Officially, it's just business, a regrettable development that in a mafia movie would be explained with an elaborate shrug: A company in Egypt cancelled a contract to supply natural gas to a company in Israel because the latter was not paying its bills. It happens.
But no one's shrugging on the increasingly tense border between Israel and Egypt. The cancellation of the gas deal is viewed as catastrophic for the fundamental security paradigm of the Jewish state. At risk is peace with the largest and most important Arab nation, the nation no country has launched a war against Israel without, and the one that became lynchpin to Israel's security when Cairo and Jerusalem signed a peace treaty 33 years ago. As the health of that treaty came into question since the revolution in Tahrir Square, the pipeline deal assumed the role of canary in the coal mine to mix our fossil fuel metaphor. And the bird just fell over in its cage.
"What lies beneath," says an Israeli official choosing the foreboding phraseology of a horror film is a reality everyone knows: "Relations with Israel in general are not popular, to say the least. [The contract cancellation] is a business conflict, but the background is the general rejection by the Egyptian people with any kind of cooperation or business with Israel."
Perhaps most ominously, the Egyptian military has chosen not to intervene to salvage the gas deal, the official says. The generals who have ruled Egypt since the fall of President Hosni Mubarak and discreetly and repeatedly interceded on Israel's behalf, Israeli officials noted gratefully now calculate that the anti-Israeli tide in Egypt is too strong one month out from elections to chose a new president. "It bodes no well, that's for sure," says the Israeli official.
Business-wise, each side has its reason. Mohamed Shoeb, chairman of the Egyptian Natural Gas Holding Company, told the independent daily Al-Masry Al-Youm in Cairo the problem was breach of contract: "non-payment of dues to the holding-company." On the Israel side, the Eastern Mediterranean Gas Company points out that in the last year almost no gas has passed through the pipeline it operates, so why should it pay? Saboteurs punctured the line with explosives 14 times since Mubarak left office, leaving behind a security vacuum in the Sinai Peninsula where the pipeline runs. An Israeli partner in the firm is already suing the Egyptian side.
But the gas deal was never only about gas. The pipeline constitutes a literal tie between the old enemies, a rare physical manifestation of the 1979 treaty, not unlike the presence of an Israeli embassy in a Cairo high-rise. Which, it turns out, is also endangered. Since an Egyptian mob overran the building six months ago, Israel has been unable to find a new home for its diplomats; they spend most of their time back in Israel.
"You understand the emotions of the people now the emotions of people against Israel," says Tamer Abu Bakr, president of Genco Group, a natural gas distribution company in Egypt. "So they found an excuse to break out of the contract." Most Egyptians view Israel as an enemy nation, the peace treaty little more than a cold diplomatic arrangement and formal end to hostilities. The gas deal, negotiated a quarter century later nominally to help warm up a cold peace, is widely deemed a product of Mubarak's corrupt regime. Hussein Salem a close friend of the then-president, and one of the prime shareholders in East Mediterranean Gas was sentenced in absentia last year for his role in the contract. Spain arrested him in June, and has agreed to extradite him to Egypt.
The nuts and bolts of the deal also offended the public. Abu Bakr notes that it had the Egyptian government selling gas at a fixed rate below the market price enriching privileged individuals at the expense of the Egyptian people, whose economic situation has grown even more dire over the last year. "The way of selling the gas to Israel was a big mistake and it was not favorable to Egypt," he says. "There was no need to put an intermediate entity between Egypt and Israel to sell this gas. We could have sold it directly. And from the economic side we could have sold it at a very good price."
In Israel, all this was very grim news. The Hebrew dailies overflowed with dire predictions Monday morning. "This is a reminder, for the time being mainly in the economic realm, that we must first and foremost depend only on ourselves," Hezi Sternlicht wrote in Israel Hayom. "The termination of the gas supply to Egypt is a sad day. It erodes what is left of a cold, deadlocked and almost wholly unimplemented peace agreement."
No one had to look far for the evidence. The Israeli official saw it in the sharp criticism by Egyptians of the Grand Mufti of Egypt, Ali Gomaa, for visiting the Al Aqsa mosque in Jerusalem last week, despite calls to boycott areas Israel conquered in 1967. "If public opinion in Egypt cannot tolerate a pilgrimage by the mufti to a Muslim holy shrine, they will not tolerate a business arrangement," the Israel official says. Coptic Christians from Egypt were likewise pilloried for visiting the Old City over Easter. Israelis no longer feel safe traveling even to the Red Sea resorts that long relied on them as customers.
Some in Israel called on the United States to intervene, in its role as "guarantor" of the 1979 peace treaty. But the treaty remains in effect, at least for now, despite calls from the newly elected, largely Islamist parliament to dissolve the pact and withdraw Egypt's ambassador. Much will depend on the outcome of presidential elections a month away. The military and its transitional government shook up the campaign this month by disqualifying several prominent candidates some speculate the move may have inhibited the generals from making another unpopular move by trying to salvage the gas deal. "The government of Egypt does not want to get involved in this," says the Israeli official.