Are Mubarak's Gas Sales to Israel Partly to Blame?
September 2, 2010
Are Mubarak's Gas Sales to Israel Partly to Blame?
The Politics of Power Cuts in Egypt
By MOHAMED WAKED
CounterPunch
Egypt has been suffering from an exceptionally hot summer, with record temperatures observed all over the country. The “terrible heat wave” mantra, thus, grew to become what is probably the most pressing issue in Egypt today. The advent of Ramadan obviously could only but emphasize this problem more, as people now have to fast through long and exceptionally hot summer days.
Naturally none of this is unique to Egypt: the entire region suffers the same heat wave. But unlike its neighbours Egypt has been suffering also from long, systematic, nationwide power cuts. Facing sudden shortages in the country’s electric generation capacity, the authorities began to reduce demand by cutting power off entire neighborhoods and cities for a while everyday: an hour if you’re lucky, 8-10 when you’re not. In several cases the cuts spanned entire cities and governorates for whole days. The fact that these outages combined all too often with water cuts highlighted the state’s failure—the latter resulting mostly from cutting the electric power that runs the water network, and to a lesser extent from accidental pipeline breaks. In either case, these cuts intertwined to undermine the already precarious legitimacy of the state.
Meanwhile, wildfires suddenly erupted in Russia and destroyed large tracts of its wheat crop, prompting the Russian government to halt its wheat exports. This bore grave consequences for Egypt, as years of twisted agricultural policies have already made it the world’s largest importer of wheat, and is especially dependant on Russian wheat. With only four months’ supply on its hands, the government hastily went shopping for other sources. Although they finally landed on alternative suppliers, by the time they had done so speculators had already taken advantage of a growing “wheat crisis” to raise the prices of un-subsidized bread, sometimes by 50%. The wheat crisis then led to a bread crisis, and that, in turn, revived the infamous bread queues, which already claimed one man dead. The “wheat crisis” also pushed the prices of other food items up, all merging to exacerbate the already heavily strained Ramadan budget.
It is difficult to understate the social resonance of this failure in a state that prides itself on its supposed infrastructural “achievements.” State pedagogy never tires from preaching that Hosni Mubarak’s wisdom has averted the useless wars that other Arabs never avoid. This, the story goes, is what allowed Egypt to focus on building itself and attain the many infrastructural “achievements” that we now supposedly enjoy. In this narrative Mubarak’s wisdom manifests itself mostly, if not solely, in his “great” infrastructure developments. In addition to justifying the state’s position vis-à-vis the Arab-Israeli conflict, this story has also become a central justification for the “wise” dictatorship that governs Egypt.
If anything, the regime’s historical brag about its infrastructure “accomplishments” to justify its colonial alliances only accentuates it current failure, which people now locate in its electricity failures. The irony here comes out most vividly on comparing Egypt to its neighbours. Evidently the same month-long “heat wave” resulted in record electricity demands in other countries in the region too. Yet, the only other cases that suffered from comparably substantial problems—actually, much more severe—are Iraq and Gaza, both under occupation. Needless to say, the current electricity situation in Iraq and Palestine is the product of decades long of systematic and deliberate efforts to destroy them by the strongest colonial forces on the face of this planet. By contrast, Egypt is a “strategic” ally, in fact doll, of the very forces that continue to destroy Palestine and Iraq. Ironically, Egypt joined this alliance for exactly the same type of “gains” that are now so scandalously failing; more ironically, to avoid the fate of Palestine and Iraq. In this way, the Egyptian regime appears to have attained its current electricity failure against every bit of colonial justification that it has been preaching for decades.
Ramadan is a month of high consumption. It witnesses the biggest sales of most food and recreational products. It’s also the time when people are fasting and impatient. They generally work less, rest in the afternoons, have iftar (break the fast) with their extended families, watch TV a lot, go out after iftar—all with great intensity. Besides, it’s also an expensive month, as middle-class families support much higher consumption behaviours. But suddenly they are required to fast without electric power amidst the melting heat and rising prices. On the domestic side that meant no cooling facitilies, TVs, and often no water too. That makes a very different and certainly difficult Ramadan. Understandably, then, these outages drove middle-class people nuts. Their immense anger and disappointment evolved directly from the bodily discomforts that they now have to suffer, which means that the state cannot just sweet-talk it away. It is no wonder thus that the failure remained front-page material in the press and TV shows for weeks now, as a sign of Egypt’s return to the so-called “middle ages.” Such deterioration also became the main topic for extended families’ chats over iftar, always cursing the state. Moreover, it provoked people to take the street, sometimes sitting in and stopping traffic by force.
