Why Did Egypt Terminate Its Gas Deal with Israel?
Author: calcalist Posted April 24, 2012
The termination of the gas agreement between Israel and Egypt deviates from the rules of normal commerce and from normal disagreements between supplier and purchaser.
A gas-supply transaction between countries, even if executed by private companies, involves great strategic importance for both sides. The buyer uses the gas to produce electricity, promote industry and even improve quality of the environment. The seller, on his part, receives substantial revenues that have a major effect on the coffers of the country to which he pays his taxes. Egypt’s investment in infrastructure to sell gas was relatively minimal due to Israel’s geographic proximity. Egypt had to lay only 160 kilometers of pipes, while Kazakhstan, for example, has had to lay over 3,500 kilometers of pipes to supply gas to Europe. Due to the gas deal with Israel, Egyptian state coffers received considerable revenues of hundreds of millions of dollars a year.
The disintegration of the gas agreement between Israel and Egypt severely compromises the interests of both countries. To this we add that the gas-supply deal is anchored in a financial appendix to the peace agreement between the two countries, and is an integral part of the agreement. Egypt’s National Gas Company is a partner to EMG (the company that supplies the gas to Israel), and it is inconceivable that the National Gas Company would take action without first consulting with the Energy Ministry and the Higher Military Council that has ruled Egypt since Mubarak’s overthrow.
Diplomatic ties between Egypt and Israel were always under the direct control of President Mubarak, due to hostility to Israel in Egyptian and Arab public opinion. One would have expected that the Higher Military Council would do everything in its power to preserve the peace agreement and its most important manifestation: the gas deal. Egypt also has an interest in maintaining peaceful ties with Israel, a peace that gave it 33 years of stability and breathing space in which to tend to its economic problems — although unfortunately, it did not exploit the opportunity properly.
It must be clear to the Higher Military Council that termination of the gas deal will harm the strategic ties between the two nations. It is possible that there was faulty communication between the gas company and the military council. If that is what happened, we will know about it in the next few days. But if Egypt does not reverse its decision, a severe blow will be delivered to the peace agreement in a way that opposes Egyptian interests — something that we in Israel find hard to understand.
Let us remind ourselves of the military council’s strange behavior when the Israeli embassy was attacked. President Obama had to intervene for the Egyptian army to take action and save our security guards who were besieged in the embassy.
Perhaps a reason for the military council’s behavior is connected to its difficulties in coping with the Sinai incidents and the unremitting attacks by the Bedouins on the gas pipeline. Recently Egypt had decided, in an effort to pacify the Bedouins, to form a master plan to develop the Sinai Peninsula, involving an investment of about a billion Egyptian pounds. However, it will be a long time before this program will be implemented.
Another possible explanation is that termination of the gas deal is a bribe for public opinion by the Muslim Brotherhood, who portrays the gas deal with Israel as part of the corruption that prevailed under Mubarak. The military council is in the midst of an uphill battle against the Muslim Brotherhood regarding the formulation of the constitution, the status of the army and the identity of the next president. It is likely that termination of the gas agreement with Israel will give the military council some points in this struggle.
One way or the other, termination of the gas deal causes severe deterioration in Israel-Egypt ties and harms one of its important foundations. If the Muslim Brotherhood succeeds in drafting a new constitution of an Islamic nature, and also wins the presidential race, then Israeli-Egyptian relations will face a difficult test.
Zvi Mazael was Israel’s ambassador to Egypt from 1996-2001.
Read More: http://www.al-monitor.com/pulse/business/2012/04/politicalyoud-better-believe-it.html