Feldman, the mother of four, is an associate professor of economics at the Hebrew University in Jerusalem and serves on the Bank of Israel’s where she’s a voting member. “I enjoy being able to balance between policy and academia. Policy can be frustrating and messy whereas academia enables me to study ‘the best ideas’ on how to tax people and raise revenue,” the professor explains. “I am very busy,” she says with a laugh, as her youngest daughter, age 7, pops in the room during our Zoom interview, asking for mommy.

In a wide-ranging interview, Feldman emphasizes that her analysis is her own as an academic and does not necessarily reflect the position of the Bank of Israel. 

Uncharted territory during COVID-19

“During the COVID era, no one knew what needed to be done,” Feldman explains as she recalls her many meetings with Finance Ministry officials debating what kind of assistance the government should be providing people and businesses. “A lot of decisions were made quickly,” she says. 

more spending at that time to mitigate a recession. During her meeting with Netanyahu, Feldman brought up examples of how other countries were using one-time grants to help out the populace during economic downturns. “He latched onto the idea and loved it,” Feldman recalls. 

After Netanyahu accepted her policy recommendations and publicly acknowledged her advice, Feldman had her “two weeks of fame,” she says with a laugh, as the Israeli media and policy community sought her fiscal and monetary expertise during a time of crisis. 

In July 2020, Netanyahu provided his pandemic-era rescue . In it, one-time grants of roughly $220 per adult and $150 per child were provided to all eligible citizens. “A family of four  received roughly $740, nearly 18% of median monthly household income in 2018. By early August, the government disbursed the payments, arguing that the grants would provide much-needed stimulus to the domestic economy. The government further encouraged the public to go out and spend on domestically produced goods and services,” according to a published by Feldman and Ori Heffez.

Prior to immigrating to Israel in 2018, Feldman served as the principal economist at the Board of Governors of the US Federal Reserve System, which she joined in 2011. From 2017-18, she served on the Council of Economic Advisers (CEA), reporting directly to the US president. 

During Feldman’s tenure at the CEA, she was able to evaluate President Donald Trump’s , which was an “exciting experience” she says as the last time the US carried out extensive tax reforms was in 1986 during the presidency of Ronald Reagan. “At the CEA, I was able to participate in the debate over the best policy options on taxation and what’s politically feasible,” the professor recalls.

Israel’s resilient economy

Israel is often referred to as “a small and open economy.” While the US, the UK and other European economies are struggling with record inflation, Israel is managing well given the global circumstances. The Jewish state, despite recent strong economic growth, however, is nonetheless feeling the inflationary pressure stemming from the US and Europe through the purchase of imported goods, the professor explains. “The movement on inflation rates can have a large impact on Israel, but   is nonetheless in a good position as are the only Organization for Economic Cooperation and Development (OECD) countries with lower rates.” 

Policymakers at the Bank of Israel, where Feldman serves, have the option to increase interest rates should the situation require it, she says but doesn’t divulge what comes next. “ The Israeli economy is in a strong shape coming out of the pandemic,” she explains.

Feldman attributes the strong fundamentals of the Israeli economy to painful lessons learned during the 1980s when the country suffered from hyperinflation. “In the 1990s, Israel took critical steps to address public debt and the deficits seriously,” Feldman says. Over the ensuing three decades, Israel has managed its economy well. “In Israel, there’s a strict belief that deficits cannot grow out of control, which is why its economy continues to perform well.”

Providing an insider’s account, Feldman says that the de facto “separation” between spending-inclined politicians and bureaucrats at the Ministry of Finance – “who control the money” – is what maintains in practice the country’s fiscal discipline. “It is the bureaucrats who prevent the spending from spinning out of control,” she says as Jerusalem tries to keep its debt at around 60% of GDP. “This policy provides Israel with the fiscal space to act when required as it has managed its economy well.” 

The Israeli economy, however, does face a degree of uncertainty stemming from the upcoming elections in November as the apparent never-ending election cycle has prevented the government from consistently setting longer run budgets. “The lack of a stable government contributes to the economy’s uncertainty as well as those stemming from geopolitics,” Feldman says, referring to the volatile politics of the broader Middle East. “All considered, Israel is doing well.”

All is not, of course, rosy in Israel as the cost of living is very high, which is one of the most important issues facing the government, Feldman argues. 

