Egypt breaks natural gas deal with Israel.

The head of the Egyptian Natural Gas Holding Company said Sunday it has terminated its contract to ship gas to Israel because of contract violations, a decision Israel said overshadows the peace agreement between the two countries, The Associated Press reported.

The 2005 natural gas deal has become a symbol of tensions between Israel and Egypt since the uprising. For many Egyptians, it typifies the close relations the regime of deposed President Hosni Mubarak forged with Israel, despite hostility toward the Jewish state among his people.

Egyptian militants have blown up the gas pipeline to Israel 14 times since the uprising.

Israel insists it is paying a fair price for the gas.

Mohamed Shoeb, the head of the Egyptian Natural Gas Holding Company, said the decision to cancel the deal was not political.
“This has nothing to do with anything outside of the commercial relations,” Shoeb was quoted as saying.

He said Israel has not paid for its gas in four months. Israeli Foreign Ministry spokesman Yigal Palmor denied that.

Shoeb told Egyptian TV the decision has been in place since Thursday.

On Sunday, Israel Finance Minister Yuval Steinitz said the unilateral Egyptian announcement was of “great concern” politically and economically.

“This is a dangerous precedent that overshadows the peace agreements and the peaceful atmosphere between Israel and Egypt,” he said in a statement. Israel and Egypt signed a peace treaty in 1979, but relations have never been warm.

The Israeli side said the decision was “unlawful and in bad faith,” accusing the Egyptian side of failing to supply the gas quantities it is owed.

Israel insists it is paying a fair price for the gas. Israel’s electricity company has been warning of possible power shortages this summer, partly because of the unreliability of the natural gas supply from Egypt.

For the long term, Israel is developing its own natural gas fields off its Mediterranean coast and is expected to be self-sufficient in natural gas in a few years.

Ibrahim Yousri, a former Egyptian diplomat who had brought the issue to court, welcomed the decision announced Sunday.

“It has become a scandal bigger than the (ruling) military council can withstand,” Yousri said. He said there are gas shortages in Egypt, and growing economic woes, further enflaming popular unrest. He called the business deal a “treason” to national interests, adding, “This is a great political step.”