Former minister jailed for 15 years over Egypt-Israel gas deal

CAIRO // A criminal court yesterday sentenced a former oil minister and a businessman to 15 years in prison for their role in selling Egypt’s natural gas to Israel.

Together with five other former energy officials, who were also given prison sentences, they were fined a combined US$2.1 billion (Dh7.7bn). They were convicted of “hurting the country’s interest” and “enabling others to make financial gains”, according to the prosecutor general.

The sentences mark another twist in the tangled history of Egypt's agreement to export gas to Israel. The 20-year deal, signed in 2005, was seen as a way to cement economic normalisation between the two countries. But from the beginning, the prosecutor general's office alleged that the price was set below market prices and that Egypt was helping subsidise Israel's military through the deal.

After the January 2011 uprising that toppled Hosni Mubarak from the presidency, the deal came under attack from revolutionary groups and critics who said the deal was one of the former president’s worst crimes. The pipeline was bombed by unknown assailants 14 times between January 2011 and April 2012. In the latter month, the Egyptian government terminated the contract with East Mediterranean Gas (EMG), the owner and operator of the pipeline, contending that EMG has stopped paying its bills.

The public prosecutor last year filed cases against Hussein Salem, a businessman with links to Mubarak who was also a founder of EMG; the former oil minister Sameh Fahmi; and several officials.

Salem, who is awaiting extradition from Spain on separate corruption charges, and Fahmi, who has been detained since last year, were each sentenced to 15 years in prison yesterday.

Five other officials also were sentenced. Mohamed Ibrahim Yousef Tawila, the former chairman of Egyptian Natural Gas Holding Company (Egas) and former president of EMG, was sentenced to 10 years. Three officials were sentenced to seven years each: Ismail Karara, the former undersecretary for gas affairs at the ministry of petroleum; Mahmoud Latif, another former oil minister; and Hassan Akl, a former deputy head of Egyptian General Petroleum Corporation (EGPC). Ibrahim Saleh, former head of EGPC, was sentenced to three years in prison.

Mubarak and his sons were this month found not guilty of charges that they had bought four villas in Sharm El Sheikh from Salem in exchange for political favours related to business deals – including the gas contract – because the statute of limitations on the case had expired. Salem, who founded EMG in 2000 with an Israeli partner Yosef Maimen, was instrumental in the first eight years of the negotiations and deal for Egypt to sell gas to Israel. He sold all his shares in 2008.

The case yesterday was based on a claim from the government that the ministry of petroleum and EMG sold gas to Israel at “below-market prices”, causing the country to lose more than US$714 million worth of income.

Lawyers for the defendants denied they had caused losses to the Egyptian government, providing an expert’s report that showed Egypt receiving the same “netback” – income after transportation and other costs – as other countries in the region, such as Qatar.

That contract’s cancellation is now the subject of lawsuits from EMG’s shareholders and arbitration cases between Israel Electric Corporation, EMG and the Egyptian government. The shareholders of EMG – from Turkey, Poland, the United States, Israel and Thailand – are suing the Egyptian government for $8 billion in damages.

Israel had used Egyptian natural gas for about 40 per cent of its needs before the attacks on the pipeline. It has had to seek more expensive and polluting alternatives to fill the gap since then, but the country has recently discovered gas reserves that analysts say are likely to mean that, within several years, it no longer needs to import natural gas.

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* With additional reporting by Agence France-Presse and Bloomberg News

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