Egypt cancels gas supply deal with Israel

25 April 2012

Gas spat symbolic of worsening ties between Egypt and Israel

Egypt has cancelled a gas supply contract with Israel, in a sign that relations between the two countries could be deteriorating following Egypt’s 2011 revolution.

Both Egyptian Natural Gas Holding Company (EGAS), the firm which exports the gas from Egypt, and East Mediterranean Gas (EMG), which receives it in Israel, have insisted the dispute is purely commercial. However, the export deal is seen in Egypt as symbolic of the unpopular 1979 peace treaty between the two countries, negotiated by former Egyptian president Hosni Mubarak, who was ousted in February 2011. The Egypt-Israel gas pipeline has been bombed at least 14 times since then.

According to the deal’s critics, the agreement sold the country’s limited gas resources at below-market prices. Israel insists that it has paid a fair price for the gas. Mubarak is currently facing criminal charges for his role in the agreement, among other allegations.

The termination of the gas deal has prompted concern over relations between the two countries. Israel initially claimed that the move violates an economic annex of the 1979 peace treaty. “EMG considers the termination attempt unlawful and in bad faith, and [has] consequently demanded its withdrawal,” said Ampal-American Israel Corporation, a stakeholder in EMG.

The Israeli government has also attempted to portray the issue as a purely commercial dispute between two companies as opposed to a political quarrel.

The issue is particularly sensitive as the pipeline supplies up to 40 per cent of Israel’s gas needs. Israelis have seen their electricity bills rise steeply in the past year as a result of the supply issue and summer blackouts are on the horizon. Ministers in Israel have said that the government would be willing to enter negotiations with Egypt for a new agreement, but the Muslim Brotherhood and other political groups have said that this would be unlikely to happen.

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