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Page added on April 22, 2012

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Israel’s Key Energy Provider, Egypt, Cuts Off All Natural Gas Supplies

Israel’s Key Energy Provider, Egypt, Cuts Off All Natural Gas Supplies thumbnail

Two months ago, we warned that while the world had decided to blissfully move on from last year’s topic #1, the MENA revolutions, and specifically the massive power vacuum left in their wake, things in the region were far from fixed. Quite the contrary, and as we added back then “it is very likely that the Mediterranean region, flanked on one side by the broke European countries of Greece, Italy, Spain (and implicitly Portugal), and on the other by the unstable powder keg of post-revolutionary Libya and Egypt, will likely become quite active yet again. Only this time, in addition to social and economic upheavals, a religious flavor may also be added to the mix”. Yet nobody cared as after a year of daily videos showing Molotov Cocktails dropping like flies, people had simply gotten habituated and needed some other source of excitement. Nobody cared also when a week ago Art Cashin warned that the hidden geopolitcal risk is not Spain but Egypt. Today, Egypt just reminded at least one country why perhaps caution about the instability caused by having a military in charge of the most populous Arabic country and the one boasting “the Canal”, should have been heeded after Egypt just announced that it is cutting off its natural gas supplies to Israel, which just so happens relies on Egypt for 40% of its energy needs.

From Reuters:

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”.

And judging by the sound and fury emanating from Israel the move was hardly expected:

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.

Suddenly Israel may have bigger things to worry about that whether or not to leak its Iran invasion plas on national TV:

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.

Furthermore, if the Egyptian move is indeed an escalation in strategic alliance shifts in the region, it could have truly huge implications:

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.

 

Egypt was the first of two Arab countries to sign a peace trety with Israel, in 1979, followed by Jordan in 1994.a

Has the country’s endless warmongering calls for a preemptive war against Iran backfired epically? We won’t know for a while, but what we do know is that any government left in the power of military elites, is, how should we say it, unstable… for the simple reason that a military regime tends to require war to remind people why it is in charge. And the Egyptian “transitional” military government appears pretty much set to become permanent. Again from Reuters:

Ex-foreign minister Amr Moussa, a leading contender for Egypt’s presidency, said on Sunday he would give the military a voice in key policies via a national security council, a move to reassure ruling generals about their status after a power transfer.

 

Moussa, a self-described liberal nationalist whose main election rivals are Islamists, also said Egypt needed a president with lobbying skills to work effectively with the Islamist-dominated parliament and other institutions after decades of autocratic government.

Which means add one more election to the already surging roster of short-term catalysts now including France, Greece, Germany and, as of yesterday, the Netherlands:

Egypt’s presidential vote that starts on May 23-24 will mark the final stage of a transition to civilian rule from generals who took charge after Hosni Mubarak was ousted last year.

Unfortunately for Israel, either outcome will likely be a choice between a rock and a hard place, as the country appears to be rapidly alienating its one core catalytic long-term ally in the region.

Moussa, 75, said the national security council, to be chaired by the president, would include senior cabinet ministers plus top military officers. It would have a broad national security brief, he told a news conference.

 

“It has to consider all issues pertaining to national security and not only issues of defence or war, etc, but issues like water, issues like relations with neighbours,” said Moussa, a former head of the Arab League.

 

“(The council) will be a power house on those issues of major priority for the national life,” he added.

 

Other candidates, including one Islamist, have made similar suggestions but Moussa’s proposal and his plans as a whole are more detailed than most.

 

 

The army has said it will hand over power and return to barracks by July 1, leaving the new president in charge.

 

But various comments from army officials, usually in private, or from the military-appointed cabinet have indicated that the military wants a longer term role in protecting broad interests that range from businesses to national security, and wants to guide state affairs that could impact them.

The only question Israel may want to answer now is whether it wants to get cozy with Russia, whose nat gas it may suddenly be very, very attractive. And for that to happen, it means a huge softening in its anti-Iran tone, which in turn will have a huge impact on regional geopolitics, and specifically the risk of war in Iran, and thus the price of Brent. All of this, of course assumes, Israel does not immediately retaliate against Egypt, recently a big recipient of US aid, not to mention tear gas, and start a pre-emptive two front pre-war…

ZeroHedge



6 Comments on "Israel’s Key Energy Provider, Egypt, Cuts Off All Natural Gas Supplies"

  1. MrEnergyCzar on Mon, 23rd Apr 2012 12:34 am 

    Sounds like another possible energy war…

    MrEnergyCzar

  2. BillT on Mon, 23rd Apr 2012 1:27 am 

    Good for Egypt! I hope they dismantle the pipeline that feeds Israel and permanently cuts them off. The Middle East wars are not over. They actually have not yet begun. This may be a very hot and long summer…literally.

  3. Kenz300 on Mon, 23rd Apr 2012 2:04 am 

    Every country needs to develop a plan to deal with energy shortages and higher prices. You would think that Israel would have already developed plan to be less reliant on its neighbors for energy. It goes to show how a cut in energy supplies can impact the economy and national security. How would a war with Iran and the cut off of supplies impact other countries around the world? What would the impact be to the fragile world economy?

  4. Alan Cecil on Mon, 23rd Apr 2012 3:27 am 

    Sounds about par for the country that has been supplying the arab terrorists in Gaza with weapons. Unfortunately, they have short memories; 1956, 1967, and even 1973 did not go well for Egypt when they went to war with Israel.

  5. Plantagenet on Mon, 23rd Apr 2012 6:31 am 

    Obama’s support for the radical Islamicists during the Tahrir Square riots in Egypt was very stupid. When Obama withdrew US support from Mubarak, he guaranteed the downfall of his moderate regime and opened the door for the new rulers of Egypt to repudiate the Camp David peace treaty and terminate its friendly relationships with Israel.

  6. BillT on Mon, 23rd Apr 2012 10:07 am 

    Alan, war is passe’. The new weapon is energy. The empire knows that. We don’t bother with oilless countries that have illegal nukes like Israel and North Korea. They don’t have any oil to speak of. We do go after countries that have oil…like Iran.

    Egypt is finally getting out from under the yoke of the Empire and thinking for itself. If they supply Gaza with missiles, good for them. It’s about time!