Israeli Prime Minister Benjamin Netanyahu announced on Wednesday an unprecedented $35 billion agreement to export natural gas to Egypt. The deal represents a watershed moment in eastern Mediterranean energy politics, combining major economic incentives with high-risk diplomatic calculation. The deal could reshape regional alliances even as it exposes Israel’s domestic energy market to long-term vulnerabilities.
The timing and approval of the deal indicate that energy policy is being deployed in the service of broader diplomatic goals. Although the commercial framework involves the American energy company Chevron and the Israeli firm NewMed Energy, the political momentum behind the agreement appears to originate in Washington. The Trump administration has been urging Netanyahu for several weeks to approve the export framework as part of a wider effort to repair relations with Egypt following the Gaza war.
This pressure is closely linked to American attempts to organise a summit between Netanyahu and Egyptian President Abdel Fattah el-Sisi, with the gas agreement acting as a necessary inducement for Egyptian participation. As a result, the deal operates as a stabilising mechanism for bringing the two states together, deepening Egypt’s reliance on Israeli gas supplies while reinforcing Israel’s claim to regional energy leadership. This geopolitical context helps explain why the government has celebrated the agreement as a “historic day” promising regulatory certainty, despite mounting criticism at home.
Economically, the scope of the deal is substantial. Over a period of approximately 18 years, Israel is expected to export around 131 billion cubic metres of natural gas. Government projections estimate that the state will collect close to $18 billion in taxes and royalties. Netanyahu said it would work as a long-term funding source for education, health care and infrastructure.
Delivering the exports will, however, require heavy upfront investment. Estimates suggest that between $5 billion will be needed to expand production at the Leviathan reservoir and upgrade transmission pipelines. Supporters of the project say this investment will generate employment and ultimately expand supply capacity for the domestic market by necessitating larger and more efficient infrastructure. Critics, however, argue that this approach ties Israel’s energy security to facilities designed primarily for export, leaving local consumers dependent on systems built to serve foreign demand.
The most contentious issue surrounding the agreement is the balance between export revenue and domestic energy security. The Finance Ministry has previously warned that Israel could face a natural gas shortage within the next 25 years as consumption rises faster than earlier forecasts predicted. The concern is that excessive exports of a finite resource may force Israel to resume energy imports or confront sharply higher electricity prices.
In response to these fears, the government has highlighted several safeguards embedded in the agreement. Officials say the Leviathan reservoir will be required to meet all Israeli demand on a daily basis before any gas is exported. A domestic price cap of $4.70 per thermal unit has also been set, and from 2032, the state will have the authority to restrict export volumes if domestic supply comes under pressure.
Despite these assurances, scepticism remains widespread. Israeli NGOs and civil society groups say the Netanyahu government yielded to pressure from gas companies by committing export volumes equivalent to roughly a decade of domestic consumption without a proper energy audit. The Israel Electric Corporation, which generates around 70 per cent of the country’s electricity, argues that the agreement does not contain sufficiently binding clauses to guarantee domestic supply in practice. The corporation is already involved in arbitration proceedings over gas pricing, underlining the ongoing tension between public utility requirements and private commercial interests.
Ultimately, the Israel-Egypt gas agreement is a calculated gamble. It prioritises immediate diplomatic priorities and fiscal returns over a more cautious approach to long-term resource conservation. By approving what has been described as the largest gas deal in Israel’s history, the government has secured a valuable diplomatic channel to Cairo and met the expectations of the US administration, but its domestic impact remains to be seen.