The economic loss that resulted from these cuts is yet another colossal aspect of our failure story. Unfortunately we don’t know its full extent yet: the media has been too obsessed with the social anger part of the story to give it the attention it deserves. Nevertheless, the sporadic coverage that we have suggests that these cuts forced perhaps tens of thousands of economic enterprises to shutdown for long durations, sometime with grave consequences to their production machinery. One report said that in the neighborhood of Shubra alone 1200 factories were forced to shutdown for three hours in only one day. The governor of Shubra has put the shutdown losses of these factories at 200 million pounds (a bit less than $40 million) for that one day. Another report said that two weeks of these cuts have cost the Aluminum factory of Naga Hmadi alone a loss of almost 400 million pounds ($80 million). It is hence safe to say that we are talking here about a gigantic national loss on a multi-billion dollar scale.
The government’s first explanation for this failure blamed it on increased consumption: the heat caused a sudden unwieldy rise in demand for electric power that surpassed the national generation capacity. This increased demand was, in turn, blamed on air-conditioners to build sympathy with the state’s dilemma by associating the root of the problem to extravagant behaviour. But these arguments –which ultimately condemn state planning- didn’t sell well. The state also made sure to drop its favourite population line along the way, which basically blames population increase for eating up all of the country’s natural resources. Egyptians are here to blame because they have too many children. Again, this decades-old argument doesn’t hold water. Egypt’s population growth is relatively small compared to most countries in the region, and more importantly lies well below its GDP—the “extra” people should have been easily more than covered.
The state’s original storyline only provoked the press to search for more-convincing explanations for this mess. In one case the Shorouk reported that the factories of the steel magnate Ahmad Ezz alone consume 17% the country’s electricity subsidies. Surely you can imagine the resonance of discovering that Ezz, Gamal Mubarak’s right hand and possibly business partner, consumes the biggest share of the electricity that has suddenly been denied to everyone. It means that Ezz’ growth is somehow implicated in causing this mess, not population growth as they claim.
On 17 August, the Holding Company for Electricity issued a statement that put an end to this speculation: the collapse resulted from a big shortage in the gas delivered to the electric generation units. According to the statement, most of Egypt’s power stations are designed to operate with natural gas as primary fuel and diesel as reserve fuel. Until recently they operated at 98 percent gas, as they should. But the ministry of petroleum gradually held back their gas until it dropped to 76%. This forced them to operate with the suboptimal diesel much more than they should, which reduced their generation efficiency below national demand. Using diesel also clogs their gas-based fuel injection system frequently, resulting in many breakdowns. It’s quite certain too that using diesel instead of gas has reduced the lifetime of their generation equipment; they probably destroyed a good part of their assets’ life and worth. While no one talks about this last point, the damage to the power generation machinery is probably to be measured in billions of dollars.
This is how the Ministry of Electricity finally cleared its name, which only begged the question, why is the ministry of petroleum withholding the needed gas? (Note that we are talking about home pumped gas here). A senior official in the ministry of electricity then explained that the ministry of petroleum started withholding their gas when it started exporting gas to Israel. In other words, Egypt has been withholding the gas marked for electric generation to give it Israel, to the extent that it compromised its electricity system, economy, and the welfare of its people so much. Such was obviously very embarrassing news. Thus Mubarak responded by holding an emergency meeting with the ministers of electricity and petroleum the very next morning. He instructed them to solve this problem at once without touching Egypt’s “international obligations” and “the needs of the Egyptian citizen.” This is another way of saying: solve it without touching Israel’s gas deliveries—“how?” is the question.
The following day the ministry of irrigation started releasing 35 million cubic-meters of water more than scheduled for that time of the year from Lake Nasser. That way they’d generate more electricity from the High Dam without consuming gas. But this also means depleting Egypt’ strategic water reserve. Such is a very sad development given the grave sacrifices that went into saving this water. One immediately recalls the 1956 tripartite war that Britain, France, and Israel launched on Egypt when Nasser nationalised the Suez Canal to build the High Dam that now saves this water; the massive national resources that went into building it; the forced migration of the Nubian villages to make space for the lake; and more. Put succinctly, every drop of this water came at a huge national cost. In light of this, dispensing with it to avoid withholding Israel’s gas share is a big insult to Egypt’s national history—not only because of the cost that went into saving it, but also because of the party that it’s being wasted for.
