Bunker mentality: The Mideast crisis
Even with rockets falling, it's business as usual in Israel. Why Americans should watch and learn.
By Nelson D. Schwartz, Fortune Magazine Europe editor

Fortune International -- Sitting in his Haifa office overlooking the Mediterranean, Israeli CEO Kobi Vortman is going over the finer points of managing a business during wartime, ticking off details such as the need to back up all data overseas and store spare parts at multiple locations inside Israel.

"In a war, you focus on whatever you have to do," says Vortman. "And this is a war, so you have to be prepared for things to go wrong." As if on cue, three dull booms echo in the distance. Another round of Katyusha rockets has landed. "I think we better go to the bomb shelter now," Vortman says, not a hint of emotion in his voice as air raid sirens belatedly begin to wail.

Like most Israeli companies, Vortman's firm, InSightec, a medical-device manufacturer that's 20% owned by GE (Charts), has a secure, windowless room on each floor for emergencies. This visit proves short: Ten minutes later Vortman is back at his desk, ready to go over InSightec's disaster-recovery plan with GE executives worried about the impact of the violence on their investment. "I'm sure they're not happy about it," says Vortman. "But that's life. We're here."

If GE execs in the U.S. are more nervous about the missiles in Haifa than Vortman is, it's partly because, like virtually all Israelis, Vortman is an army veteran (he was an artillery officer in the Golan Heights in 1973). Yet it also speaks to the very different way that both government and business leaders in the U.S. deal with potential threats.

Government's role

Nearly five years after 9/11, America is still grappling with the need to prepare for the worst. Of course, the U.S. faces fewer immediate threats than Israel does. Even with North Korea's missile program and Iran's nuclear ambitions looming on the horizon, there's little chance of rockets reaching our shores anytime soon.

But there are plenty of more pressing dangers we're not addressing. While the Department of Homeland Security worries about protecting an Alabama petting zoo and an Amish popcorn factory (both recently made its National Asset Database), port security has been all but ignored.

Business has done better - barely. Yes, many companies now store their data at offsite locations, and the chemical industry and other vulnerable sectors have "spent a fair amount of money on security," says Daniel B. Prieto, who has written on the topic for Council on Foreign Relations. (See correction)

Still, fewer than half of Fortune 500 companies have adequate strategies in place, says Steven Lewis, who has developed disaster relief plans for more than 100 large companies. The most obvious danger to America's economy - our dependence on crude - has received even less attention than the threat of terror. Big Oil still considers ethanol and other alternative fuels to be sideshows at best, potential rivals at worst.

Meanwhile, America's daily consumption of oil (nearly 21 million barrels) has only increased since 2001. Not only has Israel's bombing campaign in Lebanon crushed that nation's nascent economic rebirth, but it has also sent shock waves through world oil markets, causing crude to hit a new high of just under $80 a barrel.

With Iran both the Middle East's second-largest oil producer as well as Hezbollah's prime backer, it's clear that if the current fighting spreads to Tehran, it would have a catastrophic effect on oil prices and the U.S. economy. Such a scenario could cause oil to spike up to $100, says Larry Goldstein of the Petroleum Industry Research Foundation.

Looking out further, a U.S. confrontation with Iran over its nuclear program would be every bit as devastating. "Right now Iran is just threatening to use the oil weapon," says Mohammed Shakeel, who tracks the Middle East for Global Insight, which analyzes risk for corporate clients. "But the possibility of the oil weapon is real, especially if Iran has nothing else to fall back on."

Of course, weaning ourselves from oil and protecting the U.S. economy in the long run might require some short-term pain, like trading SUVs for Priuses and turning down the A/C. But for now, that's not the American way.

Back in Haifa, the next building over from Vortman's company is home to Mobilitec, where founder Haim Teichholtz takes the long view. "Maybe we'll suffer for one or two weeks or more," he says, "but being in a bomb shelter now is better than suffering worse later."

Reporter associate: Telis Demos.

Correction: Due to the reporter's error, Daniel B. Prieto's paper was incorrectly cited. His paper on homeland security and the private sector was written for the Council on Foreign Relations, but sold through the Brookings Institution's bookstore. Return to story.


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