Swiss court orders Israel to pay up for Iranian oil
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Swiss court orders Israel to pay up for Iranian oil

Deal dates back to days of the shah and before the revolution, when Jerusalem and Tehran worked together to export oil to Europe

An Eilat Ashkelon Pipeline Company oil terminal in Eilat (CC BY 2.5/Pikiwikisrael)
An Eilat Ashkelon Pipeline Company oil terminal in Eilat (CC BY 2.5/Pikiwikisrael)

A Swiss court has determined that the Israeli government owes Iran NIS 1 million ($260,000) for oil sent to Israel before the fall of the shah in 1979.

The decision is part of a series of arbitrations taking place in Switzerland between Israel and Iran.

In May, a Swiss court determined that Israel owed Iran $1.2 billion. According to a report in Haaretz on Monday, this latest ruling is part of the previous decision. Israel had claimed that compensation had been calculated incorrectly but that claim was rejected. Israel was also ordered to pay Iran $208,000 for legal fees.

The court also reportedly determined that since the lifting of international sanctions against Iran there were no legal obstacles to Israel sending payment to Iran.

Iranian Minister Plenipotentiary Reza Safinia, who represented Tehran in Israel, chats with then-prime minister David Ben-Gurion and at a party in Jerusalem, June 1, 1950 (photo credit: Teddy Brauner/GPO)
Iranian Minister Plenipotentiary Reza Safinia, who represented Tehran in Israel, chats with then-prime minister David Ben-Gurion and at a party in Jerusalem, June 1, 1950 (photo credit: Teddy Brauner/GPO)

In May, when the original ruling was issued, the Finance Ministry said it would refuse to send any money to Iran, noting that, “Under the laws of trade we cannot transfer funds to an enemy country.”

The case is rooted in a deal made between Israel and the Iranian government before the 1979 Islamic Revolution. During this period Iran supplied much of Israel’s oil, but did so secretly to avoid creating tension with Arab countries.

The Iranian oil was shipped to Eilat where it was sent via a small pipeline to the port city of Ashkelon. Uri Bialer, author of “Fuel Bridge across the Middle East— Israel, Iran, and the Eilat-Ashkelon Oil Pipeline,” notes that Iran became Israel’s main supplier of oil during this period.

The Israeli government, however, had bigger dreams — to become a major player in the oil industry, shipping Iranian oil from Eilat to Ashkelon and then on to Europe. This would also give Iran the ability to export oil to Europe without using the Suez Canal.

Iran was reluctant for both both political and financial reasons but after the Six Day War in 1967 and the closure of the Suez Canal, the two countries were able to bridge the gaps and come to an agreement, although Iranian involvement still remained secret.

In 1968, the Trans-Asiatic Oil Company was established as a joint Israeli-Iranian project to export Asian oil from Eilat to Europe via the Eilat-Ashkelon Pipeline — a network of pipelines that reach from Eilat to Ashkelon and up the length of Israel’s coast to Haifa.

Major oil spill north of Eilat leads to "extensive contamination" as a result of a damage to the Trans-Israel pipeline December 4, 2014. (photo credit: Courtesy Eilat Fire Department)
Major oil spill north of Eilat leads to “extensive contamination” as a result of damage to the Trans-Israel pipeline December 4, 2014. (Courtesy Eilat Fire Department)

According to the EAPC website, the company currently operates 750 kilometers of pipeline in Israel.

This arrangement ended in 1979 after the Islamic Revolution in Iran, when Iran’s oil exports to Israel ended.

In 1994 Iran turned to international arbitration, claiming that Israel owed money for the last three months of oil shipped to Eilat before the revolution but not paid for and for Iran’s share in the joint company’s assets. Israel counter-claimed that Iran owed it money for breaching the contract to supply Israel with oil until 2017.

The total Iranian claim for unpaid oil is reported to be $1.2 billion, while according to the Global Arbitration Review the claim over joint assets could reach $7 billion.

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