Who Pays for Egypt’s Israeli Oil Dependency?

Israel Halts Oil Exports to Egypt as a “Security Measure”
By Alwaan Tadros

The Zionist State invoked the “force majeure” clause in its energy supply contract with Egypt to halt gas exports indefinitely, shortly after its joint military strikes on Iran alongside the U.S. Egypt now faces severe challenges meeting domestic energy demands.

The clause exempts both parties from liability of non-compliance in cases of “unforeseen and exceptional events” such as wars or strikes. Yet Egypt reliance on a supplier whose regional military actions routinely generate precisely these “exceptional events,” demonstrates that this dependency reflects less than an oversight and more of a deliberate gamble. In such an arrangement, the resulting risks, manifested through shortages, inflation, and economic instability, are borne primarily by the Egyptian working class, while ruling elites and capitalist actors involved in structuring these agreements continue to reap the financial and political benefits.

Immediate Effects on the Egyptian Economy

Although Egypt produces and refines its own oil, current production levels remain insufficient to meet domestic needs. Domestic fuel oil production accounts for only 12% of Egypt’s domestic electricity generation, leaving the country heavily reliant on imported energy supplies, with Israeli gas constituting 72% of its oil imports.

The situation is further exacerbated by broader regional disruptions. The closure of the Strait of Hormuz, combined with reduced production in Qatar and Saudi Arabia, has triggered sharp increases in global energy prices. Consequently, Egypt faces increased costs for alternative energy imports, which were already more expensive than the Israeli supply pre-war.

Adding to this disaster, Egypt’s financial markets have already responded to these developments. By Monday, there was a notable outflow of foreign capital, which then contributed to the further depreciation of the Egypt pound, which reached 49 EGP per U.S. dollar, its weakest since July 2025.

Simultaneously, global shipping disruptions have forced companies like Maersk and CMA CGM to reroute vessels around the Cape of Good Hope, reducing Suez Canal traffic and therefore depriving Egypt of much-needed revenue.

Tourism, another critical pillar of Egypt’s economy, has also began to suffer as regional flight cancellations and security concerns by tourists have already led to a decline in travel to Egypt.

Despite the Petroleum Ministry’s assurance that consumer prices will remain stable and that electricity generation would be uninterrupted, historical precedents suggest otherwise. Previous Israeli-enforced supply interruptions in October 2023, May 2025, and June 2025 produced domestic effects that can be expected now.

For example, when gas imports declined in May 2025, authorities immediately reduced natural gas supplies to fertilizer and methanol plants by 50% and only refrained from implementing residential electricity blackouts in order to avoid generating public resentment following the prolonged blackouts in June of the previous year as a result of natural gas shortages. Furthermore, fuel price increases for households remain plausible, especially after yesterday’s increase in butane gas recently and as Egypt continues reducing fuel subsidies to comply with IMF and EU loan conditions.

Considering these past precedents, alongside the addition of the Suez Canal disruptions and the global energy crisis, these developments create strong inflationary pressures. Rising energy costs, a depreciating currency, and declining foreign revenue streams are likely to increase the price of both imported and domestically produced goods, including wheat, cooking oil, and pharmaceuticals for everyday Egyptians.

Why Does Egypt Depend on Israeli Gas

Three factors contributed to Egypt’s reliance on Israeli gas. The first is the sharp decline in production from Egypt’s largest offshore gas field, Zohr. Begining in 2021, Zohr experienced rapid decrease in output, with production falling by 26% in 2023-2024. As a result, the decline forced Egypt to reduce its own gas exports by 75% in 2022, while simultaneously increasing imports of Israeli gas by 17%.

A second factor lies in Egypt’s role within regional energy markets. Since Israel lacks liquefaction infrastructure, Egypt imported Israeli gas, liquefied it, and then exported it to Europe at a profit. Following the outbreak of the Ukraine war, European demand for alternative energy sources surged and Egypt responded by rapidly exporting large quantities of LNG, therefore depleting domestic reserves without establishing sufficient plans to replenish supply or discover new gas fields.

