Egypt's national petroleum company has announced it will terminate its multi-million dollar contract to sell natural gas to Israel. CEO Mohammed Shoeb says business, not politics, is behind the decision, citing Israeli breaches of the sales contract. Israel's Prime Minister is also describing the incident as a business dispute between the Israeli and Egyptian companies. Prime Minister Benjamin Netanyahu said he doesn't see it as quote "born out of political developments."
So why all the official clarifications? The 1979 peace deal between the two countries includes an agreement to sell Egyptian oil and later natural gas to Israel Neither side wants to characterize this incident as a violation of a peace treaty that has been in place for 33 years. Israel's Foreign Minister Avigdor Leiberman also tried to do damage control, saying the termination of the natural gas contract was a commercial problem. To make this into a political dispute, he said, would be a mistake.
But some Israeli lawmakers are calling the Egyptian move very serious. Some are warning that the cancellation natural gas deal may be a dangerous first step towards violating the 1979 peace treaty. Others believe Egypt still has too much too loose in money and international support and too little to gain to violate the treaty.
The Israeli natural gas deal, signed in 2005, is extremely unpopular among ordinary Egyptians. Many accuse President Hosni Mubarak of skimming cash off the deal and selling the natural gas to Israel at under-market prices. The Israeli government has long denied that accusation and many experts don't think it holds water. Popular antagonism and suspicion of Israel may better explain the opposition to the natural gas deal. Anti-Israel sentiment has grown more strident and public since Mubarak's ouster. The natural gas pipeline to Israel had been attacked 14 times in the Sinai in the last year.
Some of the leading Egyptian presidential candidates had vowed to cancel the natural gas deal if elected and they are among those celebrating. With this backdrop, Israeli officials are worried the natural contract may not be reinstated after the business issue is resolved. Israelis are still trying to figure out what role the Ruling Military Council and the government played in this incident. Some believe the petroleum company may have acted on its own, in another sign of the political chaos that reigns in post-Revolutionary Egypt. But other analysts say the Ruling Military Council, may have supported the move to compete with the anti-Israel stance of their Islamist rivals, including the Muslim Brotherhood.
How will the average Israeli be affected by Egypt cutting off its natural gas which is said to supply 30% of Israel's energy needs? Their electricity prices actually will not go up. That's because the government already bet that Egyptian gas would be a major problem and recently raised electricity prices 9%
No matter what happens with the natural gas contract with Egypt, Prime Minister Netanyahu says Israel will not be dependent on other countries for its energy for too much longer. The newly discovered Tamar natural gas field off Israel's coast is estimated to contain 275 billion cubic meters of natural gas and it's supposed to be operational next year.
Former Israeli ambassador to Egypt, Tzvi Mazel, had this to say, "It is not in the interest of Egypt to cancel the peace treaty with Israel. The peace treaty with Israel gave to Egypt 33 years of stability. Maybe they did not use it as they have should, right, to develop the economy. But it's very important for Egypt... I don't see why Egypt, in that time it was Mubarak the president, would put pressure on his government to sell gas to Israel in a lower price. It doesn't come to any reason. There is absolutely no reason... So maybe, doing something against Israel which looks like something against Israel, it will calm the public opinion, in a certain way for a really short time. If this is the calculation, it's bad because it will not stop the hatred of Islam to Israel, you see."