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Egypt reportedly cuts natural gas supply to Israel

Egypt has terminated its contract to supply natural gas to Israel, ending a joint venture that served as a cornerstone of the peace process between the neighbouring states.

Ampal, an Israeli partner in the East Mediterranean Gas (EMG) joint venture that operated the pipeline between the two countries, announced Sunday night that Egyptian suppliers notified EMG that they were terminating the gas supply. A spokesman for EMG could not be reached, and the company refused to confirm that it had it had ended its contract.

Israel’s Finance Minister Yuval Steinitz expressed “great worry” about reports of the Egyptian termination. His office added that the move set a “dangerous precedent that darkens the peace treaties and the atmosphere of peace between Israel and Egypt”. One Israeli official, speaking on condition of anonymity to McClatchy, said the move would be the “final bit that breaks the camel’s back” in the peace treaty between Israel and Egypt.

“The peace deal between us and Egypt has been on very shaky ground and now the final earthquake has happened. It appears the new Egyptian government is giving all the signals that it is no longer interested in the partnership and agreements it has established with Israel,” he said. The official, who has served in several diplomatic missions to Egypt, said, “Even though Israel and Egypt would like to keep peace on a military level, their governments may not let them … I’m not saying it will come to blows soon, but it is clear that Israel can no longer lean and rely on Egypt in a significant way.”

In 2005, a deal was reached between the Israeli and Egyptian governments as part of a political arrangement and sign of good faith according to which Egypt undertook to allocate 7 billion cubic meters of Egyptian gas to the Israeli market for 20 years, with an option to double the supply. According to the deal, Egypt would supply Israel with about 40 percent of its natural gas needs.

For nearly six years, Egypt fulfilled its end of the deal. But a series of attacks by militants over the last year have targeted the pipeline that carries the Egyptian gas through the Sinai Peninsula and into Israel. Egyptian military officials said they were cracking down on the militants responsible and blamed Bedouin groups, but Israeli officials expressed dissatisfaction with Egypt’s handling of the Sinai area.

In recent months, Israeli officials have become more outspoken about what they call a “threat from Egypt.” On Sunday morning, Israel’s hawkish foreign minister, Avigdor Lieberman, publically warned Israeli Prime Minister Benjamin Netanyahu that Egypt presented more of a security danger to Israel than Iran.

“We have to be prepared for all possibilities,” said Lieberman, recommending that Israel’s military form three to four new brigades along its southern border with Egypt.

Israel and Egypt signed a peace treaty in 1979 which provided for Egypt to supply Israel with oil. Egypt’s capacity to do so, however, dwindled in the next two decades, and a clause was added to the peace treaty which stipulated that Egypt would provide Israel with natural gas.

On Israel’s Channel Two television broadcast Sunday night, diplomatic reporters speculated that the termination of Egypt’s natural gas contract with Israel could be a violation of the peace treaty.

Knesset Member Binyamin Ben-Eliezer, who signed the gas deal with Egypt during his term as infrastructure minister, told Channel Two that the deal’s termination was yet another indication that a conflict between Israel and Egypt is possible. He claimed the Egyptian energy companies could not have terminated the deal without the government’s backing.

In Egypt, the gas deal between the two countries has long been seen as a symbol of the corruption of the regime of ousted President Hosni Mubarak.

Mubarak has been accused of profiting from the gas deal with Israel. Farid al Deeb, a lawyer defending Mubarak, told a Cairo court in January that there was no evidence linking Mubarak to the controversial gas deal.

Protesters in Egypt, however, have continued to deride the deal and call for new terms to be negotiated.

There was much speculation in Egypt over the timing of the decision, just weeks before the country’s first presidential election since Mubarak’s ouster, but Egyptian officials said late Sunday that the matter was commercial, not political.

Mohamed Shoeb, head of the Egyptian Natural Gas Holding Company, told the Al Jazeera TV channel that the decision to cut the exports has nothing to do with politics, but was because Israel was months behind on its payments.

A commonly held view among Egyptians is that Israel gets a sweetheart deal on the exports. Egyptians say it’s an example of the close relationship that was forged between Mubarak’s regime and Israel, the deeply unpopular former occupier of Egyptian lands. Israeli officials insist they pay regular price for the gas.

Frenkel is a McClatchy special correspondent. Hannah Allam contributed from Cairo.