The Secret Hands Guiding Israel’s Controversial Pipeline

EAPC made the headlines in December 2014 after a disastrous oil spill at a southern nature reserve. The trail of companies behind it is even more labyrinthine than its pipelines.

Sassi Horesh

They are members of one of Israel’s most secret clubs – veterans of the security establishment, local businessmen and close associates of leading politicians. They sit on the board of the Eilat-Ashkelon Pipeline Company (EAPC), all personal appointments of various finance ministers, controlling the firm under cover of a confidentiality order that keeps information about its activities under wraps.

Moti Milrod

Like many other mysterious companies, EAPC penetrated the public consciousness only after a major blunder – in this case, the large oil spill from one of its pipelines early last month that caused serious ecological damage to the Evrona nature reserve in Israel’s south.

Environmental Protection Ministry

The ensuing furor raised the question of why the state maintains a company whose activity is shrouded in mystery and exempt from the reporting and oversight required of other public bodies.

EAPC owns and operates two oil ports and terminals, in Eilat and Ashkelon, and a network of pipelines and containers for transporting and storing crude oil, cooking gas and jet fuel. All the oil imported to Israel that is processed by the oil refineries in Haifa and Ashdod passes through the EAPC system, en route to the gas tanks and stove tops in Israel and the occupied territories.

A sister company, Trans-Asiatic Oil, Ltd., operates in parallel from the same offices in the Amot Hamishpat building in Tel Aviv, and is apparently responsible for foreign oil transactions and renting tankers.

Foreign front companies

EAPC was founded in 1968 as a partnership between the Israeli government and the Iranian national oil company. It was established through foreign front companies that, to this day, hold its shares. Its primary aim was to build and operate a land bridge for transporting Iranian oil from Eilat to the Mediterranean Sea, for export to European customers.

It has a government concession to operate oil ports and pipelines that grants it a total exemption from taxes and building and planning restrictions; the concession is set to expire in two years.

After the Islamic Revolution in 1979, the partnership collapsed and Israel’s former partners forced Israel into arbitration, in order to get it to return its portion of the company. The arbitration is moving at a snail’s pace in Switzerland.

Over the years, EAPC completed its reverse-flow project, which enables the pumping of oil from its Ashkelon oil port south to Eilat, and not just northward from Eilat to Ashkelon.

As a result, crude oil produced in Russia and the Central Asian republics, loaded at Black Sea ports, can be marketed at competitive prices in southern Asia and the Far East, by transporting the oil through Israel to Eilat and shipping it from there.

No annual reports to Registrar

Official publications refer to EAPC as a partnership between the government and a “foreign company” or “third party.” The government does not publish organizational or financial data about it, nor does EAPC send annual reports to the Companies Registrar identifying its directors, as other companies must.

However, the EAPC board members can be identified because they are also on the boards of its subsidiaries, which are partners in various power production initiatives, and of a front company in Panama – the Eilat Corporation – which holds some of EAPC’s shares. All of these companies file annual reports to the relevant authorities.

For just over two years, the EAPC board has been chaired by retired general Yossi Peled, who was a minister without portfolio in the previous Netanyahu government. Peled left politics before the term ended, and former Finance Minister Yuval Steinitz appointed Peled to the EAPC post in November 2012.

Shortly afterward, Steinitz adviser David Sharan became company secretary. He recently left that position to become Netanyahu’s bureau chief. Prior to Peled, the board was headed by two other retired generals, Amos Yaron (2008-2012) and Oren Shahor (2003-2008).

Other board members with security profiles are Uri Lubrani and former Mossad head Zvi Zamir. Both played key roles in the abandoned alliance between Israel and the Shah’s regime in Iran – Lubrani as an unofficial ambassador in Tehran; Zamir as point man with the Savak, the Shah’s secret police. Lubrani, now 88, and Zamir, 89, have remained on the board, despite the changes in governments and ministers.

Other longtime members of EAPC’s board are Matti Grossinger, a Bnei Brak businessman and a Vizhnitz Hasid; and businessman Moshe Mor of Tel Aviv. Newer members include Amos Luria, an Armored Corps officer who served as CEO of the Magen David Adom rescue service and city manager at the Rehovot municipality. In the latter capacity, he was implicated in an election-funding scandal involving then Mayor Shuki Forer, but he was acquitted as part of a plea agreement. Other board members include Eitan Padan, a Steinitz associate, and two accountants – Tzahi Havusha and Shahar Shaharabani.

The Panama connection

The Finance Ministry’s accountant general, Michal Abadi-Boiangiu, serves on the board of the Panamanian Eilat Corporation, one of the co-owners of EAPC. The Eilat Corporation was registered in Panama in 1967, in anticipation of the Iranian-Israeli deal to build the pipeline between Eilat and Ashkelon. Its shares are held primarily by two Panamanian citizens, Rodolfo Chiari Correa and Domingo Diaz Arosemena. The company’s address is the law firm of Icaza, González-Ruíz & Alemán in Panama City.

The Israeli government reports its stake in The Eilat Corporation in its report to the accountant general on state assets, where its shares are listed as being worth 4,578 shekels ($1,155).

The primary owner of EAPC is a company registered in Canada called APC Holdings. It was registered in Halifax, Nova Scotia, in December 1967, and holds the government concession to operate the Eilat-Ashkelon pipeline. Its first chairman was oil expert Yisrael Koslov, who signed the concession agreement in March 1968, together with then-Finance Minister Pinhas Sapir. In their book “Oil Plots,” Eliahu Salpeter and Yuval Elizur wrote that Koslov represented the Iranian shareholders who didn’t want to be exposed.

APC Holdings renews its business license every year with the Canadian corporations registrar. The Canadian registration does not identify its shareholders, but lists three members of the board: chairman Yehuda Drori of Jerusalem, a former Finance Minister official; attorney A. Zarsky of Tel Aviv, and a Canadian Jew named Howard Sacknovitz.

Like the front company in Panama, the registered address for APC Holdings is a large law office called Stewart McKelvey, located in Halifax. The last general meeting of APC Holdings was held in December 1980, after the Iranian revolution. The company then signed a certificate turning it into a nonprofit corporation, perhaps to block the distribution of profits to its Iranian partners.

The third company that holds EAPC shares is Fimarco Anstalt, a company that has been registered in the Liechtenstein capital of Vaduz since 1959. There is no publicly available information about the company or its board of directors. According to research by historian Prof. Uri Bialer, this was an Iranian-owned front company that was set up as part of the project to build a small pipeline to bring Iranian oil from Eilat to the oil refineries in Haifa – which predated the large EAPC pipeline. Another version says the Iranians only owned 10 percent of Fimarco.

Whatever the case, someone is paying the annual company registration fee on the Vaduz company, which Liechtenstein relates to as a going concern.