A letter of credit (L/C) from Egypt's central bank is to guarantee that the country delivers on its obligations under a new settlement of a long running dispute over Cairo's ending of exports of gas to Israel.

The new agreement calls on Egypt to pay a US$500 million fine for halting gas supplies to state-owned Israel Electric Corporation (IEC), a considerable reduction on the US$1.7 billion fine imposed under a previous settlement.

Investor confidence

The new accord has been described by Egypt's oil ministry as "an amicable agreement" intended to bolster international confidence in the country's investment environment.

State-owned IEC sued Egyptian state entities after Cairo reneged on a contract signed in 2005 to supply the Israeli company with gas.

Gas cut off

Egypt continued gas deliveries until 2012 when a key stretch of the pipeline through which the fuel was exported was repeatedly subject to attacks by militants. The country was also short of gas for its domestic market at the time.

Under the settlement, Egypt will pay its fine over 8 years and six months.

Payments will be guaranteed by an L/C issued by the National Bank of Egypt.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.