More recently, for almost a year now Egypt has been facing a big rebellion from Nile basin countries, which demand redistributing the Nile water in ways that will highly reduce Egypt’s share of it. They have actually set up a treaty for that end that Egypt and Sudan refused to sign. Granting their legitimate needs, this rebellion came with much Israeli intervention and influence. So soon after signing this treaty we see Israel offering to help Egypt overcome the rebellion that it instigated, in exchange for a share of Egypt’s water. In other words, Israel has been manipulating Nile basin countries to blackmail Egypt for a cut of its water. In response to Israel’s offer President Mubarak declared, “The Nile will never leave Egypt.” This was generally portrayed as a strong response by a regime that values and defends its water. Meanwhile, the regime began to invest more in reviving its image as the guardian of this water. Hence, they started boasting about the water savings that they made by, for example, cutting down rice plantation (high water consumption crop). Then, by twist of sad irony, we see the same state very willing to waste the very water that Israel is trying to kidnap to stay exporting gas to Israel.
And there is more to this sad irony. At first, the ministry of irrigation tried not to waste the water in this way. So they opened the High Dam to release the extra water but closed the Aswan Reservoir-Dam to collect the same water behind it. This raised the water level between the two dams to a level that could have compromised the High Dam’s turbines. It took some serious emergency work to readjust the water to a safe level again. Since then we stopped hearing about attempts to save the water.
Seeking to reduce to the gravity of the scandal, the minister of petroleum tried to market an alternative explanation for this crisis. He proposed that gas deliveries to the power stations dropped because the heat reduced the efficiency of gas the pumping stations. It was the joke of town, of course, because the same heat failed to affect the pumping to Israel. The following day the press said that the ministry of petroleum finally decided to increase its gas deliveries to the power stations by reducing the quantities marked for the private sector and export to Jordan. Although Jordan pays much more for the gas, Israel remained untouchable. Nonetheless, at the end they didn’t even honour this solution, as the ministry of electricity stated that the gas never came. So we are now back to square one: electricity cuts and their associated costs are still on. Sadly this is how far Egypt is willing to avoid even reducing its gas exports to Israel.
Noteworthy here is that Egypt is not so determined to export its gas to Israel because of some profit incentive: ditching highly subsidized local sales for foreign currency market prices. To the contrary, Egypt loses a lot of money on its gas sales to Israel. Initially the 2005 gas treaty between Egypt and Israel required Egypt to supply Israel with 200 million feet of gas daily for the following15 years at a price that “ranges between 70 cents and $1.5 per BTU (British thermal unit),” to be fixed throughout the treaty’s lifetime. So we’re selling this gas at a tiny fraction of its market price, which ranges between $8-$12 per BTU. To be exact, the government refuses to declare its selling prices to date. We know about them from leaked documents and the famous court case that former ambassador Ibrahim Yusri filed to cancel this capitulation treaty, which exposed much of its dirty linen.
Yusri based his case on roughly two main points. The first was that Egypt was selling its gas at a much lower than market price, adding up to an annual subsidy to Israel of roughly $5 billion. Shocking as it may sound, the government signed this deal at the time when it was reducing energy subsidies in Egypt. Yusri’s second point was that Egypt’s gas reserves are too limited to accommodate such exports without compromising local needs in the imminent future. We now know that he was right on this point too. In the end, the Administrative court upheld the state’s right to export gas to Israel but ruled the treaty illegal on the basis of its ridiculous pricing mechanism, but the state never honour the ruling. Where Egypt to end up importing gas to cover its growing local needs, it will shamefully buy it at about $10 a BTU to sell it to Israel at $1.5, or even 70 cents.
There’s one more feature of this agreement that analysts seldom stop at. The Egyptian side had initially designed it as a business deal between a private company created for this purpose and its Israeli clients, but former Israeli prime minister Ariel Sharon refused to have it unless the Egyptian government guaranteed it in person. The Egyptian government rejected this at first but eventually succumbed to Sharon’s conditions. As such, “honouring” this treaty is now the direct responsibility of the Egyptian state, not the export company. This might partly explain why the regime is willing to accept all of the costs above to avoid touching Israel’s gas share; remember that we are talking about a regime that has a long history of dealing with its colonial treaties in very legalistic ways.
