Egypt tanks 311 AP.
(photo credit: Associated Press)
The political upheaval in Egypt may affect planned gas supply agreements with
Israel and trigger the exit of foreign investors.
“The volume of exports
of Israeli goods to Egypt is marginal but Israel is importing large quantities
of gas from Egypt, which was expected to significantly grow in the coming
years,” said Amir Kahanovich, chief economist at Clal Finance. “Although the
political unrest is not directly connected to Israel, the situation is creating
Even if Israel will be able to stand aside without getting
involved, it is fair to assume that foreign investors will not feel comfortable
investing here. The exit of foreign investors will weaken the shekel and push up
bond yields, especially long-term bills, which in turn will severe financing
conditions for state expenditure and dampen growth.”
Last year, Israel
imported 2.1 billion cubic meters of gas from Egypt. This year the amount is
expected to increase to 3 billion cubic meters and to 8 billion cubic meters in
the coming years, according to Kahanovich.
In December, Ampal-American
Israel Corporation, which has a 12.5 percent stake in Egypt’s East Mediterranean
Gas Company, signed five agreements with Israel Corp. subsidiaries - Oil
Refineries Ltd., O.P.C. Rotem Ltd., IC Power Ltd., and Dead Sea Works Ltd. - for
natural gas supply of a total of 1.4 billion cubic meters a year for a period of
The buyers have the option to increase the total quantity to
2.9 billion cubic meters. The total value of the five contracts is between $5
billion to $10b.
“The first part of the gas supply contract has already
been signed with EMG, while the other half was left to be agreed either with EMG
or Tamar gas field partners,” said Kahanovich. “The uncertainty of the situation
in Egypt raises the likelihood that Israel Corp.
will prefer to close the
second part of the contract with the Tamar partners rather than with
Over the weekend, Yosef Maiman, who owns 20.5% of EMG through
Ampal-American Israel Corporation and Merhav MNV Ltd., said over the weekend
that Egypt’s natural gas exports to Israel will continue despite the political
unrest. Maiman added that gas exports were a crucial source of revenue for Egypt
and an economic and strategic interest which the country will continue to
protect. Egypt generates an estimated $1b. a year from gas exports to Israel,
according to Maiman.
Meanwhile, Delta Galil Industries Ltd., which has a
textile factory in Egypt, announced on Sunday, that it will shut its operations
in the country in light of the political upheaval. The lingerie maker said that
it could not estimate the exact duration of the disruptions but that it was
hoping to return to production within a period of up to two weeks, which would
not have a significant impact on operations.
Delta’s operations in Egypt
are responsible for 11% of the company’s sales, out of which 9% are produced at
its factory and the remainder by local contractors. The company’s shares plunged
9.7% to NIS 30.63 at the close on the Tel Aviv Stock Exchange on
Trade between Israel and Egypt increased by 24% to $502 million
in 2010 from $405m. the previous year mainly driven by a rise in the volume of
gas imports. Last year, out of the total volume of trade between the two
countries, $355m. were generated from imports, representing an increase of 31%
compared with the $271m. reported a year earlier and $147m. from exports,
showing a rise of 10% compared with the $135m. in 2009.
minerals, mainly gas, which makes up 80% of all imports, rose by 33% in 2010 to
$285m. from the previous year. Exports of chemicals to Egypt representing 39% of
total exports, increased by 11% last year to $57m. from a year earlier and
textiles, which make up 31% of total exports, rose by 32% during the same