The US faces difficulties

“The US economy is in a very difficult position. Right now, we’re witnessing the consequences of what happened during the pandemic when generous stimulus checks were provided to Americans and businesses.” The professor believes that the next half year will be instrumental in determining whether inflationary pressures will stabilize or continue to grow. The US is at a fork in the road,” she explains but cautions that, “if anything, inflation will be a longer-term problem than initially thought. It may even last for one or two years.”

“Lockdown in China is not the entire story as the Federal Reserve is assessing what needs to be done when it comes to tackling the inflationary pressure,” she says. Referring to a recent address by in Jackson Hole, Wyoming, where the chair of the US Federal Reserve declared that the American central bank will continue to raise interest rates in order to tame surging inflation. 

In the meantime, Feldman predicts that “there will be less consensus” among policymakers on how to move forward. “There will be tensions between the more hawkish Board members and those who prefer to take a more cautious approach. Policymakers don’t want to go too hard too fast as it could plunge the economy into a recession.” This is where the current debate lies, Feldman explains. Another dynamic contributing to inflation is, of course, the war in Ukraine and its impact on global energy prices.

The U.S. economy faces additional pressure points as the country  is still  coming out of the pandemic. Labor shortages and mismatches in the labor force (the skill set that jobs require are not those necessarily held by people who are looking for jobs) contribute to the economic uncertainties, she explains. Cultural and political tensions, along with inequality that was exacerbated by the pandemic, are factors as well.[This article was first published by . Sigurd Neubauer is the publisher of.]

The views expressed in this article are the author’s own and do not necessarily reflect 51�Թ�’s editorial policy.

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Despite the city of Dubai’s remarkable success in transforming itself into a sprawling Western-style financial hub, the United Arab Emirates faced its most significant diplomatic crisis to date in 2006. As American lawmakers sought to challenge the Bush administration’s national security credentials, leaders of the House of Representatives signaled that they would and prevent the UAE state-owned Dubai Port World from managing six US ports, including New York, Newark, Baltimore and Miami.

Although the UAE eventually withdrew its bid, Abu Dhabi apparently was taken by surprise by the congressional opposition and subsequently launched a massive public relations campaign to convince Washington policymakers that the UAE was not only a reliable US ally, but that the Emirates shared Washington’s strategic interests, which, by extension, included those of Israel.

National Priority

Within this context, establishing a diplomatic channel to engage with the Jewish state and its supporters in Washington became a matter of national priority for the UAE. Immediately following the Dubai Port World controversy, the UAE appeared fearful of losing both access to US military hardware as well as participation in joint intelligence sharing, especially on issues pertaining to Iran. Abu Dhabi also feared that US investments could be hampered, and that the scandal could affect diplomatic and economic ties with Washington. To that end, Abu Dhabi sought to lay the controversy quickly to rest. The UAE subsequently sought US political and diplomatic support for its bid to permanently host the United Nations’ (IRENA).

To secure US diplomatic support for this initiative, the Emiratis engaged at the same time America’s Jewish community. Partially to ensure that no Congressional opposition would take hold (as it did amid the Dubai Port World controversy), they stressed that by hosting IRENA, “all” UN members — a reference to Israel — would be welcome to fully participate.

With tacit Israeli support, American Jewish groups vigorously supported the initiative while championing quiet diplomatic efforts to ensure Israeli business and professional organizations access to international conferences and conventions held across the UAE. Ever since IRENA was officially established in Abu Dhabi in 2008, Israeli diplomatic representatives and ministers have travelled to the Emirati capital for meetings pertaining to the UN agency. It is also assumed that Israeli officials have used the venue to hold side meetings with their Emirati counterparts on issues of mutual interest, while at the same time maintaining a diplomatic backchannel.

In parallel with this diplomatic initiative, Abu Dhabi and Washington signed the so-called 123 Agreement for Peaceful Civilian Nuclear Energy Cooperation on December 17, 2009. The agreement enables the UAE to receive nuclear know-how, materials, and equipment from the US. As part of the agreement, the UAE committed to forgo domestic uranium enrichment and the reprocessing of spent fuel. It also signed the International Atomic Energy Agency (IAEA)’s Additional Protocol, which institutes a more stringent inspections regime on the UAE’s nuclear activities. The UAE’s agreement to forgo enrichment and reprocessing has become known as the non-proliferation gold standard for nuclear cooperation agreements, because the signatory renounces the sensitive technology and capabilities that can be used to produce a nuclear weapon.

