting potash and other minerals is a business dominated by Dead Sea Works and Jordanian rival Arab Potash Co.

ICL, the world’s seventh-largest potash producer, hired staff for a new division that will remove 20 million tons a year. The project, expected to start in 2015, will dredge the salt, move it on a conveyor belt and dump it via a barge back into the northern part of the sea, from which water is hauled back to southern pools by canal.

Two Million Visitors

While the much larger Dead Sea basin to the north is shrinking at a record rate, the more lucrative southern basin’s levels have surged enough to threaten the $300 million health industry and a tourism business that drew about 2 million visitors from Israel and abroad in 2012, according to the Central Bureau of Statistics.

Now, under public pressure for companies to pay more taxes, the Israeli government is studying raising other levies on natural resource companies such as Israel Chemicals.

Finance Minister Yair Lapid in April said he would form a panel to examine royalties from natural resource producers as he scuttled merger talks between Israel Chemicals and Potash Corp. of Saskatchewan Inc. The decisions underscore hardships that companies face from an administration increasingly willing to squeeze businesses to maintain popularity and raise revenue.

Profit Margin

A heightened regulatory environment and public sentiment against Israel’s largest companies currently runs from the telecommunications industry to banking.

It led analysts from Barclays Plc to Excellence Nessuah Brokerage Ltd. to reduce price estimates for ICL, the country’s second-largest company by market value, which made a profit of $1.3 billion last year on $6.67 billion in revenue.

The stock fell as much as 2.2 percent today in Tel Aviv, bringing its decline this year to 19 percent including reinvested dividends compared with little change in the TA-25 benchmark index.

“The overall environment is making investors concerned,” said Guil Bashan, an analyst at IBI-Israel Brokerage & Investments Ltd. who reduced his price estimate to 46 shekels from 53 on May 7, citing regulatory concerns. “The risk from greater regulatory oversight should not be underestimated.’”

The harvesting of potash and minerals from the Dead Sea leaves salt residue to build up on the seabed and contributes to higher sea levels.

Dredging Salt

In late 2011, amid nationwide protests calling for more social justice, ICL agreed with the state to shoulder about 80 percent of the cost to harvest the salt and to double royalty payments to 10 percent on potash production at certain levels. Analysts such as IBI’s Bashan hailed the agreement as positive for ICL at the time as it would help put the tax story to rest.

Now, less than two years after the agreement, a new government has decided to re-examine taxes on natural resource producers including ICL. The panel studying the issue, dubbed “Sheshinski 2” in Israel, will be headed by Eytan Sheshinski, a professor emeritus from the Hebrew University of Jerusalem who led a committee whose recommendations three years ago helped the government double its share in gas and oil profits.

“The company is concerned that international investors might perceive Israel to be less of an attractive market to invest in due to the current uncertainty in the Israeli economic environment and because they find the Israeli government to be unreliable,” ICL Communications Manager Amir Avramovitz said in May, commenting on the decision to form a panel two years after an agreement was made.

‘No Contradiction’

The “Sheshinski 2” goals “are not to hurt specific companies but to contribute to the broader Israeli public welfare,” the Finance Ministry said in an e-mailed statement dated June 25.

“There is no contradiction between the salt harvest agreement signed a year ago and the establishment of a Natural Resources Committee,” it said. “The government’s decision did not explicitly forbid making changes in fiscal policy. It should be emphasized that the Israeli government sees great importance in fulfilling its agreements.

Mud Baths

The depleting Dead Sea is a source of concern for Israelis who visit the site in busloads every day to enjoy the restorative powers of its mud baths and mineral waters. ICL, a company with a 46 billion-shekel ($13 billion) market value controlled by billionaire Idan Ofer’s Israel Corp., runs a chemicals factory of smokestacks and salt-encrusted pipes that help make it one of the biggest fertilizer makers in the world.

It also contributes to the drying of the sea, according to the Friends of Earth Middle East. Half the drop in Dead Sea levels can be attributed to Israel Chemicals Ltd. and Jordan’s Arab Potash Co., according to Gidon Bromberg, Israeli director of the Friends of Earth Middle East. The company says it’s far less, attributing most of the drop to water used upstream.

With assistance from Gwen Ackerman in Jerusalem. Editors: Todd White and Randall Hackley.

To contact the reporter on this story: David Wainer in Tel Aviv at [email protected]. To contact the editor responsible for this story: Phil Serafino at [email protected].


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Tags: green, israel

Photo credit: Visitors look out on the Dead Sea in southern Israel. Ernesto Jorysz / Flickr

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