Egypt Ends Gas Deal with Israel, Stakeholder Says

by Reuters, JPost.com Staff

Finance Minister Steinitz says move is a "dangerous precedent that darkens the atmosphere of peace between Israel and Egypt."

Egypt's energy companies have terminated a long-term deal to supply Israel with gas after the cross-border pipeline sustained months of sabotage since a revolt last year, a stakeholder in the deal said on Sunday.

Ampal-American Israel Corporation, a partner in the East Mediterreanean Gas Company (EMG), which operates the pipeline, said the Egyptian companies involved had notified EMG they were "terminating the gas and purchase agreement".

The company said in a statement that the Egyptian General Petroleum Corporation and Egyptian Natural Gas Holding Company had notified them of the decision, adding that "EMG considers the termination attempt unlawful and in bad faith, and consequently demanded its withdrawal".

It said EMG, Ampal, and EMG's other international shareholders were "considering their options and legal remedies as well as approaching the various governments".

Before the sabotage, Egypt supplied about 40 percent of Israel's natural gas, which is the country's main energy source.

Israeli officials have said the country was at risk of facing summer power outages due to energy shortages.

Companies invested in the Israeli-Egyptian venture have taken a hit from numerous explosions of the cross-border pipeline and are seeking compensation from the Egyptian government of billions of dollars.

Ampal and two other companies have sought $8 billion in damages from Egypt for not safeguarding their investment.

The Egyptian decision is a potential blow to the country's ties with Israel, already tested by the toppling of Israeli ally President Hosni Mubarak a year ago.

Finance Minister Yuval Steinitz's office responded to the reports Sunday saying he views the Egyptian move "with great worry," both from a diplomatic and economic standpoint.

The move, Steinitz's office added, is a "dangerous precedent that darkens the peace treaties and the atmosphere of peace between Israel and Egypt." In response, Israel must make an extra effort to overcome any obstacles to getting Israel's own gas fields flowing this year as opposed to its scheduled operational start in 2013, a statement added.

Reuters, JPost.com Staff

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