Israel Matzav

British Gas and Israel agree to freeze out Hamas

Two weeks ago, I reported that Israel was going to cancel a deal to purchase natural gas from British Gas that would have netted the 'Palestinians' $1 billion in royalties due to the Hamas takeover in Gaza. Now, Israel has agreed with British Gas to allow the deal to go ahead and to deposit the money in trust for the 'Palestinians' to await the day when their 'government' only wants to wipe out the Jewish state in phases rather than immediately.

Israel and the British natural gas company BG Group Plc will move ahead with controversial plans to drill for natural gas in the Gaza Marine field, despite Hamas's takeover of the Gaza Strip last month, The Jerusalem Post learned on Thursday.

The two sides have arrived at an "understanding" that will transfer funds intended for the Palestinian Authority's Palestinian Investment Fund into an international bank account, a BG source told The Post.

"Both Israel and BG intend that until the PA is able to remove Hamas from power in the Gaza Strip, the money will be held in an international bank account," the source said. "Neither side wants the money to go to fund terror-related activities."

Well if that's the case, why the heck are they going to give the money to Fatah and its 'al-Aqsa Martyrs' Brigades'?

The Israeli government ministries involved - infrastructure and finance - are refusing to confirm the arrangement.

Ronen Moshe, the Infrastructure Ministry spokesman, claimed, however, that he doesn't know anything about an "understanding" between BG and Israel regarding payments to the PA, but did say that right now the two sides are negotiating over the price that Israel will pay for the gas. Similarly, the spokesman's office in the Finance Ministry claimed no knowledge of any "understanding" between Israel and BG concerning the transfer of funds to an international account, while the Prime Minister's Office said nothing new has happened since the cabinet decided earlier this year to form a negotiating team to meet with BG representatives.

According to the original bilateral arrangement between Israel and the PA, some 60 percent of the revenues from the sale of the gas will go to BG; 30% will go to BG's partner in the deal, the British energy company CCC, and 10% of the revenue, estimated to be worth hundreds of millions of dollars a year, is to be designated for the PA's Palestinian Investment Fund, under the auspices of the office of Palestinian Authority President Mahmoud Abbas.

"However, now that the PA is no longer in control of the Gaza Strip, or the marine area off of its coast, Israel, should it purchase the gas, would no longer be making payments to the PA, but rather would have to pay Hamas," explained the BG source.

Israel is obviously opposed to the money ending up in the hands of Hamas, and British law mandates that should a British organization enter into any sort of negotiations with a terrorist group, that organization's leaders will be brought to trial and may be sentenced to jail, the source said.

"Therefore, Israel and BG have come to a new understanding of transferring the money into an international account - allowing the deal to go through," he said.

Thinking as an international business transactions lawyer, if Hamas actually owns the gas, how can paying the money into this 'international bank account' result in ownership being transferred to Israel (which is essentially what's happening here - the Brits are being paid for their work)? The answer is that it cannot, and there is a major risk here that Hamas will turn to the International Court of Justice and that the court will decide that Hamas has to be compensated by turning the 'international account' over to them or - if Israel has no means of doing that (it's not clear to me who will have title to the account) - by paying them over and above the account. That's a crazy risk to take! I would never advise a client to do this!

It gets worse: Hamas isn't happy with the 10% share allocated to the gas' owner:

"It is unreasonable that the owner of the gas, Palestine, gets 10% only," Mohammed al-Madhoun, the director of Hamas leader Ismail Haniya's office, told the Palestinian Information Center, a Hamas Web site. "The government has no problem cooperating with the British gas company but only after modifying some points of the 1999 contract."

Earlier this week, Finance Ministry Accountant General energy coordinator Uri Shusterman confirmed that a dispute over prices is the official cause for the delay in the signing of a contract with British Gas, and that statement was the first comment by a government official about the negotiations with BG Group.

"Despite the disagreement, the government is determined to buy gas from the company's reserves offshore from Gaza, as an alternative to Egyptian gas," said Shusterman. [But if you look later in the article, at a part that I do not quote below, there is also an Israeli group - Yam Thetis - that has gas in the same area. Why not buy from them? CiJ]

He added that Israel is seeking to diversify its supplies of gas, which it now buys domestically and also from Egypt, in order to ensure a competitive market. He noted that the country planned to buy 1.5 billion to 1.8 billion cubic meters of natural gas per year from BG over 12-14 years.

"It's critical that Israel come to an agreement now with BG, because the longer it waits to sign, the more likely it is that gas prices are going to rise even further and the less likely it is to begin receiving gas at its desired 2011 target date," said BG.

I'm not happy with Israel putting $1 billion in Fatah's pocket and I'm certainly not happy about it putting $1 billion (or more) in Hamas' pocket. I stand by what I said about this deal in May:

I don't know what makes Mr. Shaw think that $1 billion would not be used to buy weapons, but I suppose that's not his concern. It ought to be our government's concern, but with Ehud K. Olmert on the ropes and desperate to clutch at a straw to keep him in office, he is going for a deal that will please the left and endanger Israel's security. Feigele is too stupid to understand what the agreement means. But former Prime Minister Ariel Sharon understood....

The signing of heads of terms would mark an amazing turnaround, given the political and legal disputes that have dogged the project since BG Group discovered the Gaza Marine field in 2000. It holds one trillion cubic feet of gas, the equivalent of 150 million barrels of oil, equivalent to a large North Sea field.

Six years ago Ariel Sharon, the Israeli Prime Minister at the time, vowed that Israel would never buy gas from its neighbour. The project also was held up by a legal challenge in the Israeli Supreme Court to establish whether the Palestinians had any right to the discovery. Last year BG Group was close to signing a deal to pump the gas to Egypt before Tony Blair intervened and asked the company to give Israel a second chance. Three weeks ago the Israeli Cabinet approved a proposal by Ehud Olmert, the Israeli Prime Minister, to buy gas from the Palestinian Authority. The Cabinet recognised the need for new energy sources to feed Israel’s rapidly growing economy.

But here's the biggest farce in the whole thing:

Israeli defence authorities want the Palestinians to be paid in goods and services and insist that no money go to the Hamas-controlled Government.

Someone needs to tell these baboons that it's the British who are going to pay the royalties to the 'Palestinians' and not the Israelis. The British are not going to shut off the money pipeline every time the 'Palestinians' misbehave. If Israel goes through with this deal, we give up any control we have over the funding of the 'Palestinian Authority.'

I'd also love to know which Israeli brokers are getting commissions for this deal (I've dabbled in trying to put together these kinds of deals so I know how they work) and how much they are kicking back to Ehud Korruption Olmert.

posted by Carl in Jerusalem @ 10:41 AM