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Although the widespread energy shortage was initially created to increase popular resentment against Morsi and support for his removal by the military, Egypt’s energy sector has continued to struggle in the past year. As the general who led the coup in July 2013, Abdel Fattah el-Sisi, assumes office as Egypt’s new president, he is faced with a massive energy crisis across the country.

 

To make matters worse, after the Egyptian military in 2012 acquiesced to the demands of the revolutionary forces and cut off gas supplies to Israel, Yossi Maiman, through EMG, filed a lawsuit against the Egyptian government.

 

In it, EMG accuses the government of violating the contract signed years earlier under Mubarak’s presidency that entitles EMG to 15 years of uninterrupted gas exports to Israel. The lawsuit was raised in international courts rather than in Egyptian national courts, leading some analysts to question the role of Egypt’s sovereignty in the dispute.

These gas imports would be done through another private firm currently leading Israel’s exploration in the Mediterranean, the US-based Noble Energy.

 

Just a few months after the Egyptian government lifted the trading restrictions, Noble Energy and the Spanish firm Union Fenosa issued a joint letter of intent stating that the former would supply natural gas from “offshore Israel to [the latter’s] gas liquefaction facilities” in Egypt. These facilities would be used to freeze the gas into a liquid, so that it could then be transported by tanker rather than pipeline, and sold in far greater volume elsewhere.

 

To make any future commercial deals with Israel, the Egyptians would be required to give more than just access to these plants. Israel is also seeking a commitment for ships to have access to the Suez Canal to transport gas to lucrative markets in Asia.

“Under the Morsi government, there was no confidence that Egypt would allow such shipments to go through the Suez Canal,” said Simon Henderson, director of the Gulf and Energy Policy program at the Washington Institute for Near East Policy. “The change in government has meant that this potential can be re-examined.”

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Egypt's

Director & Executive Producer

PHIL REES

Cameraman & Editor

ADRIAN BILLING

Cameraman

MANNY PANARETOS

Assistant Producer

TESSA BRYSON

Sound mixer

LINUS BERGMANN

Colorist

GEORGE JOSEPH

Text

ALI AL-ARIAN

Hussein Salem, a former intelligence officer on the Egyptian side, conducted deals with Yossi Maiman, a former intelligence agent with Israel’s Mossad. Hussein also assigned his protégé, an engineer named Sameh Fahmy, to oversee MIDOR.

FROM EXPORT TO ISRAEL

FROM EXPORT TO JORDAN

FROM EXPORT TO SPAIN

EMG is seeking $8bn in alleged losses caused by the Egyptian government. This is in addition to a $6bn lawsuit by a Spanish firm, Union Fenosa, against the Egyptian government for their alleged failure to adequately supply gas to Spain.

 

The Egyptian government now faces lawsuits in international courts due to alleged violations of contracts detailing gas deals signed under Mubarak’s presidency, as well as debts claimed by foreign companies that total $20bn in international courts.

Facing public pressure due to widespread energy shortages that resulted from years of mismanagement during and after the Mubarak era, as well as lawsuits on the international stage, the Egyptian government, led by Sisi, seems to be heading in a direction that will allow private firms to begin importing gas from Israel. “That seems like more of a compromise that lets Hussein Salem and Maiman keep making lots of money,” Mika Minio-Paluello, an energy analyst, told Al Jazeera.

 

Former petroleum minister Sameh Fahmy has been released from custody after an Egyptian court ruled that there should be a retrial, while the charges against Hussein Salem are expected to be dropped, at which point he is likely to return to Egypt. Meanwhile, Egypt’s hidden energy industry is back on track.

The Egyptian army’s supreme military council, which was overseeing the post-Mubarak transitional period, was forced to acquiesce to the calls by revolutionary forces to halt gas exports to Israel.

 

After Mohamed Morsi entered office in June 2012, following the first free and fair presidential election in Egypt’s history, he sought to confront the rampant corruption in the energy sector. Sameh Fahmy and Hussein Salem, who had already left to Spain where he has been living in exile, were sentenced to 15 years in prison for their roles in selling natural gas to Israel at below market rates.

 

Just as Morsi’s tenure in office was short-lived, so too was his attempt to confront the corruption in the energy sector. “President Morsi was facing a lot of pressure with all this network of corruption that exists in the intelligence, in the military,” Hatem Azzam, the Egyptian MP in 2012, told Al Jazeera. “This energy corruption network was one of the strongest reasons why the leaders, the army generals, decided to make the coup over Morsi.”

