Israel's Miscalculation On Egyptian Natural Gas

Police protocols published this week shed light on the decision of former Prime Minister Ariel Sharon to solely rely on Egyptian natural gas, against partnering also with the Palestinians. 

al-monitor A laborer works at the construction site of Dorad, a private power plant in the southern city of Ashkelon, May 17, 2012. Photo by REUTERS/Baz Ratner.
Shlomi Eldar

Shlomi Eldar

@shlomieldar

Topics covered

gaza strip, gaza

Sep 12, 2013

Every so often, Egypt’s supply of natural gas to Israel makes the headlines. Most of the people involved in the deal have already been put on trial in Egypt, including former Energy Minister Sameh Fahmy. During former Egyptian President Hosni Mubarak’s trial, he faced sharp accusations of being behind a dark and corrupt plot to sell Egypt’s natural resources off to private buyers. How surprising is that? There’s a lot of money in natural gas, along with passions, politics and complex international relations between the Israeli and Egyptian leaderships, both past and present. If we add the icy peace between the two countries to this mix, we find that big money could link powerful moneyed and government interests, even when they are otherwise divided by diplomatic and international disputes.

This week, on Sept. 10, the protocol of testimony to the police by the former chairman of the Electric Company Eli Landau was published for the first time. Landau was investigated regarding the gas deal with Egypt eight years ago, but only now has his testimony been revealed in full. It provides additional insight into an episode in which moneyed and government interests led Israel into an agreement that benefited them personally, rather than serving Israel’s future. In the natural gas deal, decision-makers led by then-Prime Minister Ariel Sharon ignored many of the risks that hovered over Israel.

Egypt hasn’t been providing Israel with natural gas for the past year and a half. The agreement has since been annulled. In April 2012, Egypt’s national gas company announced that it was severing all ties between it and Israel’s EMG, after the gas pipeline in the Sinai was sabotaged on several occasions. The flow of gas from Egypt to Israel was actually stopped as soon as Mubarak was deposed.

The agreement with Egypt was signed in 2005. The cabinet member behind it was Binyamin (Fouad) Ben Eliezer, the minister of infrastructure, who was a personal friend of Mubarak. Ben Eliezer received the full support of then-Prime Minister Ariel Sharon, who was vehemently opposed to signing an agreement with British Gas, which holds interests in the field off the Gaza coast, in cooperation with the Palestinian Authority. Sharon, due to his experience with the Palestinians, claimed that any Israeli money paid for gas extracted from that field would be used to fund terrorist organizations. People around Sharon took advantage of his personal enmity to convince him to sign the agreement with Egypt.

The person who threw his support behind Sharon, and some say even convinced him to sign the agreement with Egypt blindly, was Shabtai Shavit, the former head of the Mossad [1989-1996] who later became a businessman. Shavit was hired by EMG, which eventually signed the agreement with the Egyptians. Only one person stood between Sharon and the enormous pressures being placed upon him. That was Yosef Paritzky, who served as minister of national infrastructure from 2003 to 2004.

Paritzky wanted Israel to sign two agreements: one with the Egyptian government, and the other with British Gas. He believed that given the tumultuous nature of the Middle East, Israel should distribute its risks. Under no circumstances should it rely on a single supplier. At the time, Paritzky was also the only figure among the Israeli political leadership who did not trust the Egyptians. He was convinced that as soon as Mubarak was deposed or replaced, the supply of gas would come to a halt.

“It was clear to me that once Mubarak was gone, there would be no more gas, and it wouldn’t matter who replaced him,” he said in an interview with Al-Monitor. “My conclusions weren’t based on projections by Israeli intelligence or on any personal ties with senior figures in Egypt. They were based on things that actually happened and on what I was told directly by the Egyptians. I sat down with Sameh Fahmy, who was the Egyptian energy minister [1999-2011], and he told me unambiguously that the Egyptian government would not agree to an international agreement with Israel obligating it to sell gas. It couldn’t happen. He was very explicit about it.

“Nor were the Egyptians willing to give any formal guarantee in the event that the agreement was violated. I remember how a senior official in the defense establishment told me that Egypt was already in trouble because of its peace agreement with Israel, so there was no way that it would enter into yet another formal agreement with us. When Fouad [Ben Eliezer] replaced me at the Ministry of Infrastructure, he was able to obtain a signature on a memorandum of understanding that had no legal standing. It was like buying an apartment without signing a contract.”

Paritzky’s remarks fell on deaf ears. Sharon, who did not believe a word that the Palestinians said, did not want to hear of them. Mubarak was thought to be so firmly entrenched in power that he would never be deposed, and Egypt in general was considered to be an island of stability in the Arab world. Since so much money and so many personal interests were involved in the story, there were some who advocated for replacing Paritzky at the ministry for opposing the deal. They succeeded. Paritzky was eventually fired by Sharon, after people involved in the negotiations with Egypt hired a private detective to investigate him.

In the end, the question that should be asked is how it was possible that Sharon’s hatred of the Palestinians prevented him from seeing the real situation. How could he not see the signs that Egypt really wasn’t interested in a formal business relationship with Israel, or understand that everything pertaining to the flow of natural gas to Israel was entirely dependent on Mubarak? How could Sharon have been so convinced that the Palestinian Authority was channeling money to terrorists that he was ready to forego a business deal, where one of the senior partners was a gigantic corporation like British Gas, with a reputation to uphold?

The answer lies in the question itself. Israel’s prime ministers never really trusted the Palestinians. They never though that they could develop long-term business relationships with them that would withstand the test of time and succeed. The Palestinians were and maybe will always be people who cannot be trusted. Regardless of what they think or do, they will always be first to come under suspicion, and they will always be the prime suspects.

That same rigid thinking by the Israeli establishment eventually resulted in enormous losses to the economy.

Shlomi Eldar is a contributing writer for Al-Monitor’s Israel Pulse. For the past two decades, he has covered the Palestinian Authority and especially the Gaza Strip for Israel’s Channels 1 and 10, reporting on the emergence of Hamas. In 2007, he was awarded the Sokolov Prize, Israel’s most important media award, for this work.

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