A
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.”
RETURN TO TOP
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?
1
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.
2
the egyptian uprising
2
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.”
F
SINCE ITS FOUNDING, ISRAEL HAS HAD A PROBLEM SECURING OIL AND GAS.
1
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
2
1
3
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.
A
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.
WATCH THIS PART OF THE INVESTIGATION
lost power
SHARE IT ON SOCIAL MEDIA
SCROLL TO READ THE STORY
Hussein Salem
A former intelligence officer turned business tycoon, Hussein Salem is the chief architect of Egypt’s energy deals with Israel. The hidden facilitator behind the Mubarak regime, during the during the 2011 uprising, he fled from Egypt to Spain, where he is also a citizen, fearing the possibility of being targeted for his hidden gas deals.
Salem worked in Egyptian intelligence throughout the 1960s and 1970s while simultaneously pursuing various business projects that would net him millions of dollars during this time period. In the 1970s, he became close to then-Vice President Hosni Mubarak. This relationship would come to benefit Salem tremendously, as he would be granted licenses to several business ventures, including access to prime real estate in the Sinai as well as oil and gas contracts.
In the 1990s Salem established the Middle East Oil Refinery (“MIDOR”) along with his Israeli associate Yossi Maiman. Salem appointed Sameh Fahmy as the head of this gas enterprise. He would later use his close relationship to Mubarak to have Fahmy appointed as petroleum minister. In the 2000s, he pursued the large gas deal through his new company, the East Mediterranean Gas company (EMG), once again with Maiman. Before the EMG pipeline connecting the Egyptian city of El Arish to Israeli Ashkelon was officially opened, Salem sold his shares and netted billions of dollars.
He was convicted by a court in 2012 along with Sameh Fahmy of selling Egypt’s natural gas to Israel for below market rates. An Egyptian court has since demanded a retrial in the case, but it is believed that the charges levied against Salem will be dropped by the public prosecutor under Sisi’s presidency, paving his way back to Egypt.
Yossi
Maiman
Like Hussein Salem, Yossi Maiman is a former intelligence agent, with Israel’s Mossad, turned business tycoon. Born in Germany and raised in Peru, he made much of his wealth with large scale business projects such as offering financing services in various parts of the world, including South America.
In 1994, Maiman teamed up with Salem to establish the Middle East Oil Refinery (“MIDOR”) in Alexandria, contributing about $250m to investments totaling $1.2bn, making millions of dollars through the project. The rest of the money came from Salem and other private investors. In 2004, Maiman described himself to then-Israeli Energy Minister Yosef Paritzky as the sole broker for selling Egypt’s gas. During that decade, Maiman founded the East Mediterranean Gas company (EMG) with Salem. Through Salem’s contacts in the Egyptian government, which included then-President Hosni Mubarak and then-Petroleum Minister Sameh Fahmy, EMG was granted exclusive access to sell Egyptian gas abroad.
EMG constructed a pipeline connecting the Egyptian coastal town of El Arish and Ashkelon in Israel to export Egyptian gas to Israel. Maiman and Salem reportedly made billions of dollars in profit from this project. Following the January 25, 2011 uprising in Egypt, however, the Egyptian military, which assumed control of the country following Mubarak’s forced resignation, acquiesced to the demands of civil society forces that organised the mass uprising, to end Egyptian export of gas to Israel.
However, because EMG was granted exclusive rights to sell Egyptian gas, which included a clause in the contract that guaranteed the company at least fifteen years of uninterrupted gas flow to Israel, Maiman is now suing the government for $8bn in alleged loss of revenue during the time the exports to Israel were halted. The case is still pending in the international chamber of commerce.
Sameh
Fahmy
Sameh Fahmy, seen as Hussein Salem’s protégé, was an engineer appointed by Salem as CEO of the Middle East Oil Refinery in Alexandria in 1997. The building of this petroleum refinery was a joint-project between Salem and Yossi Maiman.
After Salem cashed out of the MIDOR project, earning millions of dollars in the process, he arranged for Fahmy to become Egypt’s petroleum minister. Fahmy would serve in this post from 1999 until just after the 2011 uprising. During his tenure as Egypt’s petroleum minister, the Egyptian government granted the East Mediterranean Gas company, another joint Salem-Maiman initiative, exclusive authority over gas purchases from the government’s investment authority. The contract between the Egyptian government and EMG sold Egyptian gas to the private company at prices well below market value.
Following the 2011 uprising, Fahmy was imprisoned on allegations of corruption and for his involvement in selling gas to Israel under market price through EMG. He was convicted in 2012 and sentenced to 15 years alongside Salem, who by then had fled to Spain. He was released from prison, however, in early 2014, after a Cairo court ordered a retrial.
Shabtai
Shavit
Shabtai Shavit was a former director of Mossad, Israel’s foreign intelligence agency. He was a close associate of Yossi Maiman’s. Maiman employed Shavit during the development of the gas deals with Egypt, and appointed Shavit as a senior executive with the East Mediterranean Gas company (EMG), founded by Maiman and his Egyptian counterpart Hussein Salem. According to then-Israeli Energy Minister Yosef Paritzky, “Shavit was hired by Maiman in order to promote or to enhance the [Egyptian gas] deal”.
Given Salem and Maiman’s own backgrounds in Intelligence, it is likely that Shavit also drew on his extensive networks through the intelligence and business communities during this time period. According to Mika Minio-Paulello, an energy analyst, these networks “enabled them to ensure buy-in from the key elites, from the people who needed to sign off on these deals to happen”.
Hosni
Mubarak
Former Egyptian President Hosni Mubarak oversaw and sanctioned many of the gas agreements during the 1990s and 2000s between Egypt and Israel. He was notoriously close to Hussein Salem, granting Salem several business opportunities in the Sinai Peninsula through the lucrative land deals and exclusive contracts giving him access to resources there.
Following the partnership between Salem and his Israeli counterpart Yossi Maiman in the 1990s to establish the Middle East Oil Refinery (“MIDOR”) in Alexandria, Salem recommended Mubarak appoint MIDOR’s CEO Sameh Fahmy as Egypt’s petroleum minister. During the 2000s when Fahmy served as minister, the Egyptians negotiated the notorious gas deal with Israel that eventually granted the Israelis Egyptian gas at prices well below market rate. This deal went ahead with the blessing of both Mubarak and then-Israeli Prime Minister Ariel Sharon.
Following the 2011 uprising, Mubarak was imprisoned and accused of receiving bribes from Salem in the form of villas in the Sinai Peninsula, in exchange for these favours. During this transition period, the Egyptian military, which now ruled the country, acquiesced to demands by the various civil society forces that organised the uprising, and halted gas exports to Israel. Since then, lawsuits have been raised in international courts against the Egyptian government, including by EMG as well as other foreign firms, and debts have been claimed by foreign companies. These lawsuits and debts now total $20bn in claims of alleged loss of revenue during this time period. Meanwhile, Mubarak has been released from prison and is awaiting retrial.
Yozef
Paritzky
Yosef Paritzky served as Israel’s energy minister from 2003 to 2004 and had several dealings with Egyptian Petroleum Minister Sameh Fahmy over the possibility of purchasing Egyptian gas. Although Paritzky told Al Jazeera that he enjoyed dealing with Fahmy, he was extremely suspicious of the manner in which the Egyptians sought to sell the Israelis gas. He was distrustful of working with former Mossad agent and Israeli businessman Yossi Maiman, and his joint company with Egyptian business tycoon Hussein Salem, the East Mediterranean Gas company.
“It was so covert, it was so behind the scenes,” Paritzky told Al Jazeera. “It was so un-transparent that it called for attention.” Although Paritzky objected to the deal, it went ahead with the sanction of then-Egyptian President Hosni Mubarak and then-Israeli Prime Minister Ariel Sharon. But upon looking at the terms in which Israel would purchase this gas, Paritzky found the deal very favourable to Israel. “The deal was too good to be true. The prices were ridiculous,” he said.
x
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:
$1.50
$92,484,000
$459,699,000
$2,321,595,860
$1,964,319,180
$1,069,910,000
$1,861,896,860
$1,504,620,180
$610,211,000
$228,489,000
$138,726,000
$773,782,800
$681,298,800
$620,259,360
$497,777,700
$215,796,000
$169,554,000
$224,861,000
$386,583,120
$419,877,360
$760,720,700
$558,603,360
$989,209,700
$712,743,360
$525,309,120
$726,266,700
$308,280,000
$308,280,000
$453,350,000
$2.30
$3.00
$12.60
$9.10
$10.90
$11.60
$8.50
$8.00
$5.00
$5.00
$5.00
EGYPT & ISRAEL'S
ENERGY DEALS
ENERGY IN
POST-2011 EGYPT
A NEW
POWER DYNAMIC
VIEW
THE SHOW
READ
THE STORY
