Where's the reciprocity?

Egypt earns billions from its agreement with Israel, but has failed to comply with its obligations.

By MORDECHAI TZIVIN
pyramids 224 88 (photo credit: )
pyramids 224 88
(photo credit: )
The natural gas agreement between Israel and Egypt entered into effect over six months ago. However, the Israeli economy has yet to benefit from even a single day of full contracted supplies of natural gas. The Israel Electric Company (IEC), the primary customer of Egyptian natural gas, has shown great restraint and is not taking any legal action against EMG, the Egyptian gas exporter (a company in which Yossi Maiman, an Israeli businessman, is a co-owner), despite the damage caused to the economy and to the IEC by EMG's failure to comply with the contract. During the first few months of the agreement, the IEC accepted Egyptian explanations that non-compliance was a result of technical issues. The technical problems have been since resolved, yet the gas drips at a rate that is less than half of the designated amount. That discrimination against Israel is involved is clear in view of the regular flow of natural gas to other clients, including Jordan and Syria. AT THE SAME TIME, Egyptian exports to the US under the US-Egypt QIZ agreement (which grants Egypt the status of a tax-free trade zone) have already increased by $2 billion per year. According to the agreement, which was signed in late 2004 by the then minister of tourism, trade and industry Ehud Olmert, and his Egyptian counterpart Rashid Mohammed Rashid, Egypt benefits from duty-free exports (mainly textiles) to the US, under Israel's (unutilized) export quotas, provided that Israeli inputs account for at least 18% of the value of the finished products exported to the US. So while thousands of jobs have been created in Egypt, and that country's treasury benefits from annual earnings exceeding $2 billion (and growing) under the QIZ agreement with Israel, the Israeli energy economy is forced to burn expensive and pollutant-emitting fuels because the Egyptian government has failed to honor its natural gas obligations. It is time for the Israeli government to demand reciprocity in the Israeli-Egyptian relationship, and inform Egypt that any further delay in the supply of natural gas from Egypt will lead to a suspension of the QIZ agreement. The author serves as legal counsel for several energy firms.