Abraham Accords: Two years on, economic cooperation remains vital to sustaining the historic agreements.
The Abraham Accords, brokered in 2020, represent a significant realignment of relations in the Middle East. Initiated under the Trump administration, they saw Israel normalise relations with the United Arab Emirates, Bahrain, Sudan and Morocco, largely in exchange for Israel suspending annexation plans in the West Bank. Beyond the symbolic breakthrough of diplomatic recognition, the Accords aimed to foster wider economic, security and cultural cooperation. While political progress has stalled somewhat, and Sudan’s participation remains uncertain following the outbreak of conflict there, the economic dimension – particularly energy cooperation – has proven surprisingly resilient, establishing new regional dynamics. This is especially true regarding the burgeoning natural gas partnership between Israel and Egypt, demonstrating the tangible benefits accruing from normalised relations. However, the relationship isn’t without complexities, navigating regional tensions and domestic concerns within both nations.
Progress Made: A Thriving Energy Partnership
The central development driving the Israel-Egypt relationship is centred around natural gas. For years, Egypt, despite possessing significant gas reserves, struggled to meet domestic demand and became a net importer. Simultaneously, Israel discovered substantial offshore gas fields, namely Leviathan and Tamar, in the early 2010s. The initial export agreement reached in 2018, formalised and expanded since the Accords, allows Israel to export natural gas to Egypt via the Eastern Mediterranean Gas Company (EMG) pipeline.
This has proven mutually beneficial. Israel secured a key export market and increased the economic viability of its gas fields, while Egypt gained a reliable supply, alleviating energy shortages and boosting its own potential as an energy hub. In 2022, Israel exported an estimated 6.7 billion cubic metres (BCM) of gas to Egypt, representing a growing portion of both countries’ energy mix. The revenue generated for Israel is significant, injecting billions of dollars into its economy. Beyond direct sales, a substantial portion of the Israeli gas is liquefied in Egypt’s facilities and then re-exported as LNG to Europe, contributing to European energy security in the wake of the Russia-Ukraine war.
This cooperation extends beyond simple export. The two countries are discussing further investment in pipeline infrastructure to increase capacity, and exploration for additional reserves in the Mediterranean. Egypt’s infrastructure, particularly its liquefaction plants, has become integral. The deal has also sparked increased collaboration on broader energy issues, including renewable energy projects and discussions on electricity grid interconnection – with potential to integrate further regional energy markets in the future. A joint Israeli-Egyptian-European Union summit in June 2023 further underscored the desire to deepen cooperation in the energy sector, signalling a long-term strategic commitment.
Challenges: Domestic Concerns and Regional Competition
Despite the clear economic benefits, the Israel-Egypt gas deal faces a number of challenges. Domestically, in Egypt, the agreement has faced criticism from some political factions and commentators who argue it prioritises Israeli economic gain at the expense of Egyptian sovereignty and energy independence. Concerns centre on the pricing of the gas, with some alleging Egypt is paying above market value. These accusations are often fuelled by anti-Israel sentiment and a broader discontent with the Sisi regime’s economic policies. The Egyptian government defends the deal, pointing to the essential role it plays in meeting domestic energy needs and generating export revenue.
Regional tensions also pose a risk. While Egypt and Israel share a strategic interest in regional stability and combating terrorism, competing interests and historical animosities remain. The ongoing Israeli-Palestinian conflict is a key flashpoint, with any escalation potentially impacting the broader normalisation process. Egypt’s role as a mediator between Israel and the Palestinians is crucial, and any perceived bias towards Israel – exacerbated by the gas deal – could undermine its credibility.
Furthermore, competition from other gas producers, such as Qatar and Algeria, presents a challenge. These countries view Egypt’s role as a regional energy hub with some degree of suspicion and may attempt to undercut Israeli gas exports through strategic pricing or alternative supply routes. The delicate balance of power in the Eastern Mediterranean, with Turkey also pursuing its own energy interests, adds another layer of complexity. Finally, logistical constraints – particularly the capacity of the EMG pipeline – limit the volume of gas that can be exported, hindering future expansion.
Israel-Iran Dimension: A Geopolitical Counterbalance
The Israel-Egypt gas deal exists within the wider geopolitical landscape shaped by the rivalry between Israel and Iran. Iran views the Abraham Accords, and specifically economic cooperation with Israel, as a strategic threat, aiming to undermine its regional influence. The gas deal is seen as strengthening Israel’s economic and political position, bolstering its ability to project power and reducing its vulnerability.
Iran actively attempts to disrupt this alignment, employing a range of tactics including supporting proxy groups that could threaten energy infrastructure – such as pipelines and LNG facilities – and engaging in cyber warfare. The shadow war between Israel and Iran, frequently playing out in the maritime domain, also adds to the risk, potentially disrupting gas shipments or triggering wider escalation.
For Egypt, the deal represents a counterbalance to Iranian influence in the region. By strengthening ties with Israel, Egypt signals its alignment with countries that share concerns about Iran’s regional ambitions. However, this also necessitates careful management of its relations with Iran, as a complete rupture could further destabilise the region. The normalisation process is, therefore, viewed by some in Cairo as a strategic manoeuvre to enhance Egypt’s leverage and security in a complex regional environment.
Path Forward: Consolidation and Expansion
Looking ahead, the Israel-Egypt gas deal is likely to continue as a cornerstone of the normalised relationship, though sustainable progress requires careful navigation of existing challenges. Continued dialogue and transparent pricing mechanisms will be essential to alleviate domestic concerns in Egypt. Prioritising Egyptian benefit through investment in Egyptian infrastructure and the creation of jobs related to the gas industry could also help address criticism.
Expanding the partnership beyond gas, into areas such as renewable energy and water desalination, could offer further opportunities for cooperation and deepen the mutual benefits. Regional integration – potentially involving Cyprus, Greece, and other Mediterranean states – could create a wider energy market and enhance energy security for all participants.
However, the long-term viability of the relationship depends heavily on broader regional developments, particularly the Israeli-Palestinian conflict. Progress towards a just and lasting peace is crucial for fostering a more stable and conducive environment for economic cooperation. Renewed diplomatic efforts, facilitated by Egypt and other regional actors, are essential to de-escalate tensions and create a pathway towards a more peaceful future. Sustaining the current level of cooperation, while cautiously exploring avenues for expansion, appears the most realistic approach moving forward, recognizing that political complexities will inevitably shape the economic trajectory of this evolving partnership.
Source: Analysis based on publicly available information and reports regarding regional energy markets and the Israel-Egypt relationship, informed by the stated subject matter of “The economics of the Israel–Egypt natural-gas relationship.” Independent assessment of geopolitical context informed by expert analysis from organizations such as the Atlantic Council, the Middle East Institute, and the International Energy Agency.
