Even at their best times, Egypt-Israel relations were anything but warm. However, the inter-economic cooperation witnessed a revival during the last decade of Mubarak's rule. Sherine Abdel-Razek sheds light on the depth of these connections Up to the signing of the Camp David peace treaty in 1979, Israel was the enemy state for the Egyptian people and government; an enemy that not only threats its borders but killed thousands of Egyptian soldiers in four wars. The hard feelings never went away but politics, money and business talk had a higher voice in the years that followed the treaty. Deals were done in secret at the beginning but when the economic cooperation was stamped by agreements on government levels, especially with the US linking its aid programme to the peaceful co- existence between Egypt and Israel, things changed. Egyptians got used to seeing Israeli tourists in the Red Sea, to encounter Israeli business delegations seeking investment opportunities in Cairo, even hundreds of Egyptians currently work in companies owned by Israelis in Egypt the most famous of which is Delta Galeel which works in the free zone in Nasr city and is listed in the Tel Aviv stock exchange. The fall of Mubarak regime, an obvious ally of Israel, and the emergence of a revolutionary and Arab nationalist anti-Israel spirit drew a lot of question marks on the future of the bilateral economic relations. The five attempts to blow up the pipeline transferring Egyptian gas to Israel during the last six months, as well as a clear decline in bilateral trade in the first half of 2011, underscore a cooling down in the never warm relations. The most controversial and unpopular cooperation was the deal to export Egyptian gas to Israel. In 2005, Egypt signed the agreement to supply 1.7 billion cubic metres of natural gas annually to Israel for 20 years. The Egyptian natural gas is supplied by a company called East Mediterranean Gas (EMG) via a pipeline across the Sinai Peninsula. EMG was founded as a partnership among Egyptian businessmen Hussein Salem, a friend of Mubarak and is currently in custody at Spain, the Israeli Merman Group and the Egyptian government- owned EGAS holding. At the beginning of 2011, according to Israeli reports, 40 per cent of IEC power generation was powered by natural gas, 35 per cent of which was supplied by Egypt which makes Egypt the largest single source of this fuel for the Israeli economy with a 15 per cent stake of total production. Egyptian gas exports amounted to $355 million in 2010. The idea of exporting gas to the Zionist state has always raised reservations from political powers, activists and even laymen who accused their leaders of abandoning the national wealth to the enemy state. A recently revealed WikiLeaks documents revealed that negotiations over the deal dragged out over 10 years because of worries about the political reaction in Egypt. The confidential document prepared by the US embassy in Cairo one day before the deal was signed said the US described the deal as "the most lucrative ever" not clarifying if this is politically or economically lucrative. In fact, concerns about its being low priced have given the agreement a bad reputation and stirred a lot of angry reactions. A series of law cases were filed against the Petroleum Ministry but it all concluded in February last year when a supreme court approved the sale saying the government should renegotiate the prices and quantities to be in line with international prices. The reservations intensified after toppling Mubarak with law cases being filed claiming that EMG had paid the Mubaraks hundreds of millions of dollars in kickbacks in return for being allowed to sell the gas cheaply to Israel. Salem, Mubarak, former oil minister Sameh Fahmi and other senior energy officials are currently facing trial over corruption charges related to the deal. A prosecutor-general statement said the deal in question caused Egypt losses worth more than $714 million. Since the 25 January uprising, the pipeline transferring the gas to Israel exploded five times. And while the Egyptian government said that it will resume the supply of gas -- and is currently negotiating an increase in its price -- there is suspicion at the Israeli side that the pressure of the mob might halt exports. Other than gas exports, trade between the two countries is weak and is getting even weaker since the revolution. The Israeli daily Haaretz quoted Avi Hefetz, head of the Israel Export and International Cooperation Institute, as saying that in 2010, Egypt was Israel's 36th largest export market, while in the first half of 2011, and it had tumbled to 47th. While it is hard to get the exact trade figures with Israel from the Egyptian side, Haaretz report stated that in 2010, Israeli exports to Egypt totalled $503 million, a 24 per cent increase over 2009, according to Israel's Exports Institute data. In the first half of 2011, they were only $173 million. The main Israeli exports are related to the Qualified Industrial Zone (QIZ) agreement. The QIZ is a three-way agreement with the United States that lets Egypt sell on the US market custom-free so long as at least 10.5 per cent of the inputs are from Israel. Dan Catarivas, head of the international department of the Israel Manufacturers Association told Israeli press in March that Egypt's reluctance to expand its trade with Israel to exceed the span of the commodities representing the 10.5 per cent component is a key factor in the US refusal to upgrade the QIZ to a full Free Trade Agreement (FTA), as had been done for Jordan. "We were constantly seeking ways to expand trade beyond the QIZ requirements," recalls Catarivas. "The real aim of the QIZ was for it to serve as a springboard for other areas of business cooperation. But the Egyptians were not interested, so nothing came of these efforts." While QIZ exports increased by 25 per cent since its introduction in 2004, it has not yet crossed the $1 billion mark. One of the main problems with the agreement is that only the big factories benefit from it so far and while there are about 250 companies authorised to benefit from the agreement, only 60 companies export regularly to the US markets. Experts believe that revenues of exports might even get less in the near future due to the instability in Egypt's relations with Israel and the closure of the Ouja border crossing in late August following the tension on the borders. A significant part of Israeli components in QIZ products used to pass through the crossing. Another threat that might strip the agreement of its benefits is a new bill that is submitted to the US senate finance committee and would give the same duty free status to textile exports of 13 Asian countries, putting the Egyptian products in a cut- throat competition in the US market and thus limits the benefits of the agreement. The trade in invisible goods and services is relatively big between the two countries with around 20 per cent of Israeli trade goods passing through the Suez Canal. Israel also depends on the ports of Alexandria, Damietta and Port Said as transit ports where large ships unload large containers that are then sent on smaller ships to Israel and other countries in the region. Tourism is a sector where there is a kind of mutual benefit between the two countries. According to available data from Israeli reports, 165,000 tourists entered Israel from Egypt in 2010, and 270,000 came to Israel as day tourists from Egypt via the Taba crossing. A lot of travel packages to either of the two countries include one or two day stops in the other. The number of Israelis visiting Egypt has not been affected by the uprising and until the end of July which saw the number of visitors jumping by 30 per cent. While July is the peak of the holiday season, the steady rate of flow is mainly due to the fact that Israelis do not need visas to access South Sinai, especially the resort areas of Dahab, Nuweiba, Sharm El-Sheikh and Taba. However, the last week saw a lot of cancellations by Israeli tourists. American aid to Egypt is another field that is closely related to the strength of its relation with Israel with the US military and economic aid to Egypt starting as a part of the Camp David peace accord. Moreover, many experts believe that the US decided to increase its aid this year to Egypt by $80 million, as announced last week by the new US ambassador to Egypt Ann Paterson, as kind of compensation to Egypt after three soldiers were killed on the borders in late August.
