TheChek News Flow

Move could drive out Hamas fighters but threatens to foul Gaza’s freshwater supply and damage infrastructure

WASHINGTON—Israel has assembled a system of large pumps it could use to flood Hamas’s vast network of tunnels under the Gaza Strip with seawater, a tactic that could destroy the tunnels and drive the fighters from their underground refuge but also threaten Gaza’s water supply, U.S. officials said.

The Israel Defense Forces finished assembling large seawater pumps roughly one mile north of the Al-Shati refugee camp around the middle of last month. Each of at least five pumps can draw water from the Mediterranean Sea and move thousands of cubic meters of water per hour into the tunnels, flooding them within weeks.

Israel first informed the U.S. of the option early last month, prompting a discussion weighing its feasibility and effect on the environment against the military value of disabling the tunnels, officials said.

U.S. officials said they didn’t know how close the Israeli government was to carrying out the plan. Israel hasn’t made a final decision to move ahead, nor has it ruled the plan out, officials said.

Sentiment inside the U.S. was mixed. Some U.S. officials privately expressed concern about the plan, while other officials said the U.S. supports the disabling of the tunnels and said there was not necessarily any U.S. opposition to the plan. The Israelis have identified about 800 tunnels so far, though they acknowledge the network is bigger than that.

The weekslong process of flooding the tunnels would enable Hamas fighters, and potentially hostages, to move out, a person familiar with the plan said. It is not clear whether Israel would even consider using the pumps before all the hostages are released from Gaza. The Palestinian militants who attacked Israel on Oct. 7 took more than 200 hostages and brought them back to the Gaza Strip.

“We are not sure how successful pumping will be since nobody knows the details of the tunnels and the ground around them,” the person said. “It’s impossible to know if that will be effective because we don’t know how seawater will drain in tunnels no one has been in before.”

The deliberation over the plan to flood the tunnels illustrates the balance Israel’s forces must make between pursuing their war aims and the intense international pressure they face to protect civilians. The Israeli military campaign has flattened neighborhoods and the fighting has displaced more than a million Gazans from their homes in the crowded strip of territory.

An Israel Defense Forces official declined to comment on the flooding plan, but said: “The IDF is operating to dismantle Hamas’s terror capabilities in various ways, using different military and technological tools.”

Hamas has used the extensive tunnel system to hide, move undetected between houses in Gaza and hold hostages. Some of the more sophisticated tunnels were built with reinforced concrete, contain power and communication lines, and are tall enough for an average-size man to stand up in them.

Most Gazans don’t currently have access to clean water. Among the sources for drinking water in Gaza are purification plants that have been recently disabled. Before Oct. 7, three Israeli pipelines sent water into Gaza. Of those, one has shut down and the other two operate at sharply reduced levels.

At its peak, the system provided 83 liters of water per person a day. Now Palestinians receive no more than three liters a day, according to the United Nations. The U.N. says the minimum should be 15 liters a day.

Because it is not clear how permeable the tunnels are or how much seawater would seep into the soil and to what effect, it is hard to fully assess the impact of pumping seawater into the tunnels, said Jon Alterman, senior vice president at the Washington-based Center for Strategic and International Studies.

“It’s hard to tell what pumping seawater will do to the existing water and sewage infrastructure. It is hard to tell what it will do to groundwater reserves. And it’s hard to tell the impact on the stability of nearby buildings,” Alterman said.

Former U.S. officials familiar with the issue confirmed that Israeli and U.S. officials had discussed flooding the tunnels with seawater but said they didn’t know the current status of the plan.

The former officials acknowledged such an operation would put the Biden administration in a tough position and perhaps bring global condemnation, but said it was one of the few effective options for permanently disabling a Hamas tunnel system estimated to stretch for about 300 miles.

One of the former officials said Gaza’s water and sanitation systems are badly damaged and heavily polluted, and would need to be reconstructed with international assistance after the war.

Wim Zwijnenburg, who has studied the impact of war on the environment in the Middle East, said that assuming that about one-third of the tunnel network is already damaged, Israel would have to pump roughly 1 million cubic meters of seawater to disable the rest.

Gaza’s aquifer, from which the population draws for drinking water and other uses, is already becoming saltier with a rise in the sea level, requiring more energy to fuel the desalination plants on which the population depends, said Zwijnenburg, who works for PAX, a Netherlands-based peace organization.

