Egypt terminates gas deal with Israel Al Jazeera

Top official insists decision was not political as Israel says it overshadows peace agreement between the two countries.

The head of the Egyptian Natural Gas Holding Company has said it has terminated its contract to ship gas to Israel because of violations of contractual obligations, a decision Israel said overshadowed the peace agreement between the two countries.

Mohamed Shoeb, the gas company’s top official, said Sunday’s decision was not political. “This has nothing to do with anything outside of the commercial relations,” Shoeb said.

He said Israel had not paid for its gas in four months. Yigal Palmor, Israeli foreign ministry spokesman, denied the claim of not paying.

The 2005 Egypt-Israel gas deal has come under strident criticism from leaders of the popular uprising that toppled Hosni Mubarak, the longtime Egyptian president, last year.

Critics charge that Israel got bargain prices, and Mubarak cronies skimmed millions of dollars off the proceeds.

The sale of gas to Israel, which signed a peace treaty with Egypt in 1979, has always been controversial in the Arab world’s most populous country. It was the largest trade deal between the two former foes.

Egyptian militants have blown up the gas pipeline to Israel 14 times since the uprising.

‘Bad faith’

On Sunday, Yuval Steinitz, Israel’s finance minister, said the unilateral Egyptian announcement was of “great concern” politically and economically.

“This is a dangerous precedent that overshadows the peace agreements and the peaceful atmosphere between Israel and Egypt,” he said in a statement.

Israel relies on Egyptian natural gas for 40 per cent of its supplies to produce electricity, the chairman of a government holding firm said on Sunday.

The Israeli side said the decision was “unlawful and in bad faith”, accusing the Egyptian side of failing to supply the gas quantities it is owed. The dispute is under international arbitration.

Israel insists it is paying a fair price for the gas.

Al Jazeera’s Mike Hanna, reporting from Cairo, said the row would have major political consequences.

“At the base of it, this is a commercial dispute, which has in reality been under international arbitration since September last year,” he said.

“But when this agreement was reached in 2005, it was subject to government approvals of Israel and Egypt, many believe under pressure from the government of the US.

“So although this maybe a commercial situation at the moment, this is an issue that will have immense political, international fallout in the days to come.”

However, Al Jazeera’s Cal Perry, reporting from Jerusalem, said that the Israeli government had been downplaying the dispute.

“Everyone here is downplaying it. In fact we just heard from the prime minister’s office that the deal is not off, that this is just a commercial issue between the israeli and Egyptian gas companies,” he said.

“It is not surprising that they’re downplaying it if you look at the implications this could have.

“If this deal falls apart the concerns I think many people have is that the peace treaty between Egypt and Israel, which was signed in 1979, could be in jeopardy.”

Mubarak defended

In January, a lawyer defending Mubarak told a Cairo court that there was not a shred of evidence linking the deposed Egyptian president to the controversial gas deal.

Farid al-Deeb said Egypt’s spy agency negotiated the deal in line with international norms.

“There isn’t an ounce of evidence that Mubarak was involved in the deal to import gas to Israel,” costing the state $714m in losses, Deeb told the court.

Among the shareholders of East Mediterranean, the joint Egyptian-Israeli company that carries the gas to Israel, is Hussein Salem, a close friend of Mubarak.

After the many disruptions to the supply of gas over the past year, Israeli ministers have urged the speedy exploitation of recently discovered gas fields off the country’s northern coast.

Israeli officials believe that exploitation of two major natural gas fields could compensate for the loss of Egyptian gas.

Israel has already moved to begin exploiting the fields, signing a deal with Cyprus to mark out maritime borders, but it faces challenges from Lebanon, which claims that the gas fields lie in its territorial waters.

Perry also said that the attacks on the pipeline had become a major problem for Israel in the past 14 months, and as a result the country had to purchase gas supplies from other countries as far away as Mexico.

“The price of electricity has gone up 20 per cent and the cost of living continues to go up as well,” Perry said.

Egypt says ready to resume gas supply to Israel, but at new price – Al Arabiya

By Al Arabiya With Agencies

Egypt is ready to resume gas supply to Israel but at “a new price and with new conditions,” the country’s International Cooperation Minister Fayza Abul Naga said on Monday, according to the official MENA news agency

Egypt terminated the long-term contract to export gas to Israel last Thursday, saying Israel had not met the conditions of a gas export accord signed in 2005. Egypt supplies roughly 40 percent of Israel’s gas supplies.

Abul Naga said Israel had been notified five times that it was not meeting its financial obligations under the old contract.

The Egypt-Israeli gas deal has been the subject of controversy in Egypt since the era of ousted president Hosni Mubarak, who was accused of selling gas to Israel for low prices.

Cairo’s Islamist parliament hailed the contract’s cancellation, saying it “salutes the decision to stop exporting gas to the Zionist entity” in a statement read out by the speaker, Saad al-Katatni.

The decision “reflected the will of all Egyptians,” the statement said.

Egypt’s electricity and fuel minister, Hassan Yunis, said earlier that the natural gas being exported to Israel under the controversial 15-year deal would instead be used domestically.

“The gas that used to be exported to Israel will be directed to Egyptian electricity plants, as we have more right to it,” he told reporters.

The gas contract with Israel, which signed a peace treaty with Egypt in 1979, was the largest trade deal between the two former foes.

Bedouin militants have bombed the gas pipeline — which also supplies Jordan — in Egypt’s Sinai Peninsula 14 times since a popular uprising ousted Mubarak in February 2011.

Mubarak now faces corruption charges, along with murder charges in a trial, over the gas contract, which critics said allowed Israel to buy gas at a low price and profited corrupt officials.

Israel downplayed the political significance of the cancellation on Monday, calling it a “commercial dispute” with no impact on diplomatic relations with Egypt.

“We don’t see this cutoff of the gas as something that is born out of political developments,” Prime Minister Benjamin Netanyahu told a meeting of heads of the Israel Bonds fundraising organization.

“It’s actually a business dispute between the Israeli company and the Egyptian company,” his office quoted him as saying.

A spokesman for Netanyahu insisted the agreement was still intact on Sunday.

“The gas supply deal between Israel and Egypt has not been cancelled. There is a legal dispute between Israeli and Egyptian companies,” said spokesman Ofir Gendelman in a message posted on Twitter.

State-owned Egyptian company EGAS confirmed the termination of the 20-year contract, which was agreed in 2005, on Sunday. The Egyptian state firm supplied gas for the deal between another Egyptian firm, East Mediterranean Gas (EMG), and Israel.

Hussein Salem, a businessman and close Mubarak associate, is a major shareholder in the gas firm EMG. He is now on trial in absentia facing a range of corruption charges, including some related to his involvement in the gas deal.

Reflecting popular anger at the deal, Egyptian presidential candidate Amr Moussa, a former head of the Arab League and ex-foreign minister, said ending it was “a natural step in light of information related to corruption which tarnished this deal.”

Israel has turned to more expensive fuel supplies and has warned residents to expect electricity outages this summer.

“We don’t see this cut-off of the gas as something that is born out of political developments,” Netanyahu told reporters. “It’s actually a business dispute between the Israeli company and the Egyptian company.”

Two Israeli officials made a brief trip to Cairo on Monday for talks on the gas deal, Cairo airport sources said, and Egypt’s ambassador met Israeli Deputy Foreign Minister Danny Ayalon to “provide clarifications”, Israeli media reported.

Israeli Foreign Minister Avigdor Lieberman said in a radio interview that Israel was interested in maintaining its peace treaty with Cairo and he believed “this is also a supreme interest of Egypt.”