Severing a final link between Israel and Iran

(Courtesy of tachbura.co.il)

(Courtesy of tachbura.co.il)

The Eilat-Ashkelon Pipeline is not commonly known to most Israelis, let alone people who live elsewhere in the world. I daresay few Iranians are familiar with the project, which was a joint venture between Israel and Iran back in the 1960s under Shah Mohammed Reza Pahlavi. Since the 1979 Iranian Revolution, the two countries have engaged in a bitter and secretive compensation dispute over the pipeline, but today the proceedings may have taken an important step forward.

In 1968 Israel and the National Iranian Oil Company (NIOC) agreed to a partnership that would transport, and then sell, Iranian oil to Europe through an Israeli pipeline that ran from the southern port city of Eilat to Ashkelon (see map). Why? For Israel, the 1950s and 1960s exposed the country’s lack of a domestic energy source as a serious vulnerability. Specifically, the decision by the Soviet Union to cancel its oil supply to Israel – an agreement that provided a third of the country’s needs – coupled with nationalization of the Suez Canal by Egypt in 1956, compelled Israeli Prime Minister David Ben-Gurion to seek alternatives.

The acquisition of Iranian oil became an aspect of Israel’s “periphery strategy,” a foreign policy that emphasized the cultivation of ties with non-Arab states in the Middle East – primarily Turkey, Ethiopia, and Iran. For Israeli officials, Iran was not simply a strategic ally but an important economic partner and source of oil. Together, Israel and NIOC established the Eilat Ashkelon Pipeline Company (EAPC), a jointly owned company to cover the costs for the construction of the pipeline and storage facilities, the purchase of tankers, and the management of the business. But the fall of the Shah led to an immediate divorce between the two countries and their partnership.

In response to the collapse of ties, Israel nationalized the pipeline, and despite occasional attempts to pay the Iran what it was owed continued to operate the EAPC. Finally, Iran filed for just compensation in 1994, claiming that Israel expropriated its 50% share of the company and did not receive revenues from the period of the Shah (for more, see this solid Ha’aretz piece). Israel has countered, arguing that Iran violated the terms of the accord prior to 1979.

Because most of EAPC’s activities are classified under a government-imposed gag order (the “Thirty Year” Law), it is difficult determine with whom and in what manner the company is conducting its business. But what we do know is that EAPC manages oil from a number of former Soviet states, and as I wrote last summer in an article for The New Republic with Dov Friedman, probably Kurdish oil as well. In 2007, EAPC President Oren Shachor hoped that the Eilat-Ashkelon Pipeline would function as a “strategic bridge” between the land-locked, oil-rich states of Central Asia and the markets of India, China, and South Korea.

Today, multiple news sources reported that a Swiss arbitrator reviewing the dispute ruled that Israel pay the NIOC a sum of $1.1 billion in compensation. Israel’s response wasn’t surprising. “Under the laws of trade we cannot transfer funds to an enemy country,” a statement issued by the Finance Minister said.

Regardless of its conclusion, it is fascinating to watch states with such enmity for one another seek a resolution to a particular dispute through the mediation of a third party while refusing to see eye to eye on such a wide range of geopolitical issues in the region. The fact that such arbitration can continue under such circumstances is an impressive testimony to where the international system stands and can be interpreted as a sign that these rivals can find a way to communicate without the force of arms.

But at the same time the distrust between Israel and Iran is deep. The Eilat-Ashkelon Pipeline, which served as a quirky remnant of a now distant era, will soon be stripped of the remaining threads that bound these two countries.

I have collected a number of photos of the Eilat-Ashkelon Pipeline’s construction from the 1950s and 1960s. For more information on the pipeline, read this. Hope you enjoy!

The final piece of the pipeline, 1969.

The final piece of the pipeline, 1969.

(Courtesy of mekorot.co.il)

(Courtesy of mekorot.co.il)

(Courtesy of mekorot.co.il)

(Courtesy of mekorot.co.il)

(Courtesy of mekorot.co.il)

(Courtesy of mekorot.co.il)

(Courtesy of mekorot.co.il)

(Courtesy of mekorot.co.il)

Posted on by Gabriel in Iran, Israel