Report: Israel Electric Co. May Forgive Egyptian Debt

Besides their recent collaborations on security and possibly the peace process, Israel and Egypt will soon strengthen their relationship by removing a billion dollar problem that had come between them. A report by Bloomberg said that the two countries were close to resolving a dispute over monies owed to the Israel Electric Company by Egypt. The IEC, said the report, will accept a payment of $865 million for damage to the natural gas line from Sinai to Israel, which eventually led to the closure of the gas supply to Israel.

The $865 million, to be paid off over 14 years, is actually half the amount international arbitrators said the Egyptian government owed the IEC. In a recently concluded arbitration case, it was declared that the IEC had $1.73 billion coming.

In 2008, the IEC contracted to buy gas from Egypt, with the gas flowing in a pipeline from El Arish to Ashkelon. The gas continued to flow until 2011, when, in the wake of the Arab Spring that drove Hosni Mubarak from power, gas supplies became spotty, until it was turned off altogether. The gas flow was resumed, but then a series of explosions occurred, causing further supply problems.

In 2012, Egypt said it was canceling the contract, leading the IEC to sue in international courts. The case ended up in arbitration, and last December the arbitrators ruled for the IEC – with Egypt declaring that it would not pay Israel.

Apparently this is set to change, and the settlement comes as Egypt is seeking to make a deal with Israel for natural gas. Economists said that this could be an important motivation for Egypt to settle at this time.