No Problem Here? Egypt Apparently Has Already Ended Gas Shipments to Israel

By Barry Rubin, Rubin Reports

There’s nothing to worry about, we are told, of course Egypt wants to get the money from gas shipments, right? Ideology and politics are not important, we are told, but are always trumped by material considerations.

Well, it looks as if Egypt has stopped gas exports to Israel, just about their only trade link. The company that supplies 45% of the gas needed to produce Israel’s electricity, has missed several promised deadlines to restore service since the pipeline was damaged in a terrorist explosion February 5.

The Egyptian government is pretending that there are technical problems but that’s nonsense. Either there will never be any gas shipments at all or Egypt will demand such a steep increase in price that this will be designed more to end the deal rather than to increase their revenue.

So Israel’s Electric Company is asking the Environmental Protection Ministry to switch to diesel and fuel oil. One day, Israel will have its own gas supply but it will take at least until 2013 to build the infrastructure to support this changeover.

We should wait to see whether there are real technical problems or this is just an excuse to take a popular step of ending the supply–both because most Egyptians view Israel as an evil enemy and also because the agreed price is lower than today’s market value.

Question: Will the Obama Administration pressure the new Egyptian government to renew shipments? What do you think?

Contracts are important because if one side feels free to break a deal when it wants to, or the government changes, that regime cannot be trusted. Today the gas deal, tomorrow the peace treaty?

March 14, 2011 | 3 Comments »

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3 Comments / 3 Comments

  1. You know who I miss? Mitchell. I do no remember why he visited that often, but he was always smiling.
    GAS. Without a question also oil. And also no question stupid greed.
    Israel could be free from dependance in a year plus but the bloated system people are spoking the gears.
    Be that as it may, by default, those field will be on line shortly.
    Israel will succeed and Soetoro will be long gone. The US regretfully will have a long trail ahead to travel to repair the damage the administration is causing.
    We would love to work with President Palin

  2. Nothing is more absurd than Israel trying to maintain its dependency on Egyptian natural gas. Israel should certainly allow a temporary switch to diesel and fuel oil until a transition can be made to using Israel gas reserves. The Sheshinski committee decision to drastically raise taxes on the Israel gas and oil industry was extremely foolish. It served only to damage the very industry Israel needs to rapidly develop its new found reserves and it has caused confusion and doubts among investors and businessmen regarding financing the development of discovered reserves and doubts about financing further exploration for gas & oil reserves. The decision undermined Israel economically and strategically at time when Israel needs to quickly minimize its dependency on increasingly hostile and unstable nations. Which is better moderate taxes (33%) on a booming gas & oil industry with Israeli strategic independence or high taxes (55-65%) on a overburdened and stunted gas & oil industry with Israel remaining dependent on Mulism countries increasingly dominated by Islamist movements? Lest anyone assume that I write these things out of a financial motive, I have no financial interests in any of the associated companies.