The opposition here offered many explanations as to why the Egyptian regime fell so low, which range from corruption to all sorts of conspiracy theories. Two of them are worth noting here. The first sees the treaty as part of a general Egyptian strategy to heat up Egypt’s cold relationship with Israel in order to improve its ties with Washington. Remember that they signed it in 2005. Hence, it was probably envisioned as an idea for the first time in maybe 2004, or late 2003—that is, at the peak of Bush’s belligerence in the region, which forced most Arab regimes to appease Washington in everyway possible. Recall, for example, how the Saudis donated $50 million for the London Zoo to bring London on its side, or more seriously, their Arab Peace Initiative—both coming months after September 11. In this vein, this treaty and its siblings become gifts of good intentions from a scared client-regime to avert the wrath of its irrational overlord.
The second explanation focuses more on developments within Egypt. Back then, Gamal Mubarak had just emerged as a power to be reckoned with, forming with his clique of business tycoons what the press dubbed the “new guards,” which replaced the symbols of the “old guards” –Hosni Mubarak’s “men”- within most of the influential institutions (except the security apparatus.) It was his “new guards” that negotiated and signed the capitulation treaties that were sealed with Israel then, including our gas treaty. To be exact, these treaties were among the very first things that they undertook. Their network of business friends and acquaintances also happen to be the main, if not sole, beneficiaries of warmer relations with Israel. This is quite clear in the main beneficiaries of the QIZ treaty, signed a year before the gas agreement. Seen as such, these treaties become Gamal Mubarak’s dowry for Presidency—paid to Israel to appease Washington, and also to serve his camp with new business opportunities. Such is currently the most widespread interpretation for this treaty among Egyptian opposition. And there is no reason why it cannot be harmonised with the previous one.
It’s thus ironic to see Gamal Mubarak’s fans launching his first succession campaign at the backdrop of the power cuts. The more we knew about the scandalous outcomes of this treaty, the more Gamal Mubarak Presidency campaigns we got. We now have at least three of them, all competing with each other. Roughly one came out when the power cuts was about increased consumption, another when they were linked to Israel, and a third when the Nile water was wasted.
This campaign has been thus far enigmatic; no one knows who lies behind it. The one name that was mentioned as its donor is Ibrahim Kamel. Although Kamel denied these reports, he remains its main symbol. He is the only party official (a senior member in the Policies Committee of the ruling party: the platform that Gamal Mubarak heads and uses to wield political power in Egypt), actually the only official of any sort, to declare that Gamal Mubarak will be the ruling party’s nominee for the next elections. He declared it in a press interview weeks before launching the first campaign; then reiterated it in a talk-show two weeks after it was launched. Thus, whether he funded it or not he remains its main symbol.
Kamel is a billionaire who operates in many industries, also Gamal Mubarak’s business partner. Moreover, he is the main businessman dealing with Israel in Egypt. His dealings go well beyond the known trade-based normalisation to investing in Israeli firms and partnering with Israeli businessmen in Egypt. In short, he’s an icon of normalization and has benefited personally from Egypt’s relations with Israel.
Thus, the dowry story makes a full circle: the emergence of the Gamal Mubarak camp leads to striking several deals with Israel; the business members of this camp benefit from these deals; eventually the gas deal blows its cover and causes extreme hardship in Egypt; while the camp that benefits most from deals with Israel is pushing for Gamal Mubarak’s presidency; then the hardship caused by this collapse occupies the minds of the people to the extent that they cannot follow any circles. Thus ends the circle.
The Egyptian regime has obviously gone very far for the love of Israel here—and guess what? It worked as it was designed to. Israel has just attained record electricity use levels because the “heat wave” that wreaked havoc on Egypt pushed Israel’s electricity consumption up too. In their case the increased demand went smoothly without any of the loss and agony that Egypt experienced. Clearly that is to be expected from a country with such secured fuel supply—so secured that no one dares touch it. Still, there were a few gas issues that Israel pondered on during our story period. For reasons that I don’t quite know, the Israeli government wanted to raise the retail price of natural gas. This angered some Israelis who took the street to protest the price hike. Outrageous as this may sound, they protested this endeavour by waiving Egyptian flags. It’s unclear why they did so, for the Egyptian press sufficed with publishing their photos while waving the flags. Nevertheless, it shows that our flag has become a symbol of cheap gas in the Israel—very cheap, I must add.
Mohamed Waked is an anthropologist and PhD candidate at the University of Amsterdam. He can be reached at: mohamed.waked@gmail.com.
