Monday, April 23, 2012

Egypt cancels Israeli gas contract

Termination of 20-year deal, which provided 40% of Israel's natural gas, seen as sign of fraying relations between allies

Harriet Sherwood in Jerusalem, Monday 23 April 2012

"Egypt has cancelled a 20-year contract to supply Israel with natural gas in a move interpreted as a sign of increasingly fragile relations between the allies.

Both Egyptian and Israeli officials said the reason for the termination of the deal, which was signed in 2005 and provided 40% of Israel's natural gas, was a dispute over payments between private companies. But the governments were trying to prevent it escalating into a political crisis.

The deal is unpopular in Egypt because of claims that Israel buys the gas at below-market rates. A pipeline that carries the gas to Israel across the Sinai desert has been sabotaged at least 14 times since the start of the Egyptian uprising last year, seriously disrupting supplies.

Mohamed Shoeib, of the Egyptian company Egas, said the decision to end the deal was taken "because the other party didn't fulfil its commitments".....

"This is a business dispute but it's set against a background which is highly volatile, politically speaking," said an Israeli official. "The gas deal has never been popular with the Egyptian public, and any [Egyptian] venture with Israel is highly unpopular these days.

"We're trying to avoid spillover into the political sphere. We're doing heavy damage control to prevent a major political crisis." Egyptian officials were also quietly working to resolve the issue, he said......"

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