Gas and Gaza: Energy Pact Tests Israel–Egypt Relations
A $35 billion Leviathan supply agreement collides with wartime politics as Jerusalem and Cairo test how far energy ties can stretch without breaking
[Cairo] Israel’s largest-ever natural gas export deal has become the flashpoint of a new war of words between Jerusalem and Cairo, raising fears that energy and politics are colliding just as Egypt is trying to contain the humanitarian crisis in Gaza.
At issue is a $35 billion contract to sell gas from Israel’s Leviathan field to Egypt through 2040. The agreement—hailed as a landmark partnership—unites Chevron, NewMed Energy, and Ratio Energies on the Israeli side with Egypt’s Blue Ocean Energy, which planned to route gas into Egypt’s power grid and export terminals. In late August, Israel Hayom, a free daily owned by Miriam Adelson—widow of casino magnate Sheldon Adelson and a major political donor—ran a series of articles portraying Egypt as a hostile power that violated the 1979 Camp David Accords by moving tanks and troops into Sinai.
Days later, the paper reported that Prime Minister Benjamin Netanyahu had instructed Energy Minister Eli Cohen to re-examine the Leviathan deal “in light of Egyptian violations of the peace treaty.” The report itself noted that Netanyahu’s decision followed “publications in Israel Hayom,” blurring the line between commentary and news.
I advise Netanyahu and tell him, I hope he cancels the gas agreement with Egypt, if he can bear the economic consequences, not the political ones. He will be the loser.
Egypt’s response was swift. Diaa Rashwan, head of the State Information Service, said on television: “I advise Netanyahu and tell him, I hope he cancels the gas agreement with Egypt, if he can bear the economic consequences, not the political ones. He will be the loser.”
Amr Adib, one of Egypt’s most-watched talk show hosts, told viewers that Netanyahu had “no honor” but cautioned Egyptians not to be swept into war fever. “Egypt’s first solution is never war,” he said, emphasizing the country’s military strength while urging restraint.
Economist and former lawmaker Mohamed Fouad sought to ground the debate in business terms. “The prime minister who is speaking does not have the right to cancel it,” he told Adib. “The agreement is commercial, led by Chevron and NewMed, not a government deal.”
In a separate interview with The Media Line, Fouad added: “Even in a doomsday scenario where Israel halts supplies, Egypt would convert from pipeline gas to LNG [liquified natural gas]. The cost is higher—about $2.5 billion more per year—but the system can absorb it.”
Fouad explained that the contract’s second phase—expanding supply from 1.1 to 1.6 billion cubic feet per day—requires mutual approval. “Complete cancellation would entail billions of dollars in compensation,” he said. “And if Netanyahu wanted to interfere with current flows, his problem would be with Chevron, NewMed, and Ratio—not just Egypt.”
The uproar has highlighted Egypt’s precarious energy balance. Output at the giant Zohr gas field, operated by Italy’s Eni, has fallen roughly 40% because of technical issues, forcing rationing even as Cairo continues exporting liquefied gas to Europe. To fill the gap, Israeli supplies routed through Egyptian LNG terminals have become a lifeline.
In June, during the 12-day Iran–Israel war, Israel shut down production at its Leviathan and Karish fields, halting exports to Egypt. Cairo responded by ordering fertilizer plants and other factories to suspend operations while power plants switched to more costly fuels. Still, higher volumes of Israeli gas overall meant that households in Cairo kept their lights and air conditioners on through the summer—an achievement the government of President Abdel Fattah el-Sisi touted, noting that outages were fewer than last year even in outlying governorates.
Fouad said Egypt is not trapped. “This actually happened last May when the field was shut down for 16 days during missile attacks,” he recalled. “We managed without disruption. The infrastructure can handle the alternatives.” He pointed to future agreements with Cyprus’ Cronos and Aphrodite fields, expected to deliver 1.3 billion cubic feet per day by 2028. “That is equal to what we receive from Israel today,” he said. “Diversity of sources is key, and our infrastructure is capable of it.”
Reliability Above All
Israeli analysts also question whether Netanyahu is truly considering a suspension.
Elai Rettig, assistant professor at Bar-Ilan University and senior researcher at the Begin-Sadat Center for Strategic Studies, said he had “no confirmation that this is something senior officials are seriously discussing.”
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“The Leviathan agreement was meant to be the biggest energy deal in Israel’s history,” Rettig told The Media Line. “Netanyahu has always been a strong supporter of what he calls ‘pipeline diplomacy,’ using natural gas exports to build regional ties. For him to suddenly suspend or freeze a deal of this magnitude would be completely out of character.”
Reliability comes before price, before sustainability. If a country cannot trust its supplier, it will not sign long-term contracts.
Rettig warned that reliability is the foundation of energy security. “Once you use gas as a political weapon, you undermine trust,” he said. “Reliability comes before price, before sustainability. If a country cannot trust its supplier, it will not sign long-term contracts.”
The stakes for Egypt are high. “Israel had to shut down production at the Leviathan field for security reasons, and that led to a halt in exports to Egypt,” Rettig explained. “The result was blackouts. Under Mubarak, outages were common. President Sisi has always tried to distinguish himself by promising the electricity would stay on.”