Are Mubarak's Gas Sales to Israel Partly to Blame?
The Politics of Power Cuts in Egypt
By MOHAMED WAKED
CounterPunch
Egypt has been suffering from an exceptionally hot summer, with record temperatures observed all over the country. The “terrible heat wave” mantra, thus, grew to become what is probably the most pressing issue in Egypt today. The advent of Ramadan obviously could only but emphasize this problem more, as people now have to fast through long and exceptionally hot summer days.
Naturally none of this is unique to Egypt: the entire region suffers the same heat wave. But unlike its neighbours Egypt has been suffering also from long, systematic, nationwide power cuts. Facing sudden shortages in the country’s electric generation capacity, the authorities began to reduce demand by cutting power off entire neighborhoods and cities for a while everyday: an hour if you’re lucky, 8-10 when you’re not. In several cases the cuts spanned entire cities and governorates for whole days. The fact that these outages combined all too often with water cuts highlighted the state’s failure—the latter resulting mostly from cutting the electric power that runs the water network, and to a lesser extent from accidental pipeline breaks. In either case, these cuts intertwined to undermine the already precarious legitimacy of the state.
Meanwhile, wildfires suddenly erupted in Russia and destroyed large tracts of its wheat crop, prompting the Russian government to halt its wheat exports. This bore grave consequences for Egypt, as years of twisted agricultural policies have already made it the world’s largest importer of wheat, and is especially dependant on Russian wheat. With only four months’ supply on its hands, the government hastily went shopping for other sources. Although they finally landed on alternative suppliers, by the time they had done so speculators had already taken advantage of a growing “wheat crisis” to raise the prices of un-subsidized bread, sometimes by 50%. The wheat crisis then led to a bread crisis, and that, in turn, revived the infamous bread queues, which already claimed one man dead. The “wheat crisis” also pushed the prices of other food items up, all merging to exacerbate the already heavily strained Ramadan budget.
It is difficult to understate the social resonance of this failure in a state that prides itself on its supposed infrastructural “achievements.” State pedagogy never tires from preaching that Hosni Mubarak’s wisdom has averted the useless wars that other Arabs never avoid. This, the story goes, is what allowed Egypt to focus on building itself and attain the many infrastructural “achievements” that we now supposedly enjoy. In this narrative Mubarak’s wisdom manifests itself mostly, if not solely, in his “great” infrastructure developments. In addition to justifying the state’s position vis-à-vis the Arab-Israeli conflict, this story has also become a central justification for the “wise” dictatorship that governs Egypt.
If anything, the regime’s historical brag about its infrastructure “accomplishments” to justify its colonial alliances only accentuates it current failure, which people now locate in its electricity failures. The irony here comes out most vividly on comparing Egypt to its neighbours. Evidently the same month-long “heat wave” resulted in record electricity demands in other countries in the region too. Yet, the only other cases that suffered from comparably substantial problems—actually, much more severe—are Iraq and Gaza, both under occupation. Needless to say, the current electricity situation in Iraq and Palestine is the product of decades long of systematic and deliberate efforts to destroy them by the strongest colonial forces on the face of this planet. By contrast, Egypt is a “strategic” ally, in fact doll, of the very forces that continue to destroy Palestine and Iraq. Ironically, Egypt joined this alliance for exactly the same type of “gains” that are now so scandalously failing; more ironically, to avoid the fate of Palestine and Iraq. In this way, the Egyptian regime appears to have attained its current electricity failure against every bit of colonial justification that it has been preaching for decades.
Ramadan is a month of high consumption. It witnesses the biggest sales of most food and recreational products. It’s also the time when people are fasting and impatient. They generally work less, rest in the afternoons, have iftar (break the fast) with their extended families, watch TV a lot, go out after iftar—all with great intensity. Besides, it’s also an expensive month, as middle-class families support much higher consumption behaviours. But suddenly they are required to fast without electric power amidst the melting heat and rising prices. On the domestic side that meant no cooling facitilies, TVs, and often no water too. That makes a very different and certainly difficult Ramadan. Understandably, then, these outages drove middle-class people nuts. Their immense anger and disappointment evolved directly from the bodily discomforts that they now have to suffer, which means that the state cannot just sweet-talk it away. It is no wonder thus that the failure remained front-page material in the press and TV shows for weeks now, as a sign of Egypt’s return to the so-called “middle ages.” Such deterioration also became the main topic for extended families’ chats over iftar, always cursing the state. Moreover, it provoked people to take the street, sometimes sitting in and stopping traffic by force.
