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Egypt cancels gas deal; Israeli minister warns of 'implications' for Camp David Accords
In surprise move, Egypt pulls out of unpopular gas export deal with Israel citing economic reasons; Knesset opposition leader says move calls for 'immediate American response'; Israeli PM says Israel survives without Egyptian gas
Ahmed Feteha, updated, Monday 23 Apr 2012
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Netanyahu, Mubarak
Israeli Prime Minister Benjamin Netanyahu (2nd L) shakes hands with Egyptian President Hosni Mubarak (2nd R) September 1, 2010 (Photo: Reuters)

Egypt has unilaterally terminated its natural gas export contract with Israel, a shareholder in the export operating company, East Mediterranean Gas Company (EMG), said Sunday night.

EMG told Ampal-American Israel Corporation, which owns a 12.5 per cent stake in EMG, that Egypt was ending the Gas Supply and Purchase Agreement between the two parties.

“Egyptian General Petroleum Corporation [EGPC] and the [state-run] Egyptian Natural Gas Holding Company [EGAS] notified EMG that they were terminating the Gas Supply and Purchase Agreement between the parties,” the Ampal statement read.

The company added that "EMG considers the termination attempt unlawful and in bad faith, and consequently demanded its withdrawal," noting that EMG, Ampal and EMG's other shareholders were "considering their options and legal remedies as well as approaching the various governments."

In initial reactions by Israeli government officials to Egypt's decision,Yoval Steinitz, the Israeli minister of finance, expressed deep concern towards Cairo's unilateral decision.

Steinitz told Radio Israel that the decision carries serious political and economic implications for the Camp David peace accords.

Meanwhile, Shaul Mofaz, the Knesset opposition leader, described Egypt's decision as a possible breach of the Camp David accords, and called on the United States, as a broker of the peace treaty between the two countries, to immediately take a clear stand.

Israeli Foreign Minister Avigdor Lieberman went as far as to suggest bolstering Israel's military presence along the Sinai border. "The Egyptian case is much more worrisome than the Iranian one," Ma'ariv daily quoted him as saying on Sunday.

But Mohamed Shoeib, the CEO of EGAS, told Egyptian satellite CBC news on Sunday evening that "the decision we took was economic and not politically motivated. We cancelled the gas agreement with Israel because they have failed to meet payment deadlines in recent months".

Speaking to Ahram Online on Monday, Shoeib reiterated that the decision was business-related.

"This contract is between EGPC and EGAS in Egypt, and EMG -- it is a commercial contract and the terms and conditions are clear," he said.

"It is the right of the seller to terminate if the buyer fails to pay for four months," he added, indicating that this had been the case.

Israeli Prime Minister Benjamin Netanyahu insisted the agreement was still in force and that the dispute is legal in nature.

"We don't see this cutoff of the gas as something that is born out of political developments, It's actually a business dispute between the Israeli company and the Egyptian company," Netanyahu said via his spokesperson's account on Twitter.

The Israeli PM also played down the economic importance of Egyptian gas to his country.

"We have reserves of gas to make us totally energy independent, not only from Egypt. We will become one of the largest exporters," Netanyahu said referring to the Tamar gas fields Israel is currently exploring in the Mediterranean.

For its part, the Egyptian side suggested there is still the possibility of a business solution to the dispute.

Hany Dahy, head of Egypt's Petroleum Authority, said Sunday night that Egypt is ready to consider any offers from EMG regarding the late payments.

"We have approached the Israeli side for the delayed payments but to no avail," Dahy told Al-Jazeera television.

He added that the decision to terminate the contract was taken after detailed legal consultation. The contract, Dahy explained, stipulates that one of the parties can terminate its obligations if the other does not fully comply with the terms of the contract.

"All legal precautions were taken to shelter Egypt from any legal claims for reparations following the decision," Dahy said.

Egypt's Mubarak-era gas deal with Israel has been fenced with controversy since its inception.

Some critics accused the ousted Egyptian strongman of selling the gas to Israel at below international prices, thus depriving the Egyptian economy of badly needed funds.

Mubarak is currently on trial, facing charges of conspiring with fugitive businessman Hussein Salem to export gas to Israel at below market prices.

Former minister of petroleum, Sameh Fahmy, as well as other former Egyptian officials are also on trial because of the prices stipulated in the gas deal with Israel.

Egyptian courts are yet to rule in the two cases.

For their part, however, Israeli officials repeated at several occasions that the price they pay for natural gas is better than other regional exporters receive and is in line with international prices.

Other critics have decried what they describe as government complicity in financially supporting Israel's war on the Palestinians.

Egyptian authorities announced plans in November 2011 to step up pipeline security with the installation of alarm systems and security patrols carried out by local Bedouin tribesmen.

Israel, which depends on Egyptian natural gas for 40 per cent of its energy needs, has been adversely impacted by the repeated interruption of gas supplies resulting from frequent attacks on the north Sinai pipeline since last year's revolution.