Through Salem’s strong connections to Egyptian President Hosni Mubarak and Fahmy, he was able to secure a contract that would entitle EMG to Egyptian gas at a price well below market rate, to then sell to the Israelis cheaply, with the help of his business associate, Maiman.

 

“In the same year [2008], gas was being exported in other countries for...vastly more, up to eight times more than what the Egyptians were receiving,” Mika Minio-Paluello, an energy analyst, told Al Jazeera. By 2010, he continued, EMG owners Hussein Salem and Yossi Maiman “were receiving [the gas] from the Egyptians for $3 and then selling it on to the Israelis for $4.50 and basically pocketing the difference”.

ALTHOUGH THE STORY OF EGYPT AND ISRAEL’S ENERGY RELATIONSHIP SPANS DECADES, VERY FEW PEOPLE WERE INVOLVED IN BROKERING THESE DEALS.

DURING THE 1990s AND 2000s, HUSSEIN SALEM, YOSSI MAIMAN AND THE OTHERS INVOLVED POCKETED BILLIONS OF DOLLARS THROUGH THEIR LUCRATIVE EGYPTIAN-ISRAELI GAS DEALS. BUT AT WHAT COST TO THE EGYPTIAN STATE DID THESE DEALS TAKE PLACE?

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the price of power

Using confidential documents obtained by Al Jazeera, energy analyst Mika Minio-Paluello calculated the amount of money the Egyptian people lost in these gas deals.

energy

A wide coalition of demonstrators, eventually backed by Egypt’s military, forced President Hosni Mubarak out of office on February 11, but not before Hussein Salem was able to flee the country to avoid arrest.

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the egyptian uprising

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egypt faces

In the lead-up to the July 3, 2013 military coup that overthrew President Morsi, the country’s energy shortage was an issue that gave way to much resentment against Morsi’s government among Egyptians.

 

“Egypt’s desperate. There are queues outside petrol stations. Almost every night there’s a blackout. You never know when it’s going to be,” Mika Minio-Paluello, an energy analyst, told Al Jazeera. But the shortages during Morsi’s tenure appear to have been intentionally set up.

 

“The Egyptian military used the supply of gasoline in the gas station as a weapon to throw off Morsi,” Azzam said. “One day after the coup, all these queues have disappeared and everything goes back to normal.”

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SINCE ITS FOUNDING, ISRAEL HAS HAD A PROBLEM SECURING OIL AND GAS.

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energy deals

EGYPT IS FACING A GAS CRISIS DESPITE IT HAVING BEEN, UNTIL AS RECENTLY AS 2010, ONE OF THE LARGEST GAS PRODUCING COUNTRIES IN AFRICA. HOW DID IT REACH THIS POINT?

 

AL JAZEERA INVESTIGATES THE HIDDEN STORY OF EGYPTIAN ENERGY, HOW TYCOONS CASHED IN AS A NATION LOST OUT, AND HOW EGYPT MAY BECOME DEPENDENT UPON ISRAEL FOR ITS ENERGY.

ALLEGATIONS OF CORRUPTION, IN ADDITION TO THE POLITICAL CONTROVERSY SURROUNDING THE GAS DEAL WITH ISRAEL, CONTRIBUTED TO THE UPRISING THAT SWEPT EGYPT ON JANUARY 25, 2011.

An Al Jazeera investigation by

CLAYTON SWISHER

Investigative reporter

CLAYTON SWISHER

HOW THE STORY UNFOLDS:

CLICK EACH PORTRAIT FOR MORE

ALTHOUGH THE 2011 UPRISING BROUGHT WITH IT THE FORCED RESIGNATION OF HOSNI MUBARAK ALONG WITH THE PROMISE OF FREE AND FAIR ELECTIONS, EGYPT’S ENERGY SECTOR REMAINED IN THE HANDS OF THE POWERFUL.

DESPITE THE PROMISES THAT CAME FROM EGYPT’S MILITARY FOLLOWING THE JULY 2013 COUP, FORMER ARMY CHIEF AND NOW PRESIDENT ABDEL FATTAH EL-SISI HAS YET TO ANNOUNCE A PLAN TO SOLVE EGYPT’S ENERGY CRISIS.

Egypt's

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A LOOK INTO THE HIDDEN HISTORY OF EGYPT AND ISRAEL'S ENERGY RELATIONSHIP

HOW THE 2011 UPRISING SHOOK THE FOUNDATIONS EGYPT'S BUSINESS TYCOONS OPERATED ON

FACING ITS OWN ENERGY CRISIS NOW, EGYPT MAY BECOME DEPENDENT ON ISRAELI GAS

fter Israel occupied the Sinai Peninsula in 1967, it extracted oil from the territory throughout the 1970s. In 1979, the Camp David Accords returned the Sinai to Egypt, but it also ensured that Egypt would supply oil to Israel in the years to come.

