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Egypt cancels natural gas deal with Israel

By Sheera Frenkel, McClatchy Newspapers –

JERUSALEM — Egypt has terminated its contract to supply natural gas to Israel, ending a joint venture that was a cornerstone of the peace process between the neighboring states.

Ampal, an Israeli partner in the East Mediterranean Gas (EMG) joint venture that operated the pipeline between the two countries, announced Sunday night that Egyptian suppliers notified EMG that they were terminating the gas supply. A spokesman for EMG could not be reached, and the company would not confirm that it had it had ended its contract.

Israeli Finance Minister Yuval Steinitz expressed “great worry” about reports of the Egyptian termination. His office said cancellation would set a “dangerous precedent that darkens the peace treaties and the atmosphere of peace between Israel and Egypt.”

In 2005, a deal was reached between the Israeli and Egyptian governments under which Egypt allocated 7 billion cubic meters of Egyptian gas to the Israeli market for 20 years, with an option to double the supply. According to the deal, Egypt would supply Israel with about 40 percent of its natural gas needs.

For nearly six years, Egypt fulfilled its end of the deal. But a series of attacks by militants over the last year have targeted the pipeline that carries the Egyptian gas through the Sinai Peninsula to Israel. Egyptian military officials said they were cracking down on the militants responsible and blamed Bedouin groups, but Israeli officials expressed dissatisfaction with Egypt’s handling of the Sinai area.

In recent months, Israeli officials have become more outspoken about what they call a “threat from Egypt.” On Sunday morning, Israel’s foreign minister, Avigdor Lieberman, publically warned Israeli Prime Minister Benjamin Netanyahu that Egypt presented more of a security danger to Israel than Iran.

“We have to be prepared for all possibilities,” said Lieberman, recommending that Israel’s military form three to four new brigades along its southern border with Egypt.

Israel and Egypt signed a peace treaty in 1979 that provided for Egypt to supply Israel with oil. Egypt’s capacity to do so, however, dwindled in the next two decades, and a clause was added to the peace treaty which stipulated that Egypt would provide Israel with natural gas.

Knesset Member Binyamin Ben-Eliezer, who signed the gas deal with Egypt during his term as infrastructure minister, said on Israeli television that the deal’s termination was another indication that a conflict between Israel and Egypt is possible. He said the Egyptian energy companies could not have terminated the deal without the government’s backing.

In Egypt, the gas deal between the two countries has long been seen as a symbol of the corruption of the regime of ousted President Hosni Mubarak.

Mubarak has been accused of profiting from the agreement. Farid al Deeb, a lawyer defending Mubarak, told a Cairo court in January that there was no evidence linking Mubarak to the controversial gas deal.

Protesters in Egypt, however, have continued to deride the deal and call for new terms to be negotiated.

There was much speculation in Egypt over the timing of the decision, just weeks before the country’s first presidential election since Mubarak’s ouster, but Egyptian officials said late Sunday that the matter was commercial, not political.

Mohamed Shoeb, head of the Egyptian Natural Gas Holding Company, said on the Al Jazeera TV channel that the decision to cut the exports has nothing to do with politics, but was because Israel was months behind on its payments.

A commonly held view among Egyptians is that Israel gets a sweetheart deal on the exports. Egyptians say it’s an example of the close relationship that was forged between Mubarak’s regime and Israel, the deeply unpopular former occupier of Egyptian lands. Israeli officials say they pay regular price for the gas.

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