CAIRO — The diesel fuel Egypt has supplied to the Gaza Strip is but a drop in the bucket toward easing Gaza’s power crisis, but there is hope the gesture might signal a thaw in Egypt's relations with the Hamas-run Gaza government and possibly open the flow of trade.
Egyptian authorities opened the Rafah border crossing to the Gaza Strip June 21-24 to allow in Egyptian industrial diesel for Gaza's sole power plant, which has been offline more than two months. Since then, the plant has received intermittent deliveries of Egyptian diesel fuel through the Rafah crossing.
But even as Egypt has been supplying energy, Israel has been taking it away at the request of the Palestinian Authority (PA) in the West Bank. Hamas and the PA split violently in 2007, leaving Fatah and PA President Mahmoud Abbas with the West Bank and Hamas governing the Strip. The PA, which has been pressuring Hamas financially in several ways recently, has said it will no longer foot the bill for the electricity Gaza receives through 10 Israeli power lines. On June 19, Israel began to gradually cut back the electricity.
In a statement, the Gaza Energy Authority said, “Israel has so far reduced the power lines arriving into Gaza from 120 to 36 megawatts [MW], so the Gaza Energy Authority has directly purchased Egyptian diesel itself and the power plant will continue to operate as long as diesel is available, and electricity will be distributed according to the available power."
The plant started partial operations the evening of June 21, generating 45 MW of power. Egypt sent 1.1 million liters (291,000 gallons) of fuel, enough to run the facility at full capacity for two days, Haaretz reported. Officials said the plant would run at half capacity, providing just several hours of electricity daily, to stretch the fuel supply.
Egypt is providing the oil under a tripartite understanding reached in early June by representatives of Hamas, Egypt and the reformist movement within Fatah, headed by Abbas rival Mohammed Dahlan.
The Gaza Strip, which is home to more than 2 million Palestinians, needs 450-500 MW of power per day. Power lines coming in from Egypt provide 23 MW and Gaza's sole power plant can only provide 140 MW at full capacity, in which case there is still a 60% deficit.
Mohammad Thabet, the public relations director at Gaza Electricity Distribution Co. (GEDCO), told Al-Monitor that the Gaza Energy Authority informed GEDCO that two of the plant’s four generators started operating again after receiving the Egyptian fuel. The plant had stopped operating for two months as a result of the dispute about the "blue tax" imposed on diesel imported from Israeli companies. The consensus government’s Ministry of Finance started collecting the tax on industrial diesel in April under the pretext of coping with the financial crisis the government is facing. The tax amounts to about 108% of the initial price of fuel after refining.
He added, “There is no clear schedule to distribute electricity to citizens because when Egypt started providing diesel, Israel was at the same time reducing the electricity supply lines, which resulted in power cuts, and we were unable to accurately calculate the needed electricity for the entire Strip. However, if the Egyptian power supply lines remain operative and Egypt continues to pump diesel into the power plant in Gaza, we expect to see a significant improvement in electricity."
Thabet further stressed that GEDCO loses money with each kilowatt of electricity it distributes. Whether GEDCO receives electricity from Israel or Egypt, or generates its own after buying Egyptian diesel, the cost of distributing the electricity surpasses the price plus the tariff. Thus the cost of selling electricity to citizens will remain the same.
According to economists, the introduction of Egyptian industrial diesel to the Strip’s power plant is an important economic step and helps support Gaza at political and humanitarian levels. Egypt will supply the same amount of diesel that Israeli companies supplied, but for almost half the price — and without the blue tax.
Mohammed Abu Jayyab, an economic expert and editor-in-chief of al-Eqtisadiah newspaper in Gaza, told Al-Monitor that pumping Egyptian diesel into Gaza shows a new Egyptian way of dealing with the Strip.
“The entry of Egyptian diesel is an important economic step that holds great political and humanitarian dimensions. It illustrates a new Egyptian way in dealing with the humanitarian crises plaguing Gaza, namely the electricity crisis. It comes as a result of the understanding reached between the Hamas [and Egyptian] delegations and that of Dahlan," he said.
Abu Jayyab believes that the economic feasibility of Egyptian diesel is strong compared with the Israeli diesel that the PA supplied to the generating station, noting, “We are talking about saving 50% of the price the Gaza Energy Authority used to pay for Israeli diesel, which means it will have double the quantity for the same price now.”
Economist Nouhad Nashwan told Al-Monitor that the cost per liter of Egyptian industrial diesel is 1.2 shekels (34 cents), while diesel coming from Israel costs more than 3.5 shekels ($1) per liter. Importing diesel only from Egypt would cut the cost of operating the plant at full capacity by two-thirds.
“The imported diesel from Egypt eases the electricity crisis in part, especially as the quantities will be double what Israel used to provide, and without any taxes. No longer importing diesel from Israel and resorting to Egypt instead is a major step in paving the way for a deeper trade exchange during the coming period,” Nashwan concluded.
In another sign of goodwill, Hamas is building a 7-mile-long buffer zone along the strip's border with Egypt. The area will have military posts and surveillance cameras to keep militants from crossing into Egypt and to prevent weapons and drug smuggling.