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Cablegate: Egyptian Court Seeks to End Natural Gas Exports To

VZCZCXYZ0007
PP RUEHWEB

DE RUEHEG #2373 3231614
ZNR UUUUU ZZH
P 181614Z NOV 08
FM AMEMBASSY CAIRO
TO RHEBAAA/DEPT OF ENERGY WASHINGTON DC PRIORITY
RUEHC/SECSTATE WASHDC PRIORITY 0873
INFO RUEHTV/AMEMBASSY TEL AVIV PRIORITY 1794
RUEHJM/AMCONSUL JERUSALEM PRIORITY 1083

UNCLAS CAIRO 002373

SENSITIVE
SIPDIS

NEA/ELA FOR SCHALL

E.O. 12958: N/A
TAGS: ENRG PREL ECON IS EG
SUBJECT: EGYPTIAN COURT SEEKS TO END NATURAL GAS EXPORTS TO
ISRAEL

REF: A. CAIRO 419
B. CAIRO 1359
C. CAIRO 2257
D. SIDEREAS-SCHALL EMAIL 11/2/08

Sensitive but unclassified. Please treat accordingly.

1. (SBU) The Administrative Court of Cairo ruled on November
18 that ongoing natural gas exports to Israel should be
halted because the export agreement between Egypt and Israel
violates article 123 of the Egyptian constitution, pertaining
to the protection and use of natural resources. The court
determined that the Ministry of Petroleum violated the
Constitution by allowing the state-owned Egyptian General
Petroleum Corporation (EGPC) and Egyptian Gas Holding Company
(EGAS) to negotiate a gas export agreement with the Eastern
Mediterranean Group Company (a private pipeline operator) and
Israel in 2005 without the approval of the People's Assembly.
This decision was reached by a court of first review and may
be appealed to the Supreme Administrative Court of Egypt.
Contacts in the Ministry of Petroleum are not yet willing to
discuss the verdict but a member of the public relations
office told econoff that the case does not have sufficient
merit to withstand an appeal before the Supreme
Administrative Court.

2. (SBU) According to Al Jazeera and Masrawy, an independent
Egyptian electronic news service, the plaintiff, retired
Egyptian ambassador and lawyer Ibrahim Yousri, filed this
lawsuit because the terms of the export agreement were overly
favorable to Israel and financially disadvantageous to Egypt.
Masrawy reported that Yousri is affiliated with a citizens'
group opposed to gas exports to Israel led by Mohamed Anwar
el Sadat, former member of the People's Assembly and nephew
of assassinated president Anwar el Sadat.

3. (SBU) The exact price of Egyptian gas per MMBTU to Israel
is not known but industry contacts told econoff that it is
likely under $1.50 per million British Thermal Units (MMBTU).
Egyptian gas exports to Israel have been controversial since
news of the deal became public (refs A-C) and criticism
intensified when world prices for natural gas skyrocketed to
$13 per MMBTU in the spring of 2008. Prime Minister Nazif
and Petroleum Minister Fahmy have frequently repeated since
September that the Ministry of Petroleum was renegotiating
all export contracts. The Egyptian press reported recently
that the GOE had succeeded in increasing the price per MMBTU
for its liquefied natural gas (LNG) exports to Gaz de France
and Union Fenosa of Spain to $3.12 per MMBTU from $1.78 (ref
D).

4. (SBU) COMMENT: We expect that the Ministry of Petroleum
will appeal this decision to the Supreme Administrative
Court. We do not anticipate that gas exports will be halted
pending the appeal and will continue to monitor the situation.
SCOBEY

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