The economic loss that resulted from these cuts is yet another colossal aspect of our failure story. Unfortunately we don’t know its full extent yet: the media has been too obsessed with the social anger part of the story to give it the attention it deserves. Nevertheless, the sporadic coverage that we have suggests that these cuts forced perhaps tens of thousands of economic enterprises to shutdown for long durations, sometime with grave consequences to their production machinery. One report said that in the neighborhood of Shubra alone 1200 factories were forced to shutdown for three hours in only one day. The governor of Shubra has put the shutdown losses of these factories at 200 million pounds (a bit less than $40 million) for that one day. Another report said that two weeks of these cuts have cost the Aluminum factory of Naga Hmadi alone a loss of almost 400 million pounds ($80 million). It is hence safe to say that we are talking here about a gigantic national loss on a multi-billion dollar scale.
The government’s first explanation for this failure blamed it on increased consumption: the heat caused a sudden unwieldy rise in demand for electric power that surpassed the national generation capacity. This increased demand was, in turn, blamed on air-conditioners to build sympathy with the state’s dilemma by associating the root of the problem to extravagant behaviour. But these arguments –which ultimately condemn state planning- didn’t sell well. The state also made sure to drop its favourite population line along the way, which basically blames population increase for eating up all of the country’s natural resources. Egyptians are here to blame because they have too many children. Again, this decades-old argument doesn’t hold water. Egypt’s population growth is relatively small compared to most countries in the region, and more importantly lies well below its GDP—the “extra” people should have been easily more than covered.
The state’s original storyline only provoked the press to search for more-convincing explanations for this mess. In one case the Shorouk reported that the factories of the steel magnate Ahmad Ezz alone consume 17% the country’s electricity subsidies. Surely you can imagine the resonance of discovering that Ezz, Gamal Mubarak’s right hand and possibly business partner, consumes the biggest share of the electricity that has suddenly been denied to everyone. It means that Ezz’ growth is somehow implicated in causing this mess, not population growth as they claim.
On 17 August, the Holding Company for Electricity issued a statement that put an end to this speculation: the collapse resulted from a big shortage in the gas delivered to the electric generation units. According to the statement, most of Egypt’s power stations are designed to operate with natural gas as primary fuel and diesel as reserve fuel. Until recently they operated at 98 percent gas, as they should. But the ministry of petroleum gradually held back their gas until it dropped to 76%. This forced them to operate with the suboptimal diesel much more than they should, which reduced their generation efficiency below national demand. Using diesel also clogs their gas-based fuel injection system frequently, resulting in many breakdowns. It’s quite certain too that using diesel instead of gas has reduced the lifetime of their generation equipment; they probably destroyed a good part of their assets’ life and worth. While no one talks about this last point, the damage to the power generation machinery is probably to be measured in billions of dollars.
This is how the Ministry of Electricity finally cleared its name, which only begged the question, why is the ministry of petroleum withholding the needed gas? (Note that we are talking about home pumped gas here). A senior official in the ministry of electricity then explained that the ministry of petroleum started withholding their gas when it started exporting gas to Israel. In other words, Egypt has been withholding the gas marked for electric generation to give it Israel, to the extent that it compromised its electricity system, economy, and the welfare of its people so much. Such was obviously very embarrassing news. Thus Mubarak responded by holding an emergency meeting with the ministers of electricity and petroleum the very next morning. He instructed them to solve this problem at once without touching Egypt’s “international obligations” and “the needs of the Egyptian citizen.” This is another way of saying: solve it without touching Israel’s gas deliveries—“how?” is the question.
The following day the ministry of irrigation started releasing 35 million cubic-meters of water more than scheduled for that time of the year from Lake Nasser. That way they’d generate more electricity from the High Dam without consuming gas. But this also means depleting Egypt’ strategic water reserve. Such is a very sad development given the grave sacrifices that went into saving this water. One immediately recalls the 1956 tripartite war that Britain, France, and Israel launched on Egypt when Nasser nationalised the Suez Canal to build the High Dam that now saves this water; the massive national resources that went into building it; the forced migration of the Nubian villages to make space for the lake; and more. Put succinctly, every drop of this water came at a huge national cost. In light of this, dispensing with it to avoid withholding Israel’s gas share is a big insult to Egypt’s national history—not only because of the cost that went into saving it, but also because of the party that it’s being wasted for.
More recently, for almost a year now Egypt has been facing a big rebellion from Nile basin countries, which demand redistributing the Nile water in ways that will highly reduce Egypt’s share of it. They have actually set up a treaty for that end that Egypt and Sudan refused to sign. Granting their legitimate needs, this rebellion came with much Israeli intervention and influence. So soon after signing this treaty we see Israel offering to help Egypt overcome the rebellion that it instigated, in exchange for a share of Egypt’s water. In other words, Israel has been manipulating Nile basin countries to blackmail Egypt for a cut of its water. In response to Israel’s offer President Mubarak declared, “The Nile will never leave Egypt.” This was generally portrayed as a strong response by a regime that values and defends its water. Meanwhile, the regime began to invest more in reviving its image as the guardian of this water. Hence, they started boasting about the water savings that they made by, for example, cutting down rice plantation (high water consumption crop). Then, by twist of sad irony, we see the same state very willing to waste the very water that Israel is trying to kidnap to stay exporting gas to Israel.
And there is more to this sad irony. At first, the ministry of irrigation tried not to waste the water in this way. So they opened the High Dam to release the extra water but closed the Aswan Reservoir-Dam to collect the same water behind it. This raised the water level between the two dams to a level that could have compromised the High Dam’s turbines. It took some serious emergency work to readjust the water to a safe level again. Since then we stopped hearing about attempts to save the water.
Seeking to reduce to the gravity of the scandal, the minister of petroleum tried to market an alternative explanation for this crisis. He proposed that gas deliveries to the power stations dropped because the heat reduced the efficiency of gas the pumping stations. It was the joke of town, of course, because the same heat failed to affect the pumping to Israel. The following day the press said that the ministry of petroleum finally decided to increase its gas deliveries to the power stations by reducing the quantities marked for the private sector and export to Jordan. Although Jordan pays much more for the gas, Israel remained untouchable. Nonetheless, at the end they didn’t even honour this solution, as the ministry of electricity stated that the gas never came. So we are now back to square one: electricity cuts and their associated costs are still on. Sadly this is how far Egypt is willing to avoid even reducing its gas exports to Israel.
Noteworthy here is that Egypt is not so determined to export its gas to Israel because of some profit incentive: ditching highly subsidized local sales for foreign currency market prices. To the contrary, Egypt loses a lot of money on its gas sales to Israel. Initially the 2005 gas treaty between Egypt and Israel required Egypt to supply Israel with 200 million feet of gas daily for the following15 years at a price that “ranges between 70 cents and $1.5 per BTU (British thermal unit),” to be fixed throughout the treaty’s lifetime. So we’re selling this gas at a tiny fraction of its market price, which ranges between $8-$12 per BTU. To be exact, the government refuses to declare its selling prices to date. We know about them from leaked documents and the famous court case that former ambassador Ibrahim Yusri filed to cancel this capitulation treaty, which exposed much of its dirty linen.
Yusri based his case on roughly two main points. The first was that Egypt was selling its gas at a much lower than market price, adding up to an annual subsidy to Israel of roughly $5 billion. Shocking as it may sound, the government signed this deal at the time when it was reducing energy subsidies in Egypt. Yusri’s second point was that Egypt’s gas reserves are too limited to accommodate such exports without compromising local needs in the imminent future. We now know that he was right on this point too. In the end, the Administrative court upheld the state’s right to export gas to Israel but ruled the treaty illegal on the basis of its ridiculous pricing mechanism, but the state never honour the ruling. Where Egypt to end up importing gas to cover its growing local needs, it will shamefully buy it at about $10 a BTU to sell it to Israel at $1.5, or even 70 cents.
There’s one more feature of this agreement that analysts seldom stop at. The Egyptian side had initially designed it as a business deal between a private company created for this purpose and its Israeli clients, but former Israeli prime minister Ariel Sharon refused to have it unless the Egyptian government guaranteed it in person. The Egyptian government rejected this at first but eventually succumbed to Sharon’s conditions. As such, “honouring” this treaty is now the direct responsibility of the Egyptian state, not the export company. This might partly explain why the regime is willing to accept all of the costs above to avoid touching Israel’s gas share; remember that we are talking about a regime that has a long history of dealing with its colonial treaties in very legalistic ways.
