Israeli, Egyptian officials in secret talks on gas deal crisis (HAŽARETZ NEWS) By Avi Bar-Eli and Itai Trilnick 04/29/12)
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Officially, the Israeli government has tried to minimize the
diplomatic importance of last Sunday´s announcement by Egypt´s state-
owned natural gas company that it was canceling its contract to
Israel. Behind the scenes, however, the reality was somewhat
different, belying the government´s stance that the matter was simply
a commercial dispute.
A day after last week´s unilateral announcement by EGAS, a senior
official from the Prime Minister´s Office in Jerusalem was dispatched
to Cairo. In the course of the visit, the Israeli official met with
his Egyptian government counterparts and discussed the gas contract.
He returned to Israel several hours later.
At the Foreign Ministry´s request, Egypt´s ambassador to Israel,
Yasser Reda, also met with Israel´s Deputy Foreign Minister, Daniel
Ayalon, to clarify the situation. The Prime Minister´s Office has
declined to comment for this report.
Over the weekend, German Foreign Minister Guido Westerwelle called on
the Egyptians to adhere to their peace agreement with Israel, asking
that they refrain from turning the spat over gas supplies into a
Also over the weekend, shareholders in EMG (Eastern Mediterranean
Gas ) - which had contracted for the supply of gas from Egypt to
Israel - provided their initial reaction to the Egyptian account of
the circumstances that led to the revocation of the supply contract.
Egypt´s EGAS has claimed that EMG owes the Egyptian firm $56 million
for the small quantities of gas that have been supplied over the past
year. Supplies have been repeatedly disrupted by sabotage to the
supply lines in Sinai.
In a statement, EMG´s stockholders told Reuters that it was
misleading to couch the disagreement between EMG and EGAS as purely a
commercial dispute. The supply contract between the two entities had
government backing, the statement said. EMG noted that the gas supply
deal was the subject of a memorandum of understanding between the
Egyptian and Israeli governments, which the partnership said links it
specifically to the 1979 peace agreement between the two countries.
This reference is apparently to a 2005 Egyptian government commitment
to guarantee the annual supply of 7 billion cubic meters of natural
gas over a period of 20 years.
EMG also took issue with the Egyptian position that the partnership
was in arrears in its payments to Egypt for the gas that has been
EMG pointed the finger at Egyptian natural gas companies for what it
called a failure to protect the supply pipeline and to repair it
immediately after it was damaged. Egypt has barely supplied any gas
since February 2011, EMG said; as a result, it is actually EGAS that
owes money to EMG rather than the other way around.
EMG said its shareholders around the world are considering legal
action over the matter and will probably demand substantial damages
from the Egyptians in the context of bilateral treaties between the
two countries. EMG is also currently pursuing an arbitration action
against the Egyptians in Switzerland, over its claim that the
Egyptians have violated their obligation to supply gas.
EMG is owned by a consortium of shareholders, including a 10% stake
held by EGAS itself. The Thai government gas company holds a 25%
stake; Israeli businessman Yossi Maiman´s companies - Ampal-American
Israel Corp. and Merhav - own another 11%, with the remaining
interests held by businessmen Sam Zell and David Fisher, and Israeli
institutional investors. (© Copyright 2012 Ha´aretz 04/29/12)
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