Flooding could affect Gaza’s already polluted soil, and hazardous substances stored in the tunnels could seep into the ground, he said in an email.

Egypt in 2015 used seawater to flood tunnels operated by smugglers under the Rafah border crossing with Gaza, prompting complaints from nearby farmers about damaged crops.

Typically, militaries charged with clearing tunnels, including Israel, use dogs and robots to check for threats or to search for hostages before sending ground troops in, said Mick Mulroy, a former deputy assistant secretary of defense and officer in the Marine Corps and C.I.A.

“Dogs are most effective,” he said, but need to be followed by troops to clear the tunnels. “Robots move slow and break. And using humans is risky.”

Using water over a long period would force Hamas fighters out, Mulroy said.

But “if you salted the water, it could compound the humanitarian crisis,” he said.

Move could drive out Hamas fighters but threatens to foul Gaza’s freshwater supply and damage infrastructure

WASHINGTON—Israel has assembled a system of large pumps it could use to flood Hamas’s vast network of tunnels under the Gaza Strip with seawater, a tactic that could destroy the tunnels and drive the fighters from their underground refuge but also threaten Gaza’s water supply, U.S. officials said.

The Israel Defense Forces finished assembling large seawater pumps roughly one mile north of the Al-Shati refugee camp around the middle of last month. Each of at least five pumps can draw water from the Mediterranean Sea and move thousands of cubic meters of water per hour into the tunnels, flooding them within weeks.

Israel first informed the U.S. of the option early last month, prompting a discussion weighing its feasibility and effect on the environment against the military value of disabling the tunnels, officials said.

U.S. officials said they didn’t know how close the Israeli government was to carrying out the plan. Israel hasn’t made a final decision to move ahead, nor has it ruled the plan out, officials said.

Sentiment inside the U.S. was mixed. Some U.S. officials privately expressed concern about the plan, while other officials said the U.S. supports the disabling of the tunnels and said there was not necessarily any U.S. opposition to the plan. The Israelis have identified about 800 tunnels so far, though they acknowledge the network is bigger than that.

The weekslong process of flooding the tunnels would enable Hamas fighters, and potentially hostages, to move out, a person familiar with the plan said. It is not clear whether Israel would even consider using the pumps before all the hostages are released from Gaza. The Palestinian militants who attacked Israel on Oct. 7 took more than 200 hostages and brought them back to the Gaza Strip.

“We are not sure how successful pumping will be since nobody knows the details of the tunnels and the ground around them,” the person said. “It’s impossible to know if that will be effective because we don’t know how seawater will drain in tunnels no one has been in before.”

The deliberation over the plan to flood the tunnels illustrates the balance Israel’s forces must make between pursuing their war aims and the intense international pressure they face to protect civilians. The Israeli military campaign has flattened neighborhoods and the fighting has displaced more than a million Gazans from their homes in the crowded strip of territory.

An Israel Defense Forces official declined to comment on the flooding plan, but said: “The IDF is operating to dismantle Hamas’s terror capabilities in various ways, using different military and technological tools.”

Hamas has used the extensive tunnel system to hide, move undetected between houses in Gaza and hold hostages. Some of the more sophisticated tunnels were built with reinforced concrete, contain power and communication lines, and are tall enough for an average-size man to stand up in them.

Most Gazans don’t currently have access to clean water. Among the sources for drinking water in Gaza are purification plants that have been recently disabled. Before Oct. 7, three Israeli pipelines sent water into Gaza. Of those, one has shut down and the other two operate at sharply reduced levels.

At its peak, the system provided 83 liters of water per person a day. Now Palestinians receive no more than three liters a day, according to the United Nations. The U.N. says the minimum should be 15 liters a day.

Because it is not clear how permeable the tunnels are or how much seawater would seep into the soil and to what effect, it is hard to fully assess the impact of pumping seawater into the tunnels, said Jon Alterman, senior vice president at the Washington-based Center for Strategic and International Studies.

“It’s hard to tell what pumping seawater will do to the existing water and sewage infrastructure. It is hard to tell what it will do to groundwater reserves. And it’s hard to tell the impact on the stability of nearby buildings,” Alterman said.