The pipeline transporting Egyptian gas to Israel and Jordan has been rocked by 14 explosions – by unknown assailants – since the January 25 2011 uprising that led to the ouster of longstanding president Hosni Mubarak.

Previous explosions have resulted in weeks-long supply stoppages of the pipeline run by Gasco, an EGAS subsidiary.

Supply has been halted since a previous attack on 5 February 2012. The last attack took place on 9 April.

No group has claimed responsibility for the attacks on the pipeline, which transverses an increasingly restive Sinai Peninsula. 

The 20-year natural gas deal signed between Israel and Egypt in 2005 has been a pillar of Egyptian-Israeli economic cooperation following the historic 1979 peace treaty between the two countries.

Over the course of the last decade, Egypt has become a key natural gas producer, developing gas fields in the Mediterranean Sea. It began exporting liquid natural gas (LNG) in early 2005 to Israel as well as Jordan and Spain.

 

(Additional Reporting by: Michael Gunn, Ahmed Abdel Rasoul)



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17



Barak
25-04-2012 02:32pm
11-
2+
Comments from an European friend
Reading what is happening now in your country, from an European point of view I must tell you: 1. If you want to behave in good faith don't define Israel "self proclaimed jewish state", it's a country member of United Nations with which you signed a peace treaty (BTW after 2 wars started by you) and with which you have diplomatic relations; 2. referring to the gas issue, if there are business discussions they must be solved according to what the agreement foresees (?arbitration?). Continuing with unilateral acts, sooner Egypt will have to submit to an international court and most probably will be sentenced; 3. Egypt needs international money and investments (tourist, cotton etc), unilateral and emotional acts doesn't help the economy; 3. for those who believe to the roaring lyon, please take in mind Egypt wasn't able to control the gas pipeline that 14 times blowed up in the last 13 months; Egypt is a fantastic country, don't destroy decades of efforts.
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16



GRjo
23-04-2012 10:37pm
2-
1+
good neighborhood
These frictions are expected even between friendly countries (see Argentina and Spain over Repsol). What should follow naturally is NEGOTIATIONS, for a win-win game. Add good neighborhood in this case between Egypt and Israel. Instead, Mr. Lieberman jumps on the occasion to range Egypt with Iran with all that this implies in his mouth, while others are calling on the US for arbitration... funny for a country that values bilateralism in so many other, otherwise humanitarian, issues. Well, I hope this is not a lost occasion for sitting around the table, negotiate and see eye to eye, like neighbors should.
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15



Boris
23-04-2012 03:59pm
10-
6+
good for Israel
The cancellation of gas exports from Egypt to Israel is better for Israel than Egypt. Israel will now be even more forced to expedite exploring its own gas fields in the sea, which over time will make it truly independent. Being a very high-tech country, Israel can achieve it. Egypt, though, it seems, will savour a bit of "satisfaction" for a month or two but nothing else to satisfy itself afterwards. For Egypt it is a terrible business decision.
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14



Boris
23-04-2012 03:58pm
14-
6+
good for Israel
The cancellation of gas exports from Egypt to Israel is better for Israel than Egypt. Israel will now be even more forced to expedite exploring its own gas fields in the sea, which over time will make it truly independent. Being a very high-tech country, Israel can achieve it. Egypt, though, it seems, will savour a bit of "satisfaction" for a month or two but nothing else to satisfy itself afterwards. For Egypt it is a terrible business decision.
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13



patkar
23-04-2012 03:08pm
2-
15+
unfair contract
this contract was drawn by " untrustworthy" people for their own interest. We all know that.But it still pays money !!!Egypt needs money dearly.The proper way would be to re negotiate the contract in a clear, decent way in concordance to international laws .Otherwise the credibility of Egypt in international business shall be upset, and you need investors...NOW.
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12



Gary
23-04-2012 02:25pm
8-
5+
natural gas
An otherwise objective article is flawed when it refers to "Israel's war on the Palestinians." There is certainly much controversy between Israel and the Palestinians, but why call something a war that is not a war?
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11



mohamed
23-04-2012 12:46pm
4-
8+
excellnt news
excellnt informative article, great news for egypt.
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10



F M
23-04-2012 12:20pm
1-
8+
THANKS
Very good article. Merci M. Feleha!
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9



El-Gharbawy
23-04-2012 12:12pm
7-
16+
Long-awaited decision
The least that can be said about this decision is that it is long belated. Hope it will be upheld, not withdrawn under any circumstances. It is unreasonable to support Israel with gas below international prices, while Palestinians are denied their basic rights GOOD DECISION
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8



El-Gharbawy
23-04-2012 12:11pm
4-
8+
Long-awaited decision
The least that can be said about this decision is that it is long belated. Hope it will be upheld, not withdrawn under any circumstances. It is unreasonable to support Israel with gas below international prices, while Palestinians are denied their basic rights GOOD DECISION
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