Egypt detains ex-energy minister over Israeli gas deal

Five officials are detained, questioned on allegations that Israel buys gas below market value, suspicion of profiteering.

April 21, 2011 22:13
2 minute read.
Ex-Egyptian Energy Minister Sameh Fahmy

Ex-Egyptian Energy Minister Sameh Fahmy 311 (R). (photo credit: REUTERS)

CAIRO - Egypt's public prosecutor on Thursday ordered former energy minister Sameh Fahmy and five other senior energy officials detained for questioning into a natural gas deal with Israel the government is reviewing.

The prosecutor's decision comes amid a widening crackdown on graft during the 30-year rule of deposed Egyptian president Hosni Mubarak by the government appointed by the military generals who now rule Egypt.

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The country's prosecutor said the officials would be questioned on allegations that included profiteering, squandering national wealth and harming Egypt's national interests.

A statement from the prosecutor's office said the deal in question involved selling gas to Israel at prices way below market rates, which incurred losses worth over $714 million to the state. It said Fahmy and the five officials would be held for 15 days for questioning about the deal.

Israel gets 40 percent of its natural gas from Egypt under an arrangement put in place after a 1979 peace deal.

Opposition groups have long complained gas was being sold at preferential prices and East Mediterranean Gas (EMG), the company which supplies it, violated bureaucratic regulations.

An official at Merhav, an Israeli firm that is a partner in EMG, denied any wrongdoing.

"Out of all the countries buying natural gas from Egypt, Israel pays the highest price to the Egyptian government," said the official, who declined to be identified.

"Unfortunately, people in Egypt are still under the impression that EMG pays the ridiculous price of 75 cents."

Gas deals are under review

The Merhav official said Israel paid over $3 per million BTU (British Thermal Unit), higher than he said Qatar, the largest natural gas exporter in the Middle East, receives.

The military-backed interim government is under pressure to kick start an economy that was hit hard by the popular uprising that swept Mubarak from power.

Egypt's new government has said it would review natural gas contracts with other states, including Israel and Jordan, which could boost the government's income by $3-4 billion.

The cabinet has slashed its forecasts for economic growth and investment after the protests disrupted industry and scared away foreign tourists.

Newly appointed Petroleum Minister Abdullah Ghorab said last month Egypt was trying to amend gas export deals with a number of countries, particularly Israel.

He said public disapproval of the gas exports was sufficient reason to negotiate better terms. Previous governments had insisted the natural gas deals were fair.

Egypt is a modest gas exporter, using pipelines to export to Israel, Jordan and other regional countries. It also exports liquefied natural gas via facilities on its Mediterranean coast.

The prosecutor also ordered on Thursday the detention of one of Mubarak's closest associates, Hussein Salem, a major shareholder in EMG and a former intelligence chief.

It was not immediately clear if Salem had fled Egypt after the uprising.

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