Mismanagement and ill preparedness aside, the reason Egypt began to normalize relations with Israel by fueling it in its venture to steal Palestinian oil and therefore came to be dependent on it, spans over two decades and has a much more sinister reason for it. This brings us to the third and final factor: hidden vested interests by actors in the Egyptian State, specifically intelligence services.

The original gas agreement in 2001 involved the East Mediterranean Gas Company (EMG), which transported Egyptian gas to Israel. At the time, the government maintained that EMG was a private company operating independently of the state.

Following the 2011 Egyptian Revolution, widespread public opposition to these agreements emerged, and repeated pipeline attacks disrupted gas exports to Israel. In response, the government suspended exports, and in 2012 the businessman Salem Hussein and others associated with the deal were convicted of causing $715 million in losses to the Egyptian state by selling gas to Israel at significantly below-market prices. Not only were he and other capitalists profiteering off of natural resources only for their own benefit, so was the state, as the businessman himself stated in an interview that all his projects at EMG “were merely fronts for the intelligence services.”

Under the Sisi regime, energy cooperation with Israel resumed, although the direction of supply was reversed, with Egypt now importing Israeli gas Several major agreements followed, most notably the $15 billion 2018 deal between Israeli Dolphinus Holdings and Egyptian East Gas, which the government again described as a private market transaction. Subsequent instigative reporting, however, revealed that East Gas is majority-owned by Egypt’s General Intelligence Service (GIS), whose representatives dominate the company’s board and reportedly receive 80% of its revenues. The arrangement is further obscured by a network of offshore shell corporations that conceal the ultimate beneficiaries of the contracts, allowing intelligence actors to profit at all levels of the deal, from gas transportation to the resale to the Egyptian government, all with public funds.

These obscure undemocratic arrangements have significant economic implications on working class Egyptians. Key actors have been able to shield themselves from public accountability while capturing substantial financial returns. At the same time, Egypt’s reliance on imported gas imposes higher costs on the national economy, as importing gas is considerably more expensive than producing domestically. Consequently, public resources are increasingly directed towards financing these imports rather than supporting the development of domestic energy supplies or funding essential social services and subsidies.

What’s Next

Previous disruptions in Israeli gas exports demonstrate that such shocks quickly translate into broader social and political tensions, just as it did in Aswan two years ago. During the June 2024 electricity blackouts, the result was 40 deaths, which then sparked protests that participants described as a “Dignity Revolution.” Demonstrators called for the ousting of Sisi and were met with police repression and mass arbitrary arrests.

For the residents of Aswan, these deaths were not understood as the inevitable consequence of extreme weather but as evidence that the state had failed to uphold its side of the social contract by providing them with basic necessities such as electricity and reliable infrastructure.
A similar recognition is necessary in the present moment. Public discourse must increasingly draw attention to the relationship between the economic burdens now facing Egypt’s working class and the political and economic decisions made by ruling elites. The hardships produced by energy shortages, inflation, and declining public services are not evenly distributed; rather they reflect a system in which the costs of economic dependency are borne by the broader population while the benefits of these arrangements accrue to political and capitalist elites. In this sense, the relationship is mutually reinforcing: policies that serve elite interests simultaneously generate the economic precarity experienced by the working class.

Furthermore, those same policies that benefit the elite also generate humanitarian disasters regionally and globally beyond Egypt’s borders, as the issue of Israeli gas is intimately tied to the genocide Palestinians are facing. Yet regardless of an ongoing genocide, Egypt struck yet a new oil deal in December worth a staggering $35 billion with Israel.

Recognizing these connections is a necessary precondition for meaningful political mobilization. When the causes of economic hardship and the actors who benefit from it become clear, collective solidarity and movement can emerge, allowing citizens to challenge both the normalization of energy dependency on a genocidal state and the structures that enable political and economic actors to profit from crises that impose significant costs on the broader population.