Saturday, July 23, 2005

New old news - Egypt/Israeli gas deal

July 21 - Eastern Mediterranean Gas will supply Israel Electric Corporation with natural gas under a $2.5 billion, 15-year contract.

This gas deal was actually drawn up in the first peace process, but it faltered after the assassination of Yitzhak Rabin. Anyway, there were two crucial players in the deal, both former spooks: Hussein Salem for the Egyptians, and Yossi Maiman for the Israelis. Salem has an investment vehicle called Masaka Group, and Maiman has one called Merhav.

The Midor Refinery in Egypt was part of the same package as this gas deal, and although it was eventually built, the Egyptian government had to bail it out a couple of times because the investment dried up after Rabin’s death.

Then when they finished it they found that they couldn’t actually buy any Arab oil while there was still Israeli money in the project, despite Oil Minister Fahmy going on tour round the Gulf to beg for the stuff, so they had to buy Merhav out of Midor.

Salem is CEO and Chairman of Midor. Current oil Minister Sameh Fahmy was once a vice chairman.

The major reason that the US has always been so keen on the deal is because of the classical liberal idea that economic interdependence makes war less likely. Hence the high-level interest in the deal and the role of the spooks.

There has been pressure to revive the gas project since this new peace process started picking up steam last summer, and the Israeli Electric Co signed an agreement in principle with East Mediterrannean Gas to buy the gas in May 2004.

Hussein Salem is chairman of EMG, Maiman is vice-chairman and has a significant stake in the company. Sameh Fahmy used to be chairman of EMG.

But some in Israel didn’t want the gas deal to happen, notably Joseph Paritzky, then the Infrastructure Minister, who favoured an alternative deal proposed by BG using recently discovered Palestinian gas.

So Maiman released a tape that on which Paritzky could be heard planning a smear campaign against a political opponent within his party. The cassette, it transpired, had been recorded two years before by a trade union seeking to discredit Paritzky, and had come into the possession of a private investigator retained by Maiman. With Paritzky discredited, opposition to the deal with Egypt pretty much dried up.

There was no way in hell Egypt or Israel were going to let this deal fall apart.

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