Egyptian gas pipeline 311.
(photo credit: REUTERS)
The Egyptian gas company that canceled gas exports to Israel last week has hired
an international law firm, Egyptian media reported Tuesday, after the Israel
Electric Corporation threatened to take the case to international
IEC said Monday it would take legal action against the
Egyptian Natural Gas Holding Company (EGAS) and Egyptian General Petroleum
Corporation (EGPC) for violating its gas supply and purchase agreement. Israeli
officials say gas has not flowed from Egypt to Israel for much of the past year
due to a string of attacks on the pipeline running through Egypt’s volatile
Speaking Tuesday to the state-run al-Ahram newspaper,
EGAS CEO Mohamed Shoeib rejected Finance Minister Yuval Steinitz’s claim that
the deal’s termination – which occurred Thursday but was revealed only three
days later – could mark a breach of the Egypt-Israel peace treaty.
contract is between EGPC and EGAS in Egypt, and EMG – it is a commercial
contract and the terms and conditions are clear,” Shoeib told the paper. EMG,
East Mediterranean Gas, is the consortium of Egyptian, Israeli and international
companies that oversees the bilateral gas trade since a 20-year-deal was struck
“It is the right of the seller to terminate if the buyer fails
to pay for four months,” Shoeib added.
Egyptian business executives close
to EMG insist their Israeli counterparts had fallen behind on payments, and that
the cut-off was purely a business-related move with no political
On Monday Egypt’s Islamist-dominated parliament issued a
statement saying it welcomed the deal’s termination.
“blesses the decision to stop exporting gas to the Zionist entity, and at the
same time rejects threats uttered by some Israeli leaders,” the Muslim
Brotherhood’s parliamentary speaker Saad al-Katatni said in apparent reference
to Steinitz’s remarks.
“The parliament declares the Egyptian people will
not accept these threats, and that Egyptians are standing hand in hand with the
Palestinian people,” Katatni said. “We salute the souls of the martyrs who
sacrificed their lives for our rights. We will not rest but will remain forever
Mohamed Gouda, a member of the economic board of the
Brotherhood’s Freedom and Justice Party, told the pan-Arab newspaper Asharq
that severing gas to Israel would come as a boon to Egypt’s moribund
Gouda said Egypt’s energy economy would be strengthened by
keeping its gas within its borders instead of exporting it. Abundant gas
reserves in Egypt, he said, would serve as a catalyst for foreign businesses to
set up shop there.
The article also quoted economist Kamal Ahmed as
saying that despite the legal complications that may arise as a result of the
deal’s termination, an increased domestic gas supply could increase Egypt’s
capacity to generate electricity from natural gas.
economists’ assessments stand in stark contrast to that of the US financial
analyst Citigroup, which last week issued a report indicating that the biggest
loser from the deal’s cancelation would be Cairo.
The Citigroup report
said that disruptions in Egyptian gas deliveries since last year have given
Israel Electric plenty of opportunities to find alternative energy
“Although the Israeli Ministry of Finance estimated that
Egyptian gas suspensions have cost Israel NIS 15 billion [1.7 percent GDP], we
don’t think that the damage to Israel is particularly visible,” the report said,
adding that one of Israel’s two offshore gas fields is due to become viable
within the next year.
“Since Israel’s offshore gas field Tamar is due to
begin production in April 2013, any further domestic shortfalls are likely to be