Has Al-Sisi turned down Qatari gas in favour of dependency on Israel?

14 June 2014
 Ahmad Al-Laythi
Source: Middle East Monitor

"The Egyptian public can make the calculation that it's happier to have electricity 24 hours a day because they deal with Israel in getting actual gas or they would prefer to be in the dark for some hours a day as a matter of principle," with this statement Simon Henderson of the Washington Institute concluded a documentary broadcast on Al Jazeera on Monday. The film addressed the corruption that marred the gas deal between Egypt and Israel and the role of the military in overthrowing president Mohamed Morsi to protect their economic interests with Tel Aviv.

Even though Egypt halted gas exports to Israel after the January 25 revolution, Tel Aviv discovered at that time massive amounts of gas in the Mediterranean fields of Leviathan and Tamar, enough to cover domestic consumption and export the surplus to neighbouring countries, topped by Egypt whose domestic gas demands exceeded its ability to produce. Moreover, Cairo has become unable to meet its obligations towards foreign oil companies with which Egypt signed contracts to export its share of gas discoveries after the government was forced to direct all production towards the domestic market.

In addition to the huge challenges facing General al-Sisi, the energy problem remains as one of the most serious problems he has to swiftly address. Otherwise he would risk weakening his grip on power in country which ousted two presidents in three years mainly due to instability and poverty.

Israel or Qatar

The drop in domestic gas production has led to a crisis of routine power outages in the country. At the same time, the government finds itself indebted with 8 billion dollars -which is more than half the country's foreign currency reserves. Foreign companies are now prosecuting Egypt and threatening to pull out of the domestic market and to halt their entire production, which would exacerbate the problem at an unprecedented scale. So, what would Al-Sisi do to alleviate this dilemma?

Analysts suggest that he has limited options. More specifically, he only has two options: importing gas from Israel, or Qatar. According to observers, importing from Israel constitutes a direct threat to Egyptian national security, since the Egyptian "energy security" would be fully in the hands of Tel Aviv. Furthermore, this option has another drawback as it would be embarrassing for Egypt, which until two years ago was exporting gas with staggeringly low prices, in flagrant squandering of the resources of the Egyptian state.

According to a report by Forbes magazine, purchasing gas from Israel would be tantamount to "a political land mine", particularly with reports that show that Egypt lost approximately $11 billion due to low-price gas sales to Israel, in addition to another $20 billion losses in the form of debts and liabilities. Forbes quoted Sherif al-Diwany, the executive director of the Egyptian Center for Economic studies, as saying that the ongoing tension between the governments of Egypt and Israel due to those losses will increase the cost of purchasing Israeli gas at a rate much higher than expected.

"In a volatile political situation, its not wise to become dependent on Israel – Al-Sisi will not do it," al-Diwany told Forbes. Egypt relies on natural gas to generate 70 percent of its power.

Gas in exchange for Muslim Brothers?

The second option for Al-Sisi would be to import gas from Qatar, a backer of the Egyptian Muslim Brotherhood. It is no secret that Qatar has become a foe of the new regime in Egypt after the military coup. It has been the main financial backer of Morsi and Egypt's major energy partner. Morsi has signed an agreement with Qatar to build a floating terminal designed to convert LNG to natural gas, and to provide Egypt with five free shipments to help reduce the price of gas cylinders intended for home use. However, after the overthrow of the elected president, Egypt severed its political relations with Qatar, cancelled the agreement, thus losing supply of natural gas necessary to generate electricity. It has also been deprived of the possibility of converting the import of liquefied gas to natural gas to meet its needs.

Despite the political support of Gulf countries -such as Saudi Arabia, UAE, and Kuwait- to Al-Sisi and offering him with free oil shipments, these countries cannot replace Qatar, one of the largest gas producers in the world.

A report by Mid-Africa Time website mentioned that Tariq al-Mullah, the chairman of the Egyptian general petroleum authority, started in April negotiations for the resumption of importing natural gas from Qatar, yet has so far failed to reach any agreement. The website quoted a source in the Qatari ministry of industry as saying that the only condition for resuming talks is "easing pressures on the Muslim Brotherhood and its supporters."

British journalists David Hearst said in a recent article that Morsi was an obstacle to an attractive deal between Egypt and Israel, a deal which is about to be reached, now that Morsi has been ousted.

The Al Jazeera documentary revealed Al-Sisi's secret communications with Israel to insure his political future through importing gas from Israel to cover the deficit in Egypt. The first part of Al-Sisi's plot was implemented last January by lifting the restrictions from foreign oil and gas companies operating in Egypt so they would be capable of importing gas from any foreign supplier, for the first time in the country's history, a move which opened the door for importing gas from Israel.
The Israeli military analysis website DEBKA file said that Egypt will soon start importing 4.5 billion cubic meters of gas annually from the Israeli Tamar field, which renders Israel the biggest gas exporter to Egypt. Nimrod Novick, a former adviser to the Israeli prime minister, said that Egypt, which is facing a number of lawsuits because of its failure to fulfil its obligations towards foreign companies, is currently planning to use the gas deal with Israel to solve this problem first, rather than solving the power outage problem. He pointed out that the agreement may stipulate Egypt's approval to export Israeli gas to the world through the liquefaction plants built on its territory. It seems that Al-Sisi has made up his mind to surrender to Tel Aviv and reject Qatari gas, as if he were telling Egyptians: "Accept Israeli gas or drown in your sweat and live in the dark."

Translated from Arabi21, June 13, 2014

Link:  www.middleeastmonitor.com/articles/africa/12114-has-al-sisi-turned-down-qatari-gas-in-favour-of-dependency-on-israel.