 

“Those Accords guaranteed Israel the right to bid on oil supplies from the Sinai Peninsula,” Professor James Stocker of Trinity Washington University told Al Jazeera. Because Israel became increasingly dependent on oil from the peninsula during the 1970s, “they wanted to ensure that they continue to meet their energy needs using those oil fields,” he said. In addition to this energy supply, the Accords brought together the two countries’ military and intelligence services, in a relationship that has now lasted for decades.

 

In 1994, following the Oslo Accords, in which the Palestinians formally recognised Israel, Egypt and Israel were in an even easier position to further the normalisation process. That year alone, Israeli investments were made in a $1.2bn petroleum refinery in Alexandria, called the Middle East Oil Refinery or “MIDOR”. The deal brought together individuals from Egyptian and Israeli intelligence.

Following this initiative, Fahmy, with the help of Salem, became Egypt’s petroleum minister. “The presence of Sameh Fahmy as minister defines a new era for the energy sector in Egypt, where the resources were managed by the Intelligence of Egypt,” Hatem Azzam, who was a member of parliament in Egypt in 2012, told Al Jazeera.

 

With Fahmy as oil minister, Salem was able to establish a private company, the East Mediterranean Gas company (EMG) with his Israeli counterpart, Maiman. EMG would build a pipeline connecting the Egyptian coastal city of El Arish to Israel’s Ashkelon with one purpose: to supply Egyptian natural gas to Israel.

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lost power

lost power

who was involved?

a new power dynamic

Egypt and Israel's

an energy crisis

in post-2011 Egypt

HUSSEIN SALEM

YOSSI MAIMAN

SAMEH FAHMY

nger at the export of gas to Israel remained even after the daily protests culminated with Mubarak’s forced resignation. At least 15 bombings of pipelines in the Sinai eventually brought the flow of gas into Israel to a halt in 2011.

ollowing the recent discovery of natural gas in the Mediterranean, most of which has been claimed by Israel, Sisi is now attempting to secure gas imports from Israel, at a less amicable price than Israel enjoyed from the Egyptians only a few years ago.

 

In January 2014, Sisi took the first step toward this initiative, when his military-backed government lifted restrictions on private oil and gas companies operating in Egypt, allowing them to import gas from any foreign entity.

Designer

KONSTANTINOS ANTONOPOULOS

SHABTAI SHAVIT

HOSNI MUBARAK

YOSEF PARITZKY

These men used their extended networks
in the intelligence and business communities
to secure the billion dollar gas deals.

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PRICE OF SALE
TO ISRAEL

PRICE IF EGYPT
SOLD TO JAPAN

PRICE IF EGYPT
SOLD TO GERMANY

PRICE IF EGYPT
SOLD TO SYRIA

EARNINGS IF EGYPT
SOLD TO JAPAN

TOTAL AMOUNT LOST

vs JAPAN

EARNINGS IF EGYPT
SOLD TO GERMANY

TOTAL AMOUNT LOST

vs GERMANY

EARNINGS IF EGYPT
SOLD TO SYRIA

TOTAL AMOUNT LOST

vs SYRIA

EARNINGS FROM
ISRAEL SALE

ACTUAL AMOUNT

ACTUAL AMOUNT

AMOUNT LOST

AMOUNT LOST

TOTAL AMOUNT LOST

TOTAL INCOME

TO EGYPT

$1,861,896,860.00 + $3,839,518,414.27 + $6,186,102,630.00

$11,887,517,904

These deals “add up to a total loss to the Egyptian people of possibly over $11bn. Almost all of these involved Hussein Salem at some point in time arranging the deals.”

WATCH THIS PART OF THE INVESTIGATION

MIKA MINIO-PALUELLO, ENERGY ANALYST

Al Jazeera:  “How much money will you be satisfied to take from the Egyptians?”

 

Yossi Maiman: “I'll settle for 50 billion.”

Although Salem was sentenced in absentia to 15 years over his involvement in the gas deals with Israel,
an Egyptian court has recently ordered a retrial.

AL JAZEERA TRACKS DOWN YOSSI MAIMAN. WATCH HERE:

HUSSEIN SALEM FLED TO SPAIN DURING THE 2011 UPRISING. WATCH HERE:

EGYPT & ISRAEL'S
ENERGY DEALS

ENERGY IN
POST-2011 EGYPT

A NEW
POWER DYNAMIC

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