Secrecy in Israel's Oil Industry: Lapid Extended Boss' Tenure to Tighten Grip on Firm

Lapid signed order to extend Yossi Peled’s term in November, two weeks before a massive oil leak in southern Israel.

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Repairing a segment of the Eilat-Ashkelon pipeline.
Repairing a segment of the Eilat-Ashkelon pipeline.Credit: Gil Cohen Magen

Before leaving his post, former Finance Minister Yair Lapid extended the tenure of Eilat-Ashkelon Pipeline Company chairman Yossi Peled until the company’s concession to operate the pipeline expires in March 2017.

Lapid decided to extend Peled’s term in August, and signed on it on November 19, some two weeks before a leak from the EAPC pipeline that caused heavy damage to the Evrona nature reserve, near Eilat.

Lapid also made a personnel change in a key position related to EAPC, concerning someone who wanted to increase supervision of the company.

Peled’s original term was set to end this coming October, meaning that Lapid extended it a year early, an atypical situation for a government company. Lapid’s move was questioned by others in the government, but the response was that since the company’s concession ends in March 2017 in any case, it made no sense to appoint a new chairman this October for 18 months. Sources close to Lapid said he had extended Peled’s tenure to assure continuous management and because he admired Peled’s skills.

Extending Peled’s term also facilitates the continued employment of two people affiliated with Lapid’s party at companies connected to EAPC. One is attorney Ronen Aviani, Yesh Atid’s legal adviser, who serves as an aide to Peled but is employed as an outside consultant. The other is Limor Pocker-Kobrinsky, the sister of Hillel Kobrinsky, an associate of Lapid’s. She is employed as an external consultant to Dorad, which runs a power plant in which EAPC is the primary partner. The cost of employing each of them is tens of thousands of shekels a month. Both Aviani and Hillel Kobrinsky signed conflict-of-interest documents.

Peled, a reserve major general and former minister, was originally appointed chairman of EAPC in October 2012 by Lapid’s predecessor, Yuval Steinitz, with the approval of Prime Minister Benjamin Netanyahu, to whom Peled is close. The appointment was compensation for Peled not being appointed Israel Bonds chairman, which Steinitz opposed.

In addition to serving as chairman of EAPC and its sister company, Trans-Asiatic Oil, Peled is chairman of three related companies: the Eilat Corporation, registered in Panama, through which the state holds its shares in EAPC; Eilat-Ashkelon Infrastructure Services, an EAPC subsidiary; and Dorad, the private power plant. Peled also serves as an external director of the Scailex Corporation.

EAPC has a government concession to operate the pipeline from Eilat to Ashkelon, and ports and storage facilities in both cities. The concession exempts EAPC from taxes, levies, and planning and building restrictions. Today, EAPC unloads crude oil at the Ashkelon Port, which it controls; stores oil in tank farms in both Ashkelon and Eilat; unloads and delivers jet fuel that comes from the United States to air force bases; stores cooking gas for the gas companies; and operates an oil jetty in Eilat, which is mostly idle for lack of suppliers and customers. It was a partner in a failed wind energy project near Eilat.

EAPC was founded in 1968 as a partnership between the Israeli government and the National Iranian Oil Company to bring Iranian oil from the Red Sea to the Mediterranean. The formal partnership, which was formed through companies registered abroad, remained intact even after the Islamic Revolution in 1979, the cutting of diplomatic relations, and the halting of Iranian oil supplies to Israel. The Iranian oil company dragged Israel into international arbitration to get paid for its share of the partnership, estimated in 2004 as being worth $800 million. The arbitration is taking place in Switzerland.

Iran continues to operate the front company Fimarco Anstalt, which has been registered in the Liechtenstein capital of Vaduz since 1959. It is through this company that the National Iranian Oil Company holds its shares in EAPC.

Eilat Corporation and Fimarco are equal partners in two other companies – APC Holdings, which is registered in Canