Israel to pay $1bn in oil pipeline ruling

Eilat-Ashkelon Pipeline Co. (EAPC) oil storage containers are seen on the shore of the Mediterranean Sea in the southern city of Ashkelon January 27, 2015. As Israel loudly and publicly denounces Iran and its nuclear programme this week, the two countries are quietly tussling in a decades-old dispute over a secretive oil pipeline company that could be worth billions of dollars to Tehran. In a Swiss court, lawyers for each side are locked in arbitration over EAPC, a joint venture set up in 1968, when the two nations were friendly, to transport Iranian oil to the Mediterranean. Picture taken January 27, 2015. REUTERS/Amir Cohen (ISRAEL - Tags: POLITICS ENERGY) - RTR4RW37©Reuters

Oil storage containers at Ashkelon operated by EAPC, the joint venture set up 1968

A Swiss court has ordered Israel to pay its arch-enemy Iran about $1.1bn after it lost an appeal in a long-running dispute over an oil pipeline that predates the 1979 Islamic revolution.

The Swiss Federal Tribunal’s verdict, dated June 27 and published on the court’s website, ruled in favour of Iran in regard to the Eilat Ashkelon Pipeline Company (EAPC), an Israeli-Iranian joint venture set up in 1968 when the Jewish state had friendly relations with the royalist Iranian regime.


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The Swiss court ruling also ordered Israel to pay Iran SFr450,000 ($461,700) in court costs and legal fees.

The decision is a blow for Israel in its secretive court battle with Iran over proceeds from the pipeline company, which was set up as a way for Tehran to pipe crude from the Red Sea to the Mediterranean via a cheaper and less politically volatile route than the Suez Canal.

Israel nationalised the company after the Islamic revolution in 1979, but has pursued Iran in court in France and Switzerland for billions of dollars of damages for assets and revenues it alleges it lost in the years since.

Parviz Mina, a Paris-based consultant and former official at Iran’s national oil company before the revolution, said Israel has also sought redress against Iran for its embassy and other assets that were seized by the Islamic republic.

“There are claims and counterclaims on both sides,” Mr Mina said.

The EAPC, based in Ashkelon, operates under an Israeli state decree that shrouds its affairs — including the company’s earnings — in secrecy. News reports relating to it in Israel are subject to military censorship.

Israel says the secrecy order is in place for national security reasons, but does not specify what they are.

There are claims and counterclaims on both sides

– Parviz Mina, oil industry consultant

There has also been no public reaction to the ruling in Iran.

Israel, which sees Iran’s nuclear programme and threats made by Iranian officials against it as a paramount security threat, classifies the country as an “enemy state”.

It is unclear whether it will repay the money ordered by the court.

When the Swiss court originally ruled in Iran’s favour last year, Israel’s finance ministry said that laws of trade prohibited it from transferring funds to an enemy country.

Last year’s conclusion of the US-led nuclear deal with Iran — which Israel vocally opposed — and the subsequent easing of sanctions on the lslamic republic, has raised speculation among people who follow the pipeline dispute that Iran might now find it easier to collect on any financial claims against Israel.

An Israeli government spokesman declined to comment on Israel’s loss of the appeal.

In December 2014 the oil pipeline, which the EAPC uses to transport crude from other countries, sprang a leak in southern Israel, causing the worst environmental disaster in Israeli history. The spill is the subject of a civil suit.

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