Why the $35bn Egypt–Israel gas agreement will not end the regional power struggle

Despite Israeli Prime Minister Benjamin Netanyahu approving the largest gas export agreement in Israel’s history, the deal has done little to resolve the deeper strategic rivalry between Cairo and Tel Aviv over control of the eastern Mediterranean gas hub.

The agreement, valued at $35bn and signed last week, will see Israeli natural gas supplied to Egypt until 2040. Yet behind the signature lies a growing contest over who ultimately manages, prices and routes gas flows across the region.

Energy and economic analysts say the rivalry has moved beyond negotiating rooms into a broader struggle for political influence, infrastructure dominance and regional alliances. In an eastern Mediterranean market where gas is increasingly a geopolitical tool rather than a simple energy commodity, the competition is intensifying.

While Egypt is seeking urgent relief from a deepening energy crisis, Israel is widely seen as attempting to exploit Cairo’s vulnerability to push itself forward as an alternative regional gas hub. Tel Aviv’s ambition goes beyond being a supplier via pipelines; it aims to shape pricing mechanisms and export routes across the basin.

A temporary fix, not a strategic settlement

According to Medhat Youssef, former vice-chairman of Egypt’s General Petroleum Authority, the agreement represents the end of a short-term crisis but the beginning of a long-term strategic confrontation.

Speaking to Al-Araby Al-Jadeed, Youssef said the financial burden of Israel’s war on Gaza has weighed heavily on its budget, while falling global gas prices have increased pressure on American and Israeli investors to recover costs sunk into developing the Leviathan gas field, discovered in 2010 and brought into commercial production in 2019.

“With limited domestic demand, exporting through Egypt’s gas network remains Israel’s most viable outlet,” Youssef said, noting that Egyptian infrastructure is currently the only realistic bridge to global markets.

Despite the scale of the $35bn deal, he stressed that relations between Cairo and Tel Aviv will remain competitive rather than collaborative. Egypt views the agreement as a necessary lifeline, while Israel sees it as a gateway to reshaping the regional gas market in its favour.

At stake, Youssef argued, is not merely pricing or volumes, but who will hold the keys to energy governance in the eastern Mediterranean over the next two decades.

Egypt, he said, is determined to defend its role as a transit and liquefaction hub. Israeli gas exports remain dependent on Egyptian approval to pass through national networks, whereas Israel is seeking to move towards a position of market management and price-setting. Between them, the United States acts not as an arbiter, but as a stabiliser, ensuring the rivalry remains contained and aligned with American interests.

An economic lifeline for Cairo

For Egypt, the agreement arrived at a moment of acute vulnerability. Officials in Cairo privately describe it as an “economic rescue deal”, amid a sharp decline in domestic gas production and mounting pressure on electricity grids and energy-intensive industries such as fertilisers, petrochemicals, steel and construction materials.

Under the agreement, partners in the Leviathan field, led by US energy giant Chevron, Israel’s NewMed Energy and an Egyptian firm, will export around 130bn cubic metres of gas to Egypt by 2040. Supplies will flow through interconnected pipeline networks, offering Egypt cheaper inputs than imported liquefied natural gas.

However, Youssef cautioned that these volumes will not meet Egypt’s full needs. With no major new gas discoveries and declining output from existing fields, Cairo is expected to continue importing LNG for at least another five years.

Official data from Egypt’s Ministry of Petroleum show that local gas production has been falling for more than two years, following the peak of the Zohr field. Current output stands at roughly 4bn cubic feet per day, while peak demand exceeds 6.5bn cubic feet, driven largely by electricity generation. The International Energy Agency projects that Egypt’s gas demand will remain elevated until the end of the decade, keeping pressure on the country’s balance of payments.

Can Israel replace Egypt as a regional hub?

Abdel Hamid Al-Juwaili, an international oil expert and former Egyptian petroleum official, dismissed suggestions that Israel could displace Egypt as the central player in Mediterranean gas management.

He pointed to Egypt’s early investment in three liquefaction plants at Damietta and Idku, which has made the country a de facto energy hub. Israel, he said, lacks comparable facilities and would face prohibitive costs and technical risks in attempting to export gas independently via Cyprus or Turkey.

“Realistically, Israeli gas has no commercially viable route to Europe other than through Egyptian infrastructure,” Al-Juwaili told Al-Araby Al-Jadeed.

He added that Cyprus’s decision to link its Aphrodite field to Egypt’s offshore gas network would further strengthen Cairo’s position, leaving both Israel and Cyprus with few alternatives.

Gas as a political weapon

In Israel, the deal has been framed not as support for Egypt, but as a strategic asset. Netanyahu and senior ministers have openly described gas exports as a form of “soft power”, reinforcing Israel’s emergence as a regional energy player.

Israeli policymakers view the agreement as a transitional phase, during which Tel Aviv aims to redraw the regional gas map and position itself as a central export gateway rather than a raw supplier feeding Egyptian liquefaction plants.

Analyses by Middle East Economic Survey (MEES) and Bloomberg suggest Israel is seeking a broader role encompassing pricing authority, export route selection and potentially the construction of future liquefaction facilities, possibly in partnership with Cyprus.

Beyond Egypt and Israel, regional actors are also manoeuvring. Cyprus is seeking the fastest and least costly export routes, while Turkey is attempting to reassert itself as an indispensable energy corridor linking eastern Mediterranean and Central Asian gas to Europe.

Russia and Iran are watching closely, aware that any consolidation of a US-backed eastern Mediterranean gas axis would come at the expense of their influence in regional and global gas markets.

Washington’s quiet hand

Experts agree that the United States plays a decisive role behind the scenes, not only through diplomatic pressure but by safeguarding Chevron’s investments and ensuring steady gas flows to Europe as part of efforts to reduce dependence on Russian supplies.

Washington continues to see Egypt as a cornerstone of regional stability, while tolerating Israeli ambitions as long as they align with US energy security goals. This balancing act has effectively positioned the United States as the unseen manager of the rivalry, setting limits for both sides without delivering a definitive settlement.

For now, Egypt’s geography, infrastructure and long-standing political ties with Europe and Washington give it an advantage that cannot easily be bypassed. But the struggle for dominance in the eastern Mediterranean gas market is far from over.