The Israeli government could well ban institutional investors from investing in Ofer Brothers Group companies if it decides the group did have business relations with Iran, government sources said yesterday.

The business group, owned by brothers Yuli and Sammy Ofer, deny U.S. State Department allegations of selling a tanker to Iran. The Israeli government has yet to consolidate a position on the veracity of that claim.

The Ofer Brothers Group is one of seven companies to be hit with U.S. sanctions for trading with Iran. It denies the allegation and says it did not know the tanker that originated with its group had reached Iranian hands. The Americans however say it did and that by boosting Iranian prosperity, the companies helped fund Iran's nuclear program.

The tanker in question began its voyage to Iranian possession from a Singaporean company called Tanker Pacific, which belongs to the privately owned company Ofer Shipping. Tanker Pacific sold the boat to a United Arab Emirates-based company called Crystal Shipping, for $8.65 million. Crystal then sold the tanker, called Raffles, onward to the Islamic Republic of Iran Shipping Lines.

Ofer Shipping is owned by Ofer Shipping Holdings, which is owned by Ofer Brothers, which is controlled by Sammy Ofer and Udi Angel. Udi Angel had been married in the past to Liora Ofer, who is Yuli Ofer's daughter.

The Ofers say Tanker Pacific is convinced the U.S. State Department decision is misguided.

Israeli officials, and the business group, have known of the American intention to blacklist the Ofer Brothers Group for weeks.

In recent days the Ofer Brothers Group has been seeking assistance from the Foreign Ministry and Defense Ministry in reversing the American decision and getting the company off the blacklist, say sources near the moves.

The sources claim that the Defense Ministry has accepted the company's position and has begun moves vis a vis the Americans. However, the Defense Ministry denies this and stated that it is not involved in any way in negotiating with the Americans: in any case that is the fief of the Foreign Ministry, said the Defense Ministry.

Nor has the government reached an official position on the Ofers' plight. "That is a decision at the level of ministers, even of the prime minister," said a source. "A decision has to be made whether the Ofers Brothers' version is acceptable, and if so, whether the government should take steps to change the Americans' position. If the government does not accept the Ofer Brothers' position, it will have to decide what sanctions to impose. The U.S. expects Israel to impose the sanctions decided upon in the United Nations regarding companies that trade with Iran."

Israel has two laws that bear on business with Iran: the "Trading with the Enemy" act, and "The Imports and Exports Act". Both date from the 1930s, the time of the British Mandate. But government officials say neither is relevant to this case, since it does not involve goods exiting Israel to Iran. But a government resolution dating from 2008, forbidding institutional investors to invest in Israeli or foreign corporations that have business relations with Iran, could be keenly relevant. Its execution is at the discretion of a committee which includes officials from every relevant ministry - defense, industry, finance; the Prime Minister's Office; the Bank of Israel; the anti-money laundering authority and the Israel Securities Authority.

The committee meets regularly and has a specific sub-committee discussing companies that boost Iran's nuclear program.