Israel’s ambitious plan to export natural gas to Egypt, a linchpin of its regional energy strategy, has hit a major stumbling block, as political maneuvering, economic disputes, and rising regional tensions threaten to unravel what was to be the largest energy export agreement in the country’s history. On November 1, 2025, Israeli Energy Minister Eli Cohen refused to approve the $35 billion gas export agreement with Egypt, a deal that had already been signed in August and was set to dramatically expand exports from Israel’s Leviathan gas field to its southern neighbor.
The fallout was immediate. According to Yedioth Ahronoth and other Hebrew-language media, US Energy Secretary Chris Wright canceled a planned six-day visit to Israel after Cohen’s refusal. The United States, which has a direct stake in the deal through energy giant Chevron—one of the co-owners of the Leviathan field—had been exerting significant pressure on Israel to finalize the transaction. The Israeli Energy Ministry, in a carefully worded statement, said “outstanding issues related to domestic pricing and national interests” remained unresolved, adding, “Israel will not proceed until a fair price for the domestic market is secured and its energy needs are fully met.”
For Egypt, the agreement is more than a commercial transaction—it’s a lifeline. Facing growing energy shortages due to rising demand and stagnant domestic gas production, Egypt currently imports around 60% of its gas from Israel. The Leviathan field, located about 130 kilometers off Israel’s northern coast in the Mediterranean Sea, contains an estimated 600 billion cubic meters of natural gas, enough to last until at least 2064. The August agreement aimed to nearly triple the volume of gas exported to Egypt by 2029, with NewMed Energy, the Israeli partner in Leviathan, investing $2.5 billion to drill two new wells and supply an additional 7.5 billion cubic meters of gas annually.
Yet, as Asharq Al-Awsat reports, the core of the dispute lies within Israel itself. The domestic pricing policy of NewMed Energy and the rates it wishes to charge local consumers have become a flashpoint. Minister Cohen, presenting his position as a matter of national commercial policy, has insisted that he will not approve the deal “until Israeli interests are secured and a fair price for the Israeli market is agreed upon.” According to sources familiar with the negotiations, this impasse has temporarily frozen progress and risks worsening relations not only with the United States but also with Egypt, both of which are key intermediaries in the fragile ceasefire between Israel and Hamas.
The timing could hardly be more sensitive. The decision comes amid renewed regional tensions, with accusations of violations of the Camp David Accords and a deepening crisis in Gaza. Egyptian President Abdel Fattah al-Sisi has accused Israel of committing genocide in Gaza and recently described Israel as “the enemy of the region.” Meanwhile, Cohen himself has publicly called for the destruction of Gaza’s main cities, only adding fuel to the fire.
American officials and energy companies are not the only ones frustrated by the holdup. Chevron, the US energy giant operating Leviathan, is pressing Israel to approve the agreement. As Ahmed Kandil, head of the Energy Studies Unit at Cairo’s Al-Ahram Center for Political and Strategic Studies, told Asharq Al-Awsat, “American firms have extensive operations in Egypt and Jordan, and Netanyahu’s political interference undermines their expansion goals.” He added that Egypt is prepared to diversify its gas sources through agreements with other regional suppliers, including Qatar, Algeria, and Cyprus, and is willing to honor the deal without responding to Israeli maneuvers.
Egypt’s Petroleum Ministry has already taken steps to secure alternative gas supplies, guarding against potential interruptions from Israel. The ministry is investing $5.7 billion to drill 480 wells across the Western Desert, Suez Gulf, Mediterranean, and Nile Delta, aiming to strengthen energy stability and support Europe’s growing gas needs. Cairo is also finalizing an LNG import deal with QatarEnergy and expects to begin receiving gas from Cypriot fields such as Cronos and Aphrodite by 2027 or 2028. These new sources could eventually supply up to 1.3 billion cubic meters per day, giving Egypt more bargaining power and reducing its reliance on Israeli gas.
Still, Israeli gas remains significantly cheaper for Egypt—about $7.75 per million British thermal units, compared to $13.50 for LNG purchased on the spot market. The savings help Egypt manage inflation, address balance-of-payments concerns, and clear dues with global energy firms. But the political downside is real. Commercial deals with Israel are deeply unpopular in Egypt, where public support for the Palestinian cause runs strong. Egyptian policymakers, however, view the dependency as a temporary necessity while the country works towards energy diversification.
For Israel, the stakes are equally high. The deal is crucial to its ambition of becoming a regional energy power and forging economic partnerships with neighbors like Egypt and Jordan. A recent report warned that Israel may face domestic gas shortages within 25 years unless it expands production—a goal that depends on export revenues. Without Egyptian demand, Israel could lose one of the few large-scale markets capable of sustaining that expansion, undermining what officials have described as an “anchor of its regional security architecture.”
Yet, the agreement is not without its critics. Some in Israel argue that the government should have secured greater concessions, beyond a modest 14% price increase, before moving forward. Hossam Arafat, a petroleum and mining professor at Cairo University, observed that “the deal remains threatened. Netanyahu is exploiting the preliminary nature of the agreement to pressure Egypt politically over Gaza. Ultimately, Israel risks losing, as export routes are limited and domestic consumption provides a buffer.” He added that political factors, not economics, are driving Israel’s delays, despite the clear benefits of using Egypt’s infrastructure to export gas to Europe.
The situation is further complicated by periodic disruptions. In June 2025, Israeli Mediterranean gas production was halted for security reasons amid regional tensions, briefly cutting exports to Egypt before resuming two weeks later. Israel has also cited threats from Hezbollah and maintenance issues to delay deliveries, but Egypt has managed to avoid gas shortages or load-shedding, even as summer demand peaked.
Ahmed Fouad Anwar, a member of the Egyptian Council for Foreign Affairs, summed up the Egyptian position: “Israel is using economic relations with Egypt to gain political leverage, but Egypt’s firm stance prioritizes national security over economic gains.” He warned that Israel risks its relationship with Egypt by seeking concessions to advance its Gaza policy, a move unlikely to benefit Netanyahu’s government, which currently lacks broad popular support.
As the impasse drags on, Cairo is reassessing its economic cooperation with Israel. Kandil noted that Netanyahu’s government “sold the agreement without considering its legal obligations to Egypt.” For now, the $35 billion gas deal remains in limbo, a casualty of political brinkmanship and shifting alliances in a region where energy, security, and diplomacy are inextricably linked.
The coming months will be crucial. Whether Israel and Egypt can overcome their differences and revive the deal—or whether alternative suppliers and new alliances will reshape the region’s energy landscape—remains to be seen. One thing is certain: the outcome will have far-reaching implications, not just for the two countries, but for the entire eastern Mediterranean.
