Israel Draws Closer to Egyptian Gas Deal
Israel-Egypt relations have improved in the last few days, a development that might help Israel's natural gas export options. Its prime minister, Benjamin Netanyahu, wants to broaden his governing coalition base which currently has just a one-seat majority in parliament. Netanyahu has tried to lure the Labor party into government by promising renewed diplomatic efforts to reach a compromise with the Arab world.
To his aid came Egypt's president Abdel Fatah el Sisi who claimed that now there are appropriate conditions to promote peace talks in the region. El Sisi said that a peace treaty between Israel and the Palestinian authority will be more meaningful than Israel's peace treaty with Egypt which was accomplished in 1979. Furthermore, el Sisi called on the Israeli parties to reach an agreement on promoting the peace process.
Outside interference by an Egyptian president in Israel's internal politics is unheard of. Labor party top officials, who oppose joining the coalition, blamed the PM for 'inviting' el-Sisi to release his unusual statement – which is plausible, as Netanyahu and el Sisi share some common strategic goals.
Following on the heels of el Sisi's statement, the news agency Bloomberg reported May 18 that Israel may agree to forgo half of the $1.73bn Egypt was ordered to pay by an arbitration tribunal to Israel Electric Corp following the cessation of natural gas supply in 2012. The rest of the sum will be paid in 14 annual instalments, according to the report.
Following the arbitration decision, Egypt ordered its national gas companies to stop negotiations with Israel. When that obstacles overcome negotiations may resume.
Israel and Egypt are sharing crucial interests in the region, though Netanyahu and el Sisi have never met. While Egypt is fighting Wilayat Sinai, Isis's affiliate organization in the region, Israel, according to media reports is cooperating with Egypt in intelligence efforts. It has also allowed Egypt to deploy more forces in the demilitarised peninsula than the limit set by the peace accord. Egypt is helping Israel by blocking its border with the Gaza strip and destroying the tunnels used to smuggle various goods and also weapons, ammunition and personnel, into the Gaza strip.
On the face of it Egypt is now in competition with Turkey over a Israeli gas deal. Reports in Turkey at the end of April claimed that a rapprochement between Israel and Turkey is almost a done deal and should be accomplished in a meeting scheduled for mid-May between representatives of the two states.
This meeting has not yet taken place, but Turkey is demanding the end of the Israeli naval blockade on Gaza that not only is Israel reluctant to do, but which is also contrary to Egypt's interests. Turkey is at loggerheads with Egypt over the handling of Hamas, the controlling terror organization in Gaza which is supported by Turkey. Egypt is also supported by Russia which is in conflict with Turkey, following the downing of a Russian bomber by a Turkish jet fighter, in November last year.
Therefore, the likelihood of an Israel-Turkey gas deal seems unlikely in the current environment. A gas deal with Egypt is more plausible and would have a smaller resistance by Russia. However since the export of Israeli gas would be to Egypt's LNG facilities, and not to the Egyptian domestic market, the gas price at the well head would be about half that in Israel's domestic market. For the Israeli public that would be a bitter pill to swallow.
Ya'acov Zalel