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Egypt offers gas to Israel at new price

23 April 2012, 20:39

Cairo - A senior Egyptian minister said on Monday her country is ready to resume gas exports to Israel but at a new price, after scrapping a long-term contract.

International Co-operation Minister Fayza Abul Naga said the Egyptian side had "no objections to reaching a new contract with new conditions and a new price", the official Mena news agency reported.

Egypt annulled the contract last Thursday, saying Israel had not met the conditions of a gas export accord signed in 2005. Egypt supplies roughly 40% of Israel's gas supplies.

Abul Naga said Israel had been notified five times that it was not meeting its financial obligations under the old contract.

Egypt's electricity and fuel minister, Hassan Yunis, said earlier that the natural gas being exported to Israel under the controversial 15-year deal would instead be used domestically.

"The gas that used to be exported to Israel will be directed to Egyptian electricity plants, as we have more right to it," he told reporters.

The gas contract with Israel, which signed a peace treaty with Egypt in 1979, was the largest trade deal between the two former foes and has always been controversial in the Arab world's most populous country.

Bedouin militants have bombed the gas pipeline - which also supplies Jordan - in Egypt's Sinai peninsula 14 times since a popular uprising ousted president Hosni Mubarak in February 2011.

Mubarak now faces corruption charges, along with murder charges in a trial, over the gas contract, which critics said allowed Israel to buy gas at a low price and profited corrupt officials.

Israel downplayed the political significance of the cancellation on Monday, calling it a "commercial dispute" with no impact on diplomatic relations with Egypt.

Business dispute

"We don't see this cut-off of the gas as something that is born out of political developments," Prime Minister Benjamin Netanyahu told a meeting of heads of the Israel Bonds fund raising organisation.

"It's actually a business dispute between the Israeli company and the Egyptian company," Netanyahu's office quoted him as saying.

A spokesperson for Netanyahu insisted the agreement was still intact on Sunday.

"The gas supply deal between Israel and Egypt has not been cancelled. There is a legal dispute between Israeli and Egyptian companies," said spokesperson Ofir Gendelman in a message posted on Twitter.

Exports to Israel were launched in 2008, three years after the accord which came in for heavy criticism at the time from Egypt's then banned Muslim Brotherhood.

Egypt's parliament, now dominated by the Brotherhood, and ruling military cabinet have sought to be more assertive towards Israel, distancing themselves from Mubarak's close ties with the Jewish state.

Last year, protesters ransacked the reception of the Israeli embassy, forcing its closure. Israel has since been unable to find new grounds for a mission in Cairo.

Jordan said on Monday that cut-offs in Egyptian gas supplies because of the pipeline attacks could cost it more than $2 billion this year.

Gas supplies from Egypt plunged from 300 million m³ a day in 2009 to 78 million m³ in 2011, said Jordan's Electricity Regulatory Commission head Ahmad Hyasat.



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