Egyptian Natural Gas Holding Company announced on Monday it has terminated its contract to ship gas to Israel because of contractual violations committed by Tel Aviv.
The natural gas deal, signed in 2005, is extremely unpopular in Egypt and pro-democracy activists have unanimously called for its scrapping since the overthrow of Hosni Mubarak’s regime. Egyptians believe the deal was the result of close relations between the Mubarak’s regime and the Zionist state and how his cronies hugely benefited from such business deals.
Critics insist the deal helped Israel get gas below-market prices while Mubarak’s associates made millions of dollars off the proceeds, costing the exchequer millions of dollars in lost revenue.
The gas pipeline to Israel has been targeted 14 times during the 12 months.
Israel insists it is paying a fair price for the gas and has urged Cairo to withdraw the announcement.
Mohamed Shoeb, the head of the Egyptian Natural Gas Holding Company, said Sunday the decision to cancel the deal was not political.
“This has nothing to do with anything outside of the commercial relations,” Shoeb told The Associated Press.
He added that Israel has not made any payment during the last four months. The Egyptian official told the Egyptian TV that the decision to rescind the contract was made because “each side has rights and we are representing our rights.”
Hussein Salem, a close associate of deposed Hosni Mubarak, was among the shareholders of East Mediterranean Gas Co., a joint Egyptian-Israeli company that carries gas supplies to Israel. Salem fled Egypt for Spain and was sentenced in absentia to seven years in jail over corruption charges.
Under the 2005 deal, the Cairo-based East Mediterranean Gas Co. sells 1.7 billion cubic meters of natural gas to the Israeli company at a price critics say is set at $1.50 per million British thermal units – a measure of energy.
Opposition groups filed the suit claiming Israel gets the gas on cheap rates under the 15-year fixed price deal between a private Egyptian company, partly owned by the government, and the state-run Israel Electric Corporation.
Ibrahim Yousri, a former Egyptian diplomat who had brought the issue to court, welcomed the decision.
“It has become a scandal bigger than the (ruling) military council can withstand,” Yousri said. He added that gas shortages are blighting life of millions of people in Egypt, and fuelling unrest. He branded the deal as “treason” and called its cancellation a victory of Egypt’s national interests.