Termination of Israeli-Egyptian Natural Gas Agreement Serves Dangerous Precedent

Move may be intended to pressure Israel to give up lawsuit for $8 billion in compensation for damages; decision not expected to affect electricity prices in Israel.

A photo of Dr. Zvi Bar'el.
Zvi Bar'el
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A photo of Dr. Zvi Bar'el.
Zvi Bar'el

Mohamed Shoeb, head of the Egyptian Natural Gas Holding Company, announced Sunday evening that the company will terminate its agreement to provide natural gas to Israel, after a decision had been made on Thursday due to what he termed “Israel’s repeated breaching of the agreement.”

Shoeb, in interview on Al-Hayat television, stressed that the termination of the deal was due to failure on the part of the Israeli side to transfer the payments owed by Israel for some months and “had nothing to do with the repeated attacks on the pipeline.”

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Liquified natural gas terminal at Idku, EgyptCredit: Archive

The termination of the agreement is not expected to raise Israel's electricity prices, because the recent price hike of nine percent was made while taking into account that no gas would be delivered from Egypt. Government offices have recently began looking for alternative sources of gas until the Tamar field begins supplying it in April 2013.

Despite this announcement, the fact that Egypt's ruling Supreme Military Council and the Egyptian government hadn’t announced the decision officially is puzzling, raising the questions of what motive is behind the decision and how was it decided.

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It is possible that the announcement was intended to pressure Israel into calling off the lawsuit for compensation of $8 billion over Egyptian failure to provide gas as promised. This theory agrees with the announcement by diplomatic officials in Jerusalem that the decision stemmed from a “business dispute.”

The fact that no official announcement was made may also indicate the Egyptian government intends to issue a correction or completely deny the announcement made by Shoeb.

However, even if the Egyptian government denies the decision to terminate the agreement, the fact that the company's CEO made the announcement puts the deal in the limelight. If it turns out that Egypt had really one-sidedly decided to terminate the agreement; it may be a dangerous precedent that indicates other agreements between Egypt and Israel may also come to an end.

The sale of natural gas to Israel had been one of the main criticisms the Egyptian opposition voiced against former Egyptian president Mubarak, claiming that the price the Israeli company secured was extremely low, cutting into Egypt’s national income.

Some have claimed the deal was made possible due to a bribe the Egyptian partner Hussein Salam paid Mubarak’s family in order to win the concession. Salam was indicted on this charge but fled Egypt and Egyptian attempts to have him extradited weren't succesful. Due to this background the deal has come to symbolize Mubarak’s treason and the corruption of his regime.

In addition, Bedouin in Sinai claim that the pipeline and its infrastructure had been constructed on their land and they have yet to be compensated as was promised. This is one of the reasons that some of the Bedouin families are willing to damage the pipeline and halt its activity.

Since the revolution, the agreement to sell Israel natural gas has became one of the charges Mubarak and his circle are being indicted for. Egypt’s new leadership promised to look into the price Israel is paying to see if a higher rate can be obtained.

On the other hand, the leadership of most of Egypt’s political parties, especially the Muslim Brotherhood, had made it clear they intend to “stand by all the agreements Egypt had signed in the past including the Camp David Accord and the agreement to sell natural gas,” as Khairat al-Shater, a onetime presidential candidate and other party leaders had said.

Egypt's ruling Supreme Military Council and the Egypt’s interim government also made it clear to Israel and the United States that all agreements will be kept. This commitment was perceived as a condition for a continued working relation with Israel and the U.S., relations that radical organizations and terrorists working in the Sinai are trying to undermine.

The flow of natural gas to Israel and Jordan also symbolized the regime’s ability to control the Sinai and ward off terror organizations attempts to dictate Egypt’s domestic and foreign policies. Both the gas company and Egypt’s security forces have spent great efforts and manpower in securing the pipeline, but after 14 explosions and the failure to get Sinai’s Bedouin to cooperate, it seems that Egypt had given up.

Thus, even if it turns out that a business dispute and not the failed fight to keep the flow of natural gas flowing against the saboteurs in the Sinai, are what caused the termination of the deal, Egypt’s regime may find itself in the midst of a political storm, criticized for neglecting the nation’s vital interests and losing its grip on the eastern peninsula, this time because of the deal's end.

With this in mind, it seems likely that the Supreme Military Council will instruct the Egyptian natural gas company to “reconsider” its decision to avoid the possibility that the cancelation of the deal will become a tool with which the opposition can criticize the regime.

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