Prior to signing the 123 Agreement, Emirati officials reportedly also reassured the Israeli defense establishment that their civilian nuclear program would be fully compliant with the IAEA and that its program would be fully transparent. With US Congressional support, a 2009 US-UAE bilateral agreement for peaceful nuclear cooperation did not meet with any objection from influential American Jewish organizations, such as the American Israel Public Affairs Committee, the American Jewish Committee and the Anti-Defamation League.

The UAE nuclear power program, a joint venture between state-owned . and Korea Electric Power Corp., is expected to be completed between 2017 and 2020 and to cost $30 billion.

Crisis Communications

Meanwhile, it is possible that Israel and the UAE have established a forum for crisis communications, which allegedly includes intelligence cooperation on “senior threats.” Observers and Gulf Cooperation Council (GCC) officials believe that Iranian miscalculations in the Persian Gulf could set the entire region ablaze, which would draw Israel and the UAE closer.

Whether Israel’s formal lines of crisis communications include a direct military hotline between the defense ministry in Tel Aviv and its counterparts in the Gulf remains unclear. With Israel and GCC members viewing Iran as an increasingly serious threat, Tel Aviv, and the UAE in particular, began deepening cooperation in the security sphere during 2006. To that end, Israel granted the UAE access to the Israeli-built Eros B satellite and its high-resolution imagery in addition to services it already received from its precursor, the Eros A, as reported in Defense News in 2009.

Although Eros A and B appear to be commercial knock-offs of Israel’s Ofeq spycraft, both satellites and Ofeq are built by Israel Aerospace Industries, the country’s primary defense contractor. While the UAE swiftly denied the Defense News report at the time, it is widely known that the Jewish state continues to export communication, homeland security and civilian technology against terrorism to several GCC states, including the UAE.

On the diplomatic front, shortly after Israel’s 2005 withdrawal from the Gaza Strip, Dubai led what appears to be a series of GCC goodwill gestures by which Bahrain, Kuwait, Oman and Qatar offered to officially lift their boycott of Israeli goods in return for progress on the Israeli-Palestinian peace process. As part of that effort, Israel established trade offices in Oman and Qatar. Diplomatic relations between the Jewish state and the GCC seemed at the time to be on a trajectory toward normalization. Conflicts between Israelis and Palestinians in the 2000s, however, brought an official end to that and the Israeli trade offices in Muscat and Doha were forced to close down.

In the case of Dubai, however, the Israeli trade office remained open until the Mossad’s alleged assassination of Hamas operative, Mahmoud al-Mabhouh, in January 2010. Consistent with long-standing Israeli policy, the Jewish state has never confirmed or denied the report. It prefers to remain evasive about its regional policies and, in particular, its intelligence operations.

Prior to the 2010 Mossad operation, Israel-UAE bilateral trade is believed to have exceeded $1 billion between 2006 and 2009. It is, however, widely believed that Emirati-Israeli relations ultimately collapsed following the Dubai assassination. Nonetheless — and despite no official trade relations — Israeli companies continue to export a host of civilian national security technologies, as well as water and irrigation technologies, to the GCC by means of straw companies established in Europe. Israelis are also involved in Dubai’s diamond market, among other industries, and invest in real estate using their second passports.

Looking ahead, Israel-UAE relations will most likely be about much more than trade. Even if the absence of official diplomatic relations hinders prospects for better links in certain areas between the two countries — most recently demonstrated by the controversy surrounding — bilateral relations are set to grow. In fact, the UAE is the only member of the GCC that took part in international military exercises that involved the Israeli Air Force in Greece and in the United States.

At this current juncture, Iranian-backed forces from the Levant to Yemen are raising concerns in Israel and the GCC, particularly as Daesh has lost its grip on major strongholds, and militias such as the Popular Mobilization Units appear to be filling space in Iraq. Officials in Abu Dhabi and Tel Aviv appear to see a low-profile, Emirati-Israeli strategic partnership as being not only viable, but also immensely valuable to both given the extent to which they view threats in the tumultuous Middle East through similar lens.

*[This article was originally published by , a partner institution of 51�Թ�. Correction: Israel established trade offices in Oman and Qatar, not Kuwait and Dubai as previously stated. Updated: November 23, 2017.]

The views expressed in this article are the author’s own and do not necessarily reflect 51�Թ�’s editorial policy.

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