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Egypt's lost power: the hidden story of Egypt's oil and gas industry

June 9, 2014 at 6:34 pm

“Whenever you have mutual interests between even two enemies and they agree on how to deal with it so they both profit that’s perfect, that’s exactly what you want because people like money and money talks,” Edward Walker, former U.S. Ambassador to Egypt, told Al Jazeera on how to use gas to tie Egypt and Israel together and create a relationship of interdependence.

Egypt, once a major exporter of oil and gas, went on to make a series of corrupt deals with Israel over the supply of energy; a new documentary by Al Jazeera, Egypt’s lost power set to be broadcast tonight at 8pm, explores this relationship and how ultimately Egypt’s citizens are now paying the price for such an agreement.

Investigative reporter Clayton Swisher takes the viewer to Madrid to find billionaire Hussein Salem, a major architect and beneficiary of the controversial natural gas deal of 2005. Hussein Salem founded the privately owned Egyptian-Israeli company East Mediterranean Gas (EMG), which exported the gas to Israel under this deal. Salem is accused of making sure it went ahead through his close connections to the former president.

The most contentious part of the deal is the price, which was way below market value – in 2008 EMG were paying $1.5 million per unit of natural gas. In the same year gas was being exported to Japan for $12.5 and Germany was receiving piped gas from Russia for between $8 and $10 per unit.

The documentary calculates that in 2008 Egypt made under $1 million when it could have made $770 million, whilst in the meantime taxpayers were subsidising the deal.

Dubbed the ‘Father of Sharm Al-Sheikh’ for pioneering the construction of some of the biggest hotels in the Red Sea resort, Salem fled Egypt during the 25 January revolution. He was later arrested in Spain, accused of corruption and of squandering public money, but was never extradited.

The documentary looks at how natural gas was also used to bring down Egypt’s first democratically elected leader Mohammed Morsi of the Muslim Brotherhood and bring in a military backed government.

According to Hatem Azzam, former member of the Egyptian parliament, “This energy corruption network was one of the strongest reasons why the leaders, the army generals, decided to make the coup over Morsi.”

Walker explains how Al-Sisi was viewed in Washington: “He’s attractive because he’s not Morsi. And the concern has always been to maintain and sustain the relationship between Egypt and Israel. So it was not really in our interest to see them (the Muslim Brotherhood) succeed.”

Egypt’s lost power recalls that under Morsi’s presidency there were huge lines for petrol, electricity cuts, all for which he was blamed. But according to the documentary, one day after the coup the queues disappeared and everything went back to normal as if Al-Sisi had resolved it.

Still, this is not strictly true. Today, gas production in Egypt has not met domestic demand and fuel shortages and power blackouts could continue. Ironically, because Egypt sold gas to Israel so far below market rate, Israel is now in possession of huge gas reserves it wants to sell to Egypt.

There is no doubt that corruption in Egypt is endemic and widespread; something that didn’t start with the July 3 coup but is a continuation from the Mubarak era. What the documentary shows is that it’s on an upward trajectory to the advantage of a very small select group. Meanwhile the vast majority of Egyptians continue to live in abject poverty.

Egypt’s lost power underscores how much the ideals of the January 25 revolution – which included transparency in public office, accountability and fair distribution of the country’s wealth – remain unaccomplished.

Egypt’s Lost Power broadcasts on Al Jazeera English on Monday, June 9th at 2000 GMT, and 1900 GMT on Al Jazeera Arabic. We will be updating this page with the videos from the broadcast once they are available on Youtube.