A day after EGAS dropped its bombshell, unilaterally terminating its gas supply agreement with Israel, confusion reigns, as can be said of Egypt in general after the Arab Spring revolution. Israel's reaction has been marked by supreme restraint and caution. But why did EGAS, a government company, terminate the deal anyway? Why now?
The Egyptian opposition had railed against the agreement for years. The pipeline has been blown up 14 times in the past year. There hasn't been any gas supply for two months anyway.
The official pretext is that EMG, the company that formally imports the gas, hasn't paid for the gas that was supplied since the first pipeline explosion in February 2011; EGAS claims to be owed $56 million, which EMG probably doesn't have the wherewithal to pay.
The contract lays down a procedure in the event of a dispute, and nonpayment shouldn't be grounds for unilateral termination. But there are other issues. Suspicions have been raised that corruption marred the initial contract, and EMG has been suing Egypt for compensation.
Some say the war over responsibility for the initial contract between Cairo and the heads of the Egyptian gas and oil companies led the latter to seek shelter before the next election (and outcome of the arbitration with EMG ). They created a crisis (severing the agreement ) and thereby put the ball in the politicians' court.
That would explain the contradictory clamor from Egypt. Mohamed Shuaib, head of the Egyptian Natural Gas Holding Company, blames Israeli contractual violations. Government sources say the military government had no part in the decision. Yet by evening, other voices said Cairo was prepared to open negotiations on a new agreement.
Over in Israel, the ministers and Benjamin Netanyahu himself said the development was a mere "business dispute," which is obtuse. The gas agreement had been backed by the bilateral treaty, was perceived as such, and has heavy implications for the Israeli economy. Israel has been so conciliatory - as after the attack on the Israeli Embassy in Cairo last September and the incessant attacks on the pipeline - so it can assure cooperation on security issues, which is more important.
Essentially Jerusalem is complicit in burying the gas agreement for the sake of other cooperative endeavors, but some people in the energy industry and at the ministries are uncomfortable about Jerusalem's conduct. The Arab world could see Israel's tolerance of a blunt breach of an agreement as a weakness.
"If Israel doesn't kick up a fuss and rope in the Americans, and doesn't deliver a message that agreements don't get broken, the price could be heavy," a source in the energy industry said yesterday.
If anything, with U.S. elections looming, Israel could have resolved the issue quickly with American help, said the source.
"Egypt's announcement that the contract is void is reversible, but Israel simply isn't pressing," the source added. Sector sources say Jerusalem might have come to terms with the loss of Egyptian energy and preferred not to drag out an agreement that could fire up anti-Israeli sentiment ahead of the coming Egyptian election.