The opposition here offered many explanations as to why the Egyptian regime fell so low, which range from corruption to all sorts of conspiracy theories. Two of them are worth noting here. The first sees the treaty as part of a general Egyptian strategy to heat up Egypt’s cold relationship with Israel in order to improve its ties with Washington. Remember that they signed it in 2005. Hence, it was probably envisioned as an idea for the first time in maybe 2004, or late 2003—that is, at the peak of Bush’s belligerence in the region, which forced most Arab regimes to appease Washington in everyway possible. Recall, for example, how the Saudis donated $50 million for the London Zoo to bring London on its side, or more seriously, their Arab Peace Initiative—both coming months after September 11. In this vein, this treaty and its siblings become gifts of good intentions from a scared client-regime to avert the wrath of its irrational overlord.
The second explanation focuses more on developments within Egypt. Back then, Gamal Mubarak had just emerged as a power to be reckoned with, forming with his clique of business tycoons what the press dubbed the “new guards,” which replaced the symbols of the “old guards” –Hosni Mubarak’s “men”- within most of the influential institutions (except the security apparatus.) It was his “new guards” that negotiated and signed the capitulation treaties that were sealed with Israel then, including our gas treaty. To be exact, these treaties were among the very first things that they undertook. Their network of business friends and acquaintances also happen to be the main, if not sole, beneficiaries of warmer relations with Israel. This is quite clear in the main beneficiaries of the QIZ treaty, signed a year before the gas agreement. Seen as such, these treaties become Gamal Mubarak’s dowry for Presidency—paid to Israel to appease Washington, and also to serve his camp with new business opportunities. Such is currently the most widespread interpretation for this treaty among Egyptian opposition. And there is no reason why it cannot be harmonised with the previous one.
It’s thus ironic to see Gamal Mubarak’s fans launching his first succession campaign at the backdrop of the power cuts. The more we knew about the scandalous outcomes of this treaty, the more Gamal Mubarak Presidency campaigns we got. We now have at least three of them, all competing with each other. Roughly one came out when the power cuts was about increased consumption, another when they were linked to Israel, and a third when the Nile water was wasted.
This campaign has been thus far enigmatic; no one knows who lies behind it. The one name that was mentioned as its donor is Ibrahim Kamel. Although Kamel denied these reports, he remains its main symbol. He is the only party official (a senior member in the Policies Committee of the ruling party: the platform that Gamal Mubarak heads and uses to wield political power in Egypt), actually the only official of any sort, to declare that Gamal Mubarak will be the ruling party’s nominee for the next elections. He declared it in a press interview weeks before launching the first campaign; then reiterated it in a talk-show two weeks after it was launched. Thus, whether he funded it or not he remains its main symbol.
Kamel is a billionaire who operates in many industries, also Gamal Mubarak’s business partner. Moreover, he is the main businessman dealing with Israel in Egypt. His dealings go well beyond the known trade-based normalisation to investing in Israeli firms and partnering with Israeli businessmen in Egypt. In short, he’s an icon of normalization and has benefited personally from Egypt’s relations with Israel.
Thus, the dowry story makes a full circle: the emergence of the Gamal Mubarak camp leads to striking several deals with Israel; the business members of this camp benefit from these deals; eventually the gas deal blows its cover and causes extreme hardship in Egypt; while the camp that benefits most from deals with Israel is pushing for Gamal Mubarak’s presidency; then the hardship caused by this collapse occupies the minds of the people to the extent that they cannot follow any circles. Thus ends the circle.
The Egyptian regime has obviously gone very far for the love of Israel here—and guess what? It worked as it was designed to. Israel has just attained record electricity use levels because the “heat wave” that wreaked havoc on Egypt pushed Israel’s electricity consumption up too. In their case the increased demand went smoothly without any of the loss and agony that Egypt experienced. Clearly that is to be expected from a country with such secured fuel supply—so secured that no one dares touch it. Still, there were a few gas issues that Israel pondered on during our story period. For reasons that I don’t quite know, the Israeli government wanted to raise the retail price of natural gas. This angered some Israelis who took the street to protest the price hike. Outrageous as this may sound, they protested this endeavour by waiving Egyptian flags. It’s unclear why they did so, for the Egyptian press sufficed with publishing their photos while waving the flags. Nevertheless, it shows that our flag has become a symbol of cheap gas in the Israel—very cheap, I must add.
Mohamed Waked is an anthropologist and PhD candidate at the University of Amsterdam. He can be reached at: mohamed.waked@gmail.com.
posted by Hanan Elbadry at 11:40 PM
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