Water supplies are at record low levels. Allocations to farmers and urban consumers have been cut back. The government is threatening to fine water wasters. The country faces severe ecological damage. Foreign Minister Shimon Peres stipulated that the price of water from Turkey should not exceed the cost of desalinating Mediterranean water.
Price is the mechanism that allocates scarce resources in any economic system.
It is a mechanism that is invariably corrupted in Israel through subsidies, regulations, non-tariff barriers, high taxes, and other governmental interventions. Turkey holds all the cards on this deal. Israel has been hoisted on its petard because price has not been allowed to allocate Israel s domestic water resources efficiently. The state runs the country s water system and runs it badly, as is the case with Israel s state-controlled sectors. This problem, and its solution, were explained in Professor Steven Plaut s Policy Studies paper, Water Policy in Israel.