Egypt’s blackouts are here to stay

After exporting gas at low prices to Israel for years, Egypt finds itself in a deepening energy crisis.

Egypt has lost billions from selling gas to Israel at a below-the-market price [EPA]

As Israeli tanks invaded Gaza in December 2008, they didn’t lead the way. Some 500 yards ahead, Israeli drones cleared the area with missiles. Even after the initial assault, Operation Cast Lead saw an enormous use of drones. On January 4, a missile hit the roof of the Habbash family home in Gaza City. Six Palestinian children had been playing on the roof seconds earlier. Two children lost their legs and 10-year-old Shaza and 12-year-old Israa were killed

Throughout Operation Cast Lead, while Palestinians sat in darkness, subsidised gas from Egypt powered the Israeli war machine. 

Pumped through a pipeline from al-Arish to Ashkelon, this transfer of cheap energy symbolised the tight economic, political and military partnership between the Egyptian and Israeli leadership. EMG, the company behind the gas transfer, was fronted by former agents from Mossad and Egyptian intelligence, Yossi Maiman and Hussein Salem. During the 2000s, they exploited their close relationships with the Israeli and Egyptian regimes to negotiate immensely profitable deals.

It paid off. Egyptian President Hosni Mubarak agreed that Egypt would sell gas to EMG at very cheap rates – far below what the gas was worth. Initial prices were set at $0.75- $1.5. And even after public opposition, the price only increased to $3. Salem and Maiman sold the gas on to the Israelis for $4.5 – pocketing the difference.

The same year, gas was being sold in Japan for $11. Egypt lost billions of dollars. My calculations showed that the revenues squandered through the deal ranged from $500m up to $1.8bn. Total losses, including from other controversial gas deals with Jordan and Spain, could be over $11bn. Neoliberal economists argue against the notion of “fair price” – but there’s no doubt that Egypt was ripped off.

Eager to get a slice of the cake, the EU piled in on the exploitation of Egyptian natural resources, pushing for pipelines to be extended towards the European grid. The European Investment Bank gave a $100m subsidy to expand the export pipeline to Jordan and has lobbied for it to run north towards Turkey and eventually into Europe.

Sisi’s options

The energy situation in Egypt is desperate. After exporting much of its gas, Egypt faces an acute fuel shortage and rising demand. Electricity blackouts are an everyday occurrence and parts of Cairo go dark four times a day, always unannounced. Streets are blocked near petrol stations with long queues of cars waiting for fuel. Many expect the crisis to escalate through Ramadan and the summer – especially as climate change could bring the hottest weather to date.

Ensconced in the Presidential Palace at Ittihadeya, President Abdel Fattah el-Sisi faces pressure to come up with answers fast. Government officials have started making promises: Egypt will go nuclear; coal imports will start; fracking will open up new gas fields in the desert; gas will be imported – from the Gulf or maybe from Israel.

Sisi’s recent economic plan included a nuclear power station in Dabaa near Alexandria. This sounds like a quick fix, and there’s an implication that Egypt might acquire nuclear weapons in the process. The price tag for the nuclear power plant is huge and disposing of nuclear waste will be costly. It is clear that the costs – whether financial or environmental – will be dumped on future Egyptian generations. Nuclear power plants being built in France and Finland are many years behind schedule. And while Egypt going nuclear might stroke some macho egos, the plants will be run by foreign companies and will just make the country more vulnerable.

In April, the government announced that Egypt will allow the import of coal for industrial use, in the face of heavy opposition. This will appease the cement lobby, but using coal for energy – whether in factories or power stations – will destroy public health and make Egypt more susceptible to fluctuating coal prices.

Energy companies are pushing to expand fracking for gas: Halliburton claims that Egypt has large shale gas reserves in the Western Desert. But fracking requires enormous amounts of water and will deplete the Nubian Sandstone Aquifer. Egypt is already facing water scarcity and rising temperatures in coming years mean agriculture will require more irrigation. The free fuel from Saudi, Kuwait and the UAE will most likely come to an end this autumn, although behind closed doors, Egypt is negotiating for long-term gas imports.

The Israelis have started exploiting large gas fields in the East Mediterranean. But building dependence on the Israeli state would hand the Israelis another weapon for its arsenal of political control. It would hang a yoke around the neck of Egyptian politicians and ensure continued collaboration in the oppression of Palestinians. The same applies to imports from Saudi Arabia – another neighbour eager to influence Egypt’s political direction. If Egypt does sign long-term deals, it would be better off sourcing it from Libya (which has the closest large gas reserves to Cairo) or Algeria or further afield.

Short-sighted solutions

Nuclear, coal, fracking and importing gas are all short-sighted solutions that dump enormous costs on future generations. The only solution is a rapid transition to renewable energy, which could deliver energy to the Egyptian people, create a wealth of jobs, and reduce dependence on bullying neighbours. Egypt has enormous solar energy potential – Europe has been considering it for years, hoping to lock the Egyptian desert into the European electricity grid.

But achieving energy justice in Egypt is more than a matter of Sisi choosing the energy source. It’s not only about the technology, but also how it is governed and who controls it.

The old gas export contracts were created by corrupt networks of government officials, intelligence agencies and elite businessmen who stole the public wealth of the Egyptian people. Those networks were never dismantled and still exist today.

The energy negotiations with the Israelis, Saudi Arabia, and BP on its North Alexandria field – all are veiled in secrecy. There is no space for public debate and the population is cut out of the decision-making process. This smacks of the arrogance of the 2000s and is reminiscent of Salem and Maiman. It’s hard to imagine how things will be different under Sisi. Without a change to the structures of power, corruption will repeat itself and the interests of Egyptians will be subjugated to profiteering companies.

Finding a solution to Egypt’s energy crisis is impossible without democracy. It won’t happen while activists such as Alaa Abdel-Fattah and Mahienour el-Massry are rounded up and jailed, and corrupt elite businessmen like Salem are welcomed.

The decisions on Egypt’s energy future will be as political as those in the past, when Egyptian gas powered Israel’s military occupation of Palestine.

Mika Minio-Paluello works for the energy think-tank Platform and is co-author of The Oil Road: Journeys from the Caspian Sea to the City of London (2012). Based out of Cairo, Mika challenges the power of private oil companies and works with North African front-line communities facing oil extraction and climate change.

Follow him on Twitter: @mikaminio