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The franchise of the Israel Oil Refineries (known by its Hebrew acronym Bazan) was extended on Sunday, putting the lid on privatizing the state-owned company.

Neither National Infrastructure Minister Avigdor Lieberman, whose ministry is in charge of Bazan, nor the director of the Government Companies Authority, Yaron Jacobs, were invited to the meeting at which the extension was decided upon. Those who did attend the meeting, hosted by Director-General of the Prime Minister's Office Uri Shani, were Idan Ofer and Yossi Rosen of the Israel Corporation, Nir Gilad from the Finance Ministry, and Ovadia Eli and Yashar Ben Mordechai from Bazan. Bazan is controlled by the government (74 percent) and the Israel Corp. (26 percent).

The extension of the franchise spells the final termination of the government's decision to break Bazan up into two companies, Bazan Haifa and Bazan Ashdod. A committee headed by Professor Reuben Gronau had recommended this in 1996 as a first step toward privatization, arguing that it would lay the groundwork for free-market competition in the local market for fuel. After many delays, the government finally approved these recommendations in August 1999.

The Israel Corp. has a right of first refusal on Bazan's stock, and was in negotiations with the government over the possibility of buying one of the spin-off plants. In February 2000, the company informed the government of its consent to the break-up and its intent to buy the facility in Ashdod, but it later retracted.

Bazan's franchise grants the company extensive benefits in terms of state taxes, municipal taxes and construction permits. Once the franchise expires, its land automatically reverts to the state, but Bazan will be compensated for the value of the facilities on the premises. The value of these facilities was estimated in 1995 at $252 million, while the land was valued at $115 million. Since then, the company has expanded its facilities, so its assets are now worth much more.

The state comptroller recently rebuked the government for not having finished examining the issue of Bazan's franchise by April 2000.

Sources in the fuel sector told Ha'aretz yesterday that the Prime Minister's Office deliberately bypassed the Government Companies Authority in order to close a deal on the extension of the franchise with the Ofer Brothers, who control the Israel Corp.

Neither Bazan nor the Infrastructure Ministry would comment yesterday.