Submarine Case Resurfaces in New Election Headache for Netanyahu

(Bloomberg) -- Benjamin Netanyahu should have been on a tear. Polls were boding well, and just weeks before April 9 elections, Donald Trump handed the prime minister a long-sought coup by recognizing Israeli sovereignty over a strategic plateau captured from Syria in 1967.

But new discoveries concerning the one corruption scandal Netanyahu has managed to dodge in his current term -- a controversial $2 billion deal for submarines and corvettes that has ensnared members of his innermost circle -- has thrust the case and his possible involvement back in the public eye less than three weeks before Israel’s vote.

In examining Netanyahu’s request to have benefactors help fund his legal defense in three other corruption cases in which he stands to be indicted, a government committee found out he once held shares in a supplier of components to Thyssenkrupp AG, the German consortium that was to build the Israeli naval vessels. While he sold the stake before the deal went through, the state prosecutor’s office is considering whether to open a criminal investigation against him, media reported.

“There is no connection between my investment and the submarines,” Netanyahu said in a rare television interview on Saturday, shortly before leaving for Washington to meet Trump and attend the annual conference of the pro-Israel AIPAC lobby. “The allegation that I made money from the submarines is a straight-out lie.”

Victory Lap

The resurfacing of the submarine deal couldn’t have happened at a worse time for Netanyahu. Instead of savoring a victory lap in Washington over its recognition of Israel’s control of the Golan Heights, he came back in focus as the man accused by critics of eroding the country’s norms and its hallowed military.

Complicating things further, the star state witness in the submarine case last week suddenly retracted his confession to bribery.

This new headache won’t necessarily stand between Netanyahu and the premiership. While some polls show his Likud party losing strength since the submarine case became an issue again, his current coalition of nationalist and religious parties is still outstripping a center-left bloc led by Blue & White.

Netanyahu’s visit with Trump and Brazilian President Jair Bolsonaro’s planned trip to Israel at the end of the month will allow him to “demonstrate he is a strong leader and that leaders around the world like him,” said Gideon Rahat, a research fellow at the Israel Democracy Institute research center. “It isn’t the last word.”

Above Board

Netanyahu tried to defuse the new uproar by noting he sold his investment a full year and a half before the first of four submarines was purchased. (He’d been re-elected prime minister by that time.) He attributed his reported $3.9 million profit from the sale of his shares to a cousin to good business sense, and insisted all of his dealings were above board and reported to authorities.

The company in which he was invested was run by that same cousin and later sold to GrafTech International Ltd., which supplies components used in steelmaking to Thyssenkrupp. On Sunday, Thyssenkrupp told Israel’s Globes newspaper that GrafTech didn’t sell products to its marine division.

Critics have questioned whether the price at which Netanyahu bought the shares constituted an illicit gift. They also note his shifting accounts of the stock sale’s timetable and his controversial decision to let Thyssenkrupp sell similar submarines to Egypt -- the type of sale Israel usually tries to block to maintain its regional military advantage.

On Saturday, Netanyahu invoked unspecified national security considerations as his reason for not disclosing that decision.

Allegations that he compromised Israel’s security are “blood libel,” he said.

To contact the reporter on this story: Gwen Ackerman in Jerusalem at gackerman@bloomberg.net

To contact the editors responsible for this story: Lin Noueihed at lnoueihed@bloomberg.net, Amy Teibel, Paul Abelsky

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