Even with Israeli gas, Rettig noted, demand in a country of 110 million far outstrips supply. “That is why Cairo is also working to develop its own fields, but that will take three to seven years.”
Natural gas cannot be managed like a political tap you open and close at will. You will chase away future customers.
He also stressed that regional export ambitions depend on trust. “There are ideas about sending Israeli gas not only to Egypt but eventually to Lebanon and Syria, and even to Turkey in the longer term. Some politicians frame this as part of the Abraham Accords. But none of this will come true if Israel starts using gas as a political weapon. Natural gas cannot be managed like a political tap you open and close at will. You will chase away future customers.”
Ofir Winter, senior researcher at Tel Aviv University’s Institute for National Security Studies, said gas cooperation is “a shared strategic interest for both countries” that involves major international stakeholders. “Energy relations have been one of the rare bright spots during the war,” he said. “They should not be subjected to politicization.”
Still, Winter acknowledged fragility. Since the war began, new projects have been paused due to political risk and investor hesitation. “But the underlying logic of decoupling energy from military disputes remains intact,” he said. “Geographic proximity, the absence of viable alternatives, and the mutual benefits of energy flows make this cooperation difficult to replace.”
Gaza ‘Red Line’
Egypt will never be a gateway for displacement
The gas storm coincided with another flashpoint. Netanyahu suggested in a Telegram interview that Palestinians could exit Gaza through Rafah, the crossing into Egypt. Cairo reacted furiously, calling the remarks an attempt at ethnic cleansing. “Egypt will never be a gateway for displacement,” its Foreign Ministry said.
Foreign Minister Badr Abdelatty repeated the warning in a call with US Special Envoy Steve Witkoff, saying Israel’s delay in responding to a ceasefire plan brokered by Egypt and Qatar was “prolonging the bloodshed and worsening the humanitarian catastrophe.”
Reporting by Egypt’s state-owned Al-Ahram stressed that Cairo’s stance has been consistent since 1948: Palestinians must remain on their land and achieve statehood. Retired Air Vice Marshal Hesham Halaby said displacement schemes were “not new” and had been repeatedly blocked by Egypt and its allies. Brig. Gen. Khaled Okasha said Netanyahu’s words showed “total disregard for international law.”
Sara Sharif, analyst of Israeli affairs and columnist for Al-Dostor, told The Media Line that Netanyahu’s accusations about Egypt keeping Rafah closed “underscore how quickly mistrust between Cairo and Tel Aviv can grow.” She added: “Israel knows it cannot afford to appear as the sole obstacle to humanitarian relief.”
Sharif said Israel’s “fortress mentality” is designed to prevent another Oct. 7 by locking down borders and keeping hostile groups away. But with Egypt, she said, the calculus is different: “Despite recurring strains, the two countries share a peace treaty and neither side wants a fight. Cairo is not seen as a front like Lebanon, Syria, Yemen, or Iraq. Both governments continue to calculate that stability is the greater interest.”
A Test of Stability
The United Arab Emirates, widely seen as the linchpin of the Abraham Accords, sided with Egypt in condemning Netanyahu’s words as “a dangerous continuation of occupation policy.” Unlike Bahrain, Morocco, or Sudan, the UAE brought financial weight, diplomatic reach, and military cooperation to the 2020 accords, making it the keystone that gave the agreements momentum. Emirati investments and joint ventures with Israel turned normalization from a declaration into a strategic framework.
Saudi Arabia also issued statements of solidarity with Egypt, underscoring how displacement has become a galvanizing regional concern. Yet the dispute is tied to energy realities as much as politics.
Background helps explain the stakes. The East Mediterranean Gas (EMG) pipeline originally carried Egyptian gas to Israel, but repeated attacks in Sinai and contractual disputes ended those flows in 2012. In 2019, the pipeline was reversed so Israeli gas could flow to Egypt; when EMG was shut in October 2023, limited volumes were diverted via Jordan until the route stabilized. Today, Egypt liquefies pipeline gas at Idku and Damietta for export.
The Leviathan agreement itself reflects the scale of interdependence. Chevron, which operates the field and holds a 40% stake, leads the partnership alongside NewMed Energy at 45% and Ratio Energies at 15%. On the Egyptian side, the buyer is Blue Ocean Energy, tasked with channeling the gas into the power grid and export facilities.
Under the new arrangement announced in August, the partners plan to supply roughly 130 bcm to Egypt by 2040 in two phases, including a new transmission link via Nitzana after Leviathan’s expansion.
Behind the heated rhetoric, the fundamentals of gas cooperation remain. Egypt’s weakened production capacity has left it reliant on Israeli supplies, even as it tries to preserve its traditional role as mediator in the conflict. Israeli exports through Egyptian terminals give Jerusalem critical revenue and a route to Europe.
Rettig said tampering with such a deal for political reasons would be reckless. “Energy reliability is everything,” he said. “If Israel starts playing politics with gas, it will lose Egypt and future customers too.”
Winter agreed. “Energy ties are not business as usual,” he said, “but they have proven to be one of the few remaining stable bridges in the region. That is why it is so important to preserve them from politicization and maintain them as a shared strategic interest.”