Former U.S. officials familiar with the issue confirmed that Israeli and U.S. officials had discussed flooding the tunnels with seawater but said they didn’t know the current status of the plan.

The former officials acknowledged such an operation would put the Biden administration in a tough position and perhaps bring global condemnation, but said it was one of the few effective options for permanently disabling a Hamas tunnel system estimated to stretch for about 300 miles.

One of the former officials said Gaza’s water and sanitation systems are badly damaged and heavily polluted, and would need to be reconstructed with international assistance after the war.

Many energy-intensive industries consider relocating operations abroad

German companies have slashed their investment plans for this year and next, adding to the challenges plaguing Europe’s largest economy.

In a benchmark survey published on Monday based on responses from 5,000 businesses, the Ifo Institute in Munich said it found they had “significantly reduced their investment plans”. 

The institute’s index of net investment plans fell from 14.7 in March, when it carried out its last survey, to 2.2 in the poll carried out in the first three weeks of November. For next year, the index, which measures the difference between the percentage of companies planning to increase investments and those planning to cut them, fell even lower to 1.2.

“The investment climate has deteriorated noticeably,” said Lara Zarges at Ifo. “This is the result of increased financing costs, weak demand and economic policy uncertainty.” 

The findings came only weeks after a German constitutional court ruling left the government with a €60bn hole in its budget, complicating the ability for Berlin to provide companies with state support next year.

Chancellor Olaf Scholz’s government is still trying to agree a new budget for 2024. It said last week that the court ruling would force it to wind down its €200bn Economic Stabilisation Fund, which has been subsidising electricity and gas prices for households and businesses, rather than rolling over the funds into next year.

The court’s decision was announced on November 15, in the middle of the Ifo survey. Zarges said she had been surprised that companies responding after the ruling were “slightly more optimistic” on investment than those that responded before it. But she said this showed that this year’s investments are unlikely to be affected by the budget upheaval.

She said extra pressure on government spending was likely to have more of an impact on companies’ investment plans for 2024 and predicted this could show up in next March’s survey “depending on how the budget turmoil will develop”.

The largest cut in investment plans was found in the manufacturing sector, where the investment index has dropped from 21.4 in March to 6.8 in the latest study.

Within this sector, there were even bigger falls noted among the most energy-intensive industrial groups, such as chemical producers, suggesting they would sharply reduce capital expenditure this year.

German industrial energy prices are double those in the US and China, according to a recent study by research group Prognos for the Bavarian employers’ association VBW.

Retailers also signalled heavy cuts to their investment plans, which have turned negative for this year and next, Ifo said. However, automotive manufacturers said they aimed to maintain their investment at a high level.

Carsten Brzeski, head of global macro research at Dutch bank ING, said the recent court ruling had caused “self-inflicted damage to the German economy”, adding that it “will weigh strongly not only on investments but also on consumption”. It prompted him to slash his forecast for German gross domestic product to shrink 0.4 per cent next year.

German investment has rebounded in recent years, according to figures from the World Bank showing gross fixed capital formation as a share of GDP has risen from a low of 19 per cent in 2009 to 23 per cent last year — catching up with the EU average.

However, a growing number of German companies plan to shift parts of their activities abroad, particularly energy-intensive manufacturers, according to a recent study by consultancy Deloitte and the business lobby group BDI.

Last month’s survey of 100 German companies with turnover of more than €50mn each found a third were planning or considering relocating parts of their value chain out of their home country. Almost 60 per cent said the security and cost of energy was the main reason to move activities overseas.

Tel Aviv Stock Exchange EVP head of trade Yaniv Pagot: The researchers did not realize that TASE shares are quoted in agorot not shekels.

Tel Aviv Stock Exchange EVP head of trade Yaniv Pagot has told "Globes" that the findings of a US research study claiming that investors carried out major short trades on Israeli shares, with an emphasis on Bank Leumi (TASE:LUMI), are inaccurate and divorced from reality.

Pagot says, "What the researchers did in the study was to assume through lack of familiarity with the local market that share prices in Israel are quoted in shekels rather than agorot (100 agorot equals a shekel). From this there were many mistakes. In the research they took the increase in the short sales balance on 4,500,000 shares. The researchers estimated that the price per share fell from NIS 734 instead of 734 agorot or NIS 7.34. Therefore they calculate a profit of NIS 3.2 billion (in Leumi shares) when in practice the profit was only NIS 32 million. The researchers magnified the loss per share 100 times. This is a fundamentally mistaken assumption."

He adds, "There is also a lack of understanding of what happens on the capital market in Tel Aviv. If we assume that somebody carried out a huge short sale in a share, whoever made such a short sell would be completely transparent to the local regulator because he has to sign a share lending agreement with a TASE member. So would somebody from Hamas or a straw company acting on their behalf sign a share lending agreement on the TASE? Even if somebody wants to borrow shares worth NIS 500 million, they need to identify themselves to a bank and take out a credit framework. So the bank need information on who is involved. There are matters like money laundering etc. In other words, there could not be such a scenario. It is regrettable that the researchers did not check with Israeli TASE members and they could have asked how these things work in Israel."

Bank Leumi shares are among the most traded on the TASE and were at the heart of the research published on December 3 by Robert J. Jackson Jr. of the New York University School of Law and Prof. Joshua Mitts of Columbia Law School. They found a sharp and significant rise in short sales of Bank Leumi shares as well as ETFs that track Israeli companies in the days preceding the attack.

In terms of market cap, Bank Leumi is the second most valuable stock traded on the TASE, worth about NIS 43 billion. The most valuable company is NICE Systems Ltd. (Nasdaq: NICE; TASE:NICE), with a market cap of NIS 44 billion.

The average daily trading volume of Bank Leumi shares on the TASE over the past year has been NIS 114 million - the largest followed by Bank Hapoalim with an average daily trading volume of NIS 92 million. Over the past month the average daily trading volume of Leumi shares has fallen to NIS 91 million. But between September and November the daily average was NIS 112 million. The recent fall shows how high the trading volume of Bank Leumi shares were at the start of the war. The high liquidity would have allowed traders to exercise aggressive short positions with relative ease.

Short positions on Leumi jumped to NIS 422 million on October 5

An examination of TASE data show that on October 8 Bank Leumi's share price slumped 8.8% after the attack the day before. The average daily trading volume in October after the start of the war was NIS 165 million, far higher than the average over the past year.

The US study found that between September 14 and October 5, a short position was built amounting to 4.43 million shares in Bank Leumi. After the Hamas attack, those who built that position reaped profits of NIS 3.2 billion. However, because of the muddling up of shekels with agorot this was really only an estimated profit of NIS 32 million.

But "Globes" examination of TASE data does find that there was a consistent rise in short trading balances on Bank Leumi shares prior to the outbreak of the war. On July 26 there was NIS 285 million in short trade balances on Bank Leumi, which has climbed to NIS 407 million by the last week of September and NIS 422 million on October 5. By November 2, almost a month after the start of the war, the short trade balances on Leumi's share had fallen to NIS 371 million, and fell further to NIS 355 million on November 23. The rise in short positions ahead of the outbreak of the war and the fall after the start of the war, shed additional light on the matter.

In terms of trading, Bank Leumi's share price tanked after the outbreak of the war. On Sunday October 8, all TASE indices fell sharply. By October 23 Leumi's share price had fallen 22% in 12 trading days from the start of the war, with NIS 6.5 billion shaved off its market cap, which had fallen to NIS 37 billion. Since then Leumi's share price has recovered and as of this morning had gained 16% since October 23, with a market cap of NIS 43 billion.

The choice, to the extent that it was indeed made by the short traders, of Bank Leumi shares was apparently made mainly due to the high liquidity of the shares. When the shares are traded in large volumes, it is possible to receive more offers to short the share, thus building more significant positions.

But at the same time, there are those who see the choice of Bank Leumi shares as having a symbolic dimension as well. It is possible that the parties who acted tried to convey a kind of message in their malicious behavior, since Bank Leumi is not just any bank. This was the bank that was established in London in 1902 to fulfil Herzl's vision of a Jewish state.

Full disclosure: Earlier today "Globes" published the aforementioned research findings as they are after requesting a response from the TASE and the Israel Securities Authority. Subsequently "Globes" received the response of the TASE, which detailed the errors in the research and the article has been revised accordingly.