Israel-Egypt strike deal

An Israeli company has struck a $15 billion-dollar deal to export natural gas to Egypt. Yuval Steinitz, the Israeli energy minister has deemed this the most significant development between Israel and Egypt since the two nations signed a peace treaty in 1979.

Background

Israel is the world's only Jewish state. In the immediate aftermath of the creation of Israel, a war between Arab nations and Israel took place. The Arabs were initially on the offensive, but their military resources dried up when the UN declared an arms embargo on the region. Thus, Israel shares a complicated relationship with rest of the Arab world.

However, ties have improved over the years especially between Israel and Egypt. The countries fought in the 1948 Arab–Israeli War and the Yom Kippur War in 1973. In 1979, the two nations signed the Egypt-Israel Peace Treaty. Full diplomatic relations were established on January 26, 1980. They share a border and Egypt has since emerged a strategic partner for Israel. Nevertheless, the relationship is sometimes described as a "cold peace" with many skeptical about its effectiveness.

However, the geopolitics of Middle East has been evolving in the recent years. Many nations in the region have begun normalizing their ties to Israel. In 2018, reports emerged that Israel has been conducting a secret air campaign on jihadists in the Sinai Peninsula in Egypt with the blessing of Egyptian President el-Sisi. This indicated the two nations have even embarked on a strategic relationship in a bid to secure borders.

Analysis

Egypt is one of the top 20 nations with large proven reserves of natural gas. It is also known for its natural gas production as well as natural gas consumption. As of 2014, Egypt had 1846.3 bcm of proved natural gas reserves. As of 2014, Israel produced over 7.5 billion cubic meters (bcm) of natural gas a year.

The clearest indication of the deepening strategic ties between Israel and Egypt emerged in February 2018. An Israeli company and Egypt have struck a $15 billion deal in which the company would export natural gas to Egypt. The deal was announced by Israeli company Delek Group which has agreed to supply 64 billion cubic metres of gas over a period of one decade to Dolphinus Holdings, a private Egyptian company. Yuval Steinitz, the Israeli energy minister has deemed this the most significant development between the two countries since they signed a peace treaty in 1979.

Israeli Prime Minister Benjamin Netanyahu reacted to the announcement stating, “I welcome the historic agreement that was announced on the export of Israeli gas to Egypt. This will put billions into the state treasury to benefit the education, health and social welfare of Israel's citizens.” He added, “Many did not believe in the gas outline,” he said. “We led it forward with the knowledge that it would strengthen our security, strengthen our economy, strengthen regional relations, and above all, it would strengthen the citizens of Israel... This is a joyous day.”

“Certainly there are political sensitivities around it,” said Jack Kennedy, senior analyst at IHS Markit, an energy research organization. “But with the trends we have been seeing in recent years between Israel, Egypt and Saudi Arabia on security co-operation which has been increasing year after year, I wouldn’t be surprised to see more such deals in the future.”

However, some experts have questioned whether this plan is even viable. “There’s not even a route determined, so it’s hard to sign a binding agreement,” said Brenda Shaffer, an American-Israeli professor at Georgetown University in Washington who has previously advised the Israeli government on energy policy. “Either EMG would need to agree to transit the gas – and that’s to resolve the whole arbitration process... For years, the Egyptians said they wouldn’t buy Israeli gas until the arbitration is dropped.”

Assessment

Our assessment is that the deal signals a shift in ties between nations in the Middle East. There is growing cooperation in trade and security between Israel and Egypt. Countries like Saudi Arabia and UAE have also begun to lay down the groundwork for more friendly ties with Israel especially in the wake of increased conflict between Saudi Arabia and Iran. It is likely that there would be similar deals struck in the near future.