Sunday, April 22, 2012

Egypt Terminates Energy Deal That Began With Camp David Accords

This is a seriously disturbing turn of events in Israel-Egypt relations. Egypt has terminated its longstanding deal to provide Israel with natural gas.
Ampal-American Israel Corporation, a partner in the East Mediterranean Gas Company (EMG), which operates the pipeline, said the Egyptian companies involved had notified EMG they were "terminating the gas and purchase agreement." The company said in a statement that the Egyptian General Petroleum Corporation and Egyptian Natural Gas Holding Company had notified them of the decision, adding that "EMG considers the termination attempt unlawful and in bad faith, and consequently demanded its withdrawal". It said EMG, Ampal, which is controlled by Israeli businessman Yossi Meiman, and EMG's other international shareholders were "considering their options and legal remedies as well as approaching the various governments". Before the sabotage, Egypt supplied about 40% of Israel's natural gas, which is the country's main energy source. In October 2011 EMG took legal action against the Egyptian government's energy companies and filed an $8 billion lawsuit against the Egyptians, claiming they had breached agreements obligating them to supply natural gas to the company.
The Jerusalem Post has a slightly different accounting of the cessation of the deal, where Egyptian leaders say that this is merely a contractual dispute, but it does appear that they're pushing to stop the gas deal that has been largely in place since the the Camp David Accords. There's no word from the Israeli government about the change in the deal, but they're going to have to address this rather quickly because it's a significant hit to Israel's energy needs. In the year since Hosni Mubarak was deposed, Egyptian leaders have had increasing trouble in trying to secure the pipeline that runs to Israel. The pipelines have been sabotaged several times, but it's the political leaders' statements about threatening to cut off Israel's gas shipments that are more disconcerting. Eygptian leaders seem to be more interested in ratcheting up the political rhetoric against Israel than they are in improving their domestic economic situation. The Egyptian junta is more than willing to use Israel as a foil for what ails Egypt than they are to actually take positive steps to improve economic opportunities for those least fortunate in Egyptian society. Not only that, but the Egyptians are shortsighted if they think that turning against the Camp David Accords will help with the Egyptian economy. After all, Israelis used to visit Egypt (particularly the Sinai) and spend their tourism dollars. With all the upheaval since the beginning of the Arab Spring last year, tourism revenues are down sharply and it's even more extreme when dealing with the share of Israeli tourists visiting the country. As far as Israel's energy situation is concerned, they're going to be scrambling to find additional energy sources. Accelerating exploitation of the natural gas fields off the Israeli coastline will occur, but that will be against a backdrop of Palestinian claims that Israel is expropriating their resources (when you consider that Palestinians consider Israelis to be illegitimate regardless of what borders one considers for the State of Israel, you begin to understand why they'd be opposed to any kind of development of any natural resources, not just natural gas). It would also mean that Lebanon and Hizbullah might get active since the gas fields run north into Lebanese waters - so there will have to be accommodation there as well.

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