By Adam Morrow
CAIRO, Jul 6 2005 (IPS)

A recent deal to sell Egyptian natural gas to Israel, while unpopular with the general public here, marks steadily improving diplomatic relations between the historical antagonists.

While government spokespeople from both sides hailed last week’s agreement for the sale of 1.7 billion cubic meters of gas a year, the transaction comes at a time when ongoing Israeli heavy-handedness vis-à-vis its Palestinian population – as well as Tel Aviv’s reluctance to implement commitments it made at a February summit in Sharm El-Sheikh – has continued to alienate large sections of the Egyptian public.

According to the agreement signed by Egyptian Minister of Petroleum Sameh Fahmy and Israeli Minister of Infrastructure Binyamin Ben-Eliezer at a ceremony Jun. 30, also attended by Egyptian Prime Minister Ahmed Nazif, Egypt will supply Israel with the gas for 15 years, by way of a maritime pipeline to the southern Israeli town of Ashkelon.

The deal – expected to generate between two billion and three billion U.S. dollars a year in revenue – is to be cemented by a second, final pact, expected in August. The pipeline is slated to begin delivering gas late in 2006.

Although the deal comes at a time of popular anger over Israeli policies, many financial analysts agree that – from a strictly economic standpoint – the move was a practical one. "Economically, it makes good sense," said Nashwa Saleh, head of research at Cairo-based investment house HC Brokerage. "We have more natural gas than we can consume locally – it’s smart to export."

Recent estimates have put Egypt’s gas reserves as high as three trillion cubic meters.

Talks between Eastern Mediterranean Gas, a private firm jointly owned by an Egyptian businessman and the Israeli Merhav Group, and the state-run Israel Electric Corporation, which intends to buy the gas, have been ongoing since 2001. But an agreement was delayed several times due to ongoing Israeli-Palestinian violence, which made it politically awkward for Cairo to commit to the sale. Meanwhile, given the political sensitivities involved, authorities remained tight-lipped about the discussions.

A deal was most recently delayed in April, when a scheduled trip to Cairo by Ben-Eliezer was cancelled at the last minute. According to recently named Israeli Ambassador to Egypt Shalom Cohen, the hold-up was caused by "technical and legal" issues between the two companies, rather than political considerations.

"These deals are brokered through companies. Egyptian companies will sell to Israeli companies," Cohen told reporters in mid-June, adding that the transaction comprised commercial agreements as well as diplomatic ones. "We thought we could sign the deal at the official level before the two companies agreed . but it took time for the companies to settle the legal issues involved."

"We’ve had offers from other countries, but we are intent on making this deal with Egypt," Cohen added.

Despite the sale’s economic potential, the notion of cooperation with Israel remains broadly unpopular on the Egyptian street. "With what they’re doing to the Palestinians, they don’t deserve this big gift," said one 30-year-old Cairo resident who works as a waiter at a multinational restaurant chain.

"Especially when they haven’t even lived up to their commitments from the Sharm summit," at which the Israeli side promised to relinquish control of five Palestinian cities in the West Bank, he added.

In an indication of the deal’s sensitivity among the public, coverage of the agreement in the state media was relatively sparse. The government-run daily ‘Al-Ahram’, for example, buried its story on page seven, despite the pact’s considerable economic import.

"This is the standard attitude of official and semi-official newspapers," said Emad Gad, an expert on Israeli affairs at the state-run Al-Ahram Centre for Political and Strategic Studies. "They usually play down such issues if they’re very unpopular."

Still, despite ongoing disapproval here of Israeli policies in the occupied territories, the gas pact comes within the context of unprecedented diplomatic rapprochement between the two nations.

Recent gestures of reconciliation have included prisoner exchanges; the signing of a major bilateral trade deal; a series of recent visits to Cairo by high-level members of Israeli officialdom, including the foreign minister and the leader of the Knesset; and – most importantly – the return of an Egyptian ambassador to Tel Aviv after a four-year absence.

"The signing of the agreement has great importance for the improvement of the diplomatic mood between the two countries," said a statement from Ben-Eliezer’s ministry.

Egyptian analysts agree the deal could not have happened before the current era of diplomatic friendliness, which they largely attribute to U.S. pressure. "Egypt wants to deliver a message to the U.S. administration by cooperating with Israel," explained Gad. "Cairo wants to say, ‘we’re leaders in the peace process, and we’re doing everything we can to promote it’, in hopes of deflecting American pressure."

In a sop, perhaps, to domestic public opinion, a second memorandum of understanding was inked between the Egyptian Petroleum Ministry and the Palestinian Energy and Natural Resources Authority. Signed on the same day as the Egypt-Israel deal, Cairo’s agreement with the Palestinian Authority aims to boost bilateral cooperation in the oil and gas sector..

"The goal of the agreement is to promote joint Egyptian-Palestinian projects for the development of discoveries, and the utilization of Palestinian natural gas in Gaza’s coastal region . in hopes of maximizing the benefits of natural gas accruing to the Palestinian side," Magdi Radi, a spokesman for Prime Minister Nazif, was quoted as saying by independent daily ‘Al-Masry Al-Youm’.

According to Gad, the latter accord is economically significant, even if no joint energy projects are yet in the offing. But he added that it was also a way for Cairo to offset the importance of its concurrent dealings with Tel Aviv.

"Egyptian diplomacy is looking for political cover," he said. "It wants to sell the idea that Egypt – while signing the gas deal with Israel – is also working for the benefit of the Palestinians," added Gad.

Excerpt: