Severing of agreement to supply gas isn’t political, it’s commercial, Israel’s leaders chorused. But they know better

Even as tensions between Israel and Egypt continue flaring up, Jerusalem has adopted a keep cool and wait for better times strategy in the hopes of keeping the peace with its neighbor. With the supply of gas from Egypt unreliable long before it was canceled altogether this week, and with the outcome of Egypt’s democratization process unclear, Jerusalem has evidently decided that the best policy is to sit quietly and hope for the storms to pass.

The strategy was much in evidence this week when the bitter initial Israeli response to the cancellation of Egypt’s deal to supply natural gas — Finance Minister Yuval Steinitz called the move “very worrying,” and a dangerous precedent that cast a shadow over bilateral ties — rapidly gave way to milder comments. Leaders from both countries rushed to assert that the move was the result of a commercial dispute and had no deeper implication for the peace treaty the two nations signed 33 years ago.

“We don’t see this cutoff of the gas as something that is born out of political developments. It’s actually a business dispute between the Israeli company and the Egyptian company,” Prime Minister Benjamin Netanyahu stated reassuringly.

Officials in Cairo, including the head of the state-owned Egyptian Natural Gas Holding Company, Mohamed Shoeb, also said the cutoff was the result of alleged breaching of agreements on the part of the Israeli company managing the gas transfer. Egypt’s Minister of International Cooperation, Fayza Abul Naga, on Monday agreed in principle to renew the gas deal with Israel, albeit “with new conditions and new prices.”

The apparent exception to the “sit quiet” strategy, not atypically, has been the blunt-speaking Foreign Minister Avigdor Lieberman, who earlier this week provoked the ire of many Egyptians when he reportedly suggested their country was a greater threat to Israel than Iran. Prominently reported in the Egyptian media, and not denied by his office, the remarks drew a bitter response from Egypt’s interim leader, Field Marshal Muhammad Hussein Tantawi in Cairo. Chastened, perhaps, Lieberman toed the line on the gas deal, giving two radio interviews to insist that the gas rupture shouldn’t be portrayed as political.

Such finessing apart, however, there can be no doubt that the treaty signed by Anwar Sadat and Menachem Begin in 1979 is under concerted attack in Egypt. And whether the gas cutoff was motivated by money or politics is not exactly the point. Potential Egyptian presidents know that bashing Israel is a sure-fire vote-winner, and the interim military leadership knows how profound the anti-Israel bitterness has become in the street.

In a different phase of relations, Israeli officials acknowledge privately, the Egyptian government simply would not have allowed a dispute over payment to sever the gas deal. In a different phase of relations, they add dryly, Egypt’s government would have been able to prevent the incessant sabotaging of the supply pipeline — blown up more than a dozen times in the past year.

In Egypt, things are changing fast “I think it’s both political and commercial,” Magdy Nasrallah, a professor in the department of petroleum and energy at the American University in Cairo, told The National newspaper regarding the canceled deal. “Everybody has to realize that things in Egypt are changing very fast. We have serious economic problems and we’re not going to keep subsidizing Israel’s gas needs.”

On Tuesday, German Foreign Minister Guido Westerwelle got involved, saying the cutoff must not endanger the peace between the two nations. “I expect from the current and future leaders of Egypt a clear commitment to peace inside and outside its borders. Part of this is also the historic peace treaty with Israel.”

It is no secret that the peace agreement — which stipulates that bilateral relations would include “normal commercial sales of oil by Egypt to Israel” — was never popular on the Egyptian street. But after president Hosni Mubarak fell in early 2011, the people became more vocal about their displeasure over their government’s business dealings with the Zionists, turning it into an issue with which aspiring politicians can score points without much effort.

Several prominent Egyptian leaders have expressed their delight over this week’s suspension of the deal, among them presidential hopefuls Abdel Moneim Aboul Fotouh and Hamdeen Sabahi. “The Egyptian people do not want to export gas to Israel and the president must act according to their wishes,” Fotouh said.

Tantawi’s sharpened rhetoric underlines the point. Just recently he reiterated “the importance of the peace agreement and cooperation to both countries,” but on Monday, responding to Lieberman, he sounded very different. “Our borders are constantly burning, but we do not attack any neighboring country but only protect our borders,” Tantawi said during a live ammunition maneuver in the Sinai. “If anyone comes close to Egypt’s border, we will break their leg. Therefore, our forces must be in a perpetual state of alert.”

Obviously, Israel is registering all of this. But, for now at least, it apparently intends to do very little about it..

“The prime minister is concerned about keeping the peace and is mindful of acting responsibly,” a government official said, indicating that Israel can do very little but wait for the bad weather to pass.

Diplomatic Israeli sources said they were being careful not to escalate the crisis and therefore decided not to respond in kind to Tantawi’s belligerent statement. Jerusalem is “just trying to contain the crisis” and is waiting for the formation of an elected government “in order to establish a working dialogue,” one official told The Times of Israel.

Israeli sources also said they were continuing to talk with Cairo about economic cooperation, especially in the framework of the Qualifying Industrial Zone, or QIZ. Signed by Israel and Egypt under American auspices in 2004, the QIZ grants Egypt duty-free access to US markets for products that contain at least 12% Israeli components.

Observers said the QIZ agreement meant only few political and economic gains for Israel, despite a slight boost in exports. It mainly helped “remove the Arab ‘taboo’ against conducting business openly with Israeli firms,” according to political scientist and financial analyst Vikash Yadav.

Plenty of gas?

Never mind the reasons for Egypt’s gas-supply decision and what it signals for the future of bilateral relations — at least Israelis need not worry about running out of power, energy analysts say.

They basically agree with Netanyahu, who declared himself “quite confident” about covering the country’s energy needs for the future. The country has “the reserves of gas to make Israel totally energy independent, not only from Egypt but from any other source, and to have Israel become one of the world’s large exporters of natural gas,” the prime minister said Monday.

Since the Arab Spring started, the frequent attacks on the gas pipeline have cost Israel NIS 15 billion, and yet “we don’t think that the damage to Israel is particularly visible,” financial giant Citi Capital Markets said, according to Globes.

Economics professor Eytan Sheshinski, who chaired a committee that determined the government’s policy regarding the recent natural gas findings off Israel’s coast, agrees. “De facto, the situation is not going to change very much. The Egyptians have not supplied the amount they have been contracted to, and the Israel Electric Company and other clients of the Egyptian national gas company have all factored in that Egyptian gas won’t be flowing,” he told The Times of Israel on Wednesday.

If everything goes according to plan, Israel will be able to cover its energy needs quite soon after the Tamar field – which contains 250 billion cubic meter of natural gas — starts producing, according to several experts.

“If Tamar starts producing in 2013, as they have announced just now again, then this is not going to be a serious issue,” Sheshinski said, adding that Israel’s energy needs will be covered for the next 20 to 25 years. Israelis might face “some disruptions” of electricity during the coming summer, he added, but several other factors have contributed to that, such as the insufficient capacity of power generators.

In case of a dire shortage, Israel has several alternatives to make sure its citizens don’t run out of power, he said. The state could use coal or oil to generate electricity, options that are more costly and are not environment-friendly. There are also smaller natural gas deposits whose development hitherto has not been regarded as worthwhile. In light of the current situation, that might be reconsidered, he said.

Whether Israel’s fraught relationship with its first, precious peace partner can be so smoothly finessed is an entirely different question. For now, the Israeli government position seems to be to hope that it can, notwithstanding the accumulating evidence to the contrary. The trouble is, in contrast to gas supplies, that if the entire Egyptian-Israeli relationship is running out of power, there aren’t too many alternatives. (© 2012 THE TIMES OF ISRAEL 04/24/12)