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Saudi Arabia halts $23bn oil aid deal to Egypt 'indefinitely'

Egypt and Iran deny talks over alternative deal after Riyadh pulls supplies under $23bn agreement which included handover of Red Sea islands
Egyptian oil minister Tarek El Molla (R) with Cypriot energy minister Yiorgos Lakkotrypis in August
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Saudi Arabia has informed Egypt that shipments of oil products expected under a $23bn aid deal have been halted indefinitely, suggesting a deepening rift between the two countries.

On Monday Egypt's oil minister, Tarek El Molla, confirmed Saudi Arabia 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 Egyptian oil ministry official told Reuters. "They only informed the authority about halting shipments of petroleum products until further notice."

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.

The statements came as Egypt was forced to deny reports on Sunday that Molla was due to fly to Iran to negotiate new oil deals.

However, speaking in Abu Dhabi, Molla on Monday said he was not going to Iran. An Iranian oil official later said that a report on the trip by the semi-official Mehr news agency on was "incorrect".

Egyptian Prime Minister Sherif Ismail was quoted by state newspaper al-Ahram as saying Molla was not visiting Iran and Egypt was not negotiating with Tehran over importing oil products.

Reuters reported that 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.