Saudi oil shipments to Egypt halted indefinitely, Egyptian officials say

November 7, 2016 1:12 PM EST

A Saudi Aramco employee sits in the area of its stand at the Middle East Petrotech 2016, an exhibition and conference for the refining and petrochemical industries, in Manama, Bahrain, September 27, 2016. REUTERS/Hamad I Mohammed


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CAIRO/ABU DHABI (Reuters) - Saudi Arabia has informed Egypt that shipments of oil products expected under a $23 billion aid deal have been halted indefinitely, suggesting a deepening rift between the Arab world's richest country and its most populous.

Saudi Arabia has been a major donor to Egypt since President Abdel Fattah al-Sisi seized power in mid-2013 but Riyadh has become frustrated with Sisi's lack of economic reforms and his reluctance to be drawn into the conflict in Yemen.

During a visit by Saudi King Salman in April, Saudi Arabia agreed to provide Egypt with 700,000 tonnes of refined oil products per month for five years but the cargoes stopped arriving in early October as festering political tensions burst into the open.

Egyptian officials have said since that the contract with Saudi Arabia's state oil firm Aramco remains valid and had appeared to expect that oil would start flowing again soon.

On Monday, however, Egyptian Oil Minister Tarek El Molla confirmed it had stopped shipments indefinitely. Aramco has not commented on the halt and did not respond to calls on Monday.

"They did not give us a reason," an oil ministry official told Reuters. "They only informed the authority about halting shipments of petroleum products until further notice."

The move comes as a source in Molla's delegation said late on Sunday evening that he would visit Iran, Saudi Arabia's main political rival, to try to strike new oil deals.

Egypt and Iran's diplomatic relations have been strained since the 1970s. An Egyptian official visiting Iran would cement a break in its alliance with Saudi Arabia and mark a seismic shift in the regional political order.

Speaking to reporters in Abu Dhabi, Molla said he was not going to Iran. An Iranian oil official later said that a report by the semi-official Mehr news agency suggesting Molla would meet his Iranian counterpart in Tehran on Monday was "incorrect".

Egyptian Prime Minister Sherif Ismail also said Molla was not visiting Iran and Egypt was not negotiating with Tehran over importing oil products, state newspaper al-Ahram reported.

But two security sources and the source in Molla's delegation said the minister had been scheduled to go, and the low-key visit was now delayed after the news became public.

Gulf Arab countries, led by Saudi Arabia, have pumped billions of dollars into Egypt's flagging economy since former general Sisi took over after a year of divisive rule by the Muslim Brotherhood.

But with the Brotherhood threat diminished, Gulf rulers have grown disillusioned at what they consider Sisi's inability to reform an economy that has become a black hole for aid, and his reluctance to back them on the regional stage.

Egypt has been reluctant to provide military backing for Riyadh's war against the Iranian-backed Houthi group in Yemen.

In Syria, where Saudi Arabia is a leading backer of rebels fighting against Iranian-backed Bashar al-Assad, Sisi has supported Russia's decision to bomb in support of the president.

A deal to hand over two Red Sea islands to Saudi Arabia, made at the same time as the oil aid agreement, has faced legal challenges and is now bogged down in an Egyptian court.

(Reporting by Ehab Farouk in Cairo and Maha El Dahan and Rania El Gamal in Abu Dhabi; Writing by Lin Noueihed; Editing by Andrew Torchia, Catherine Evans and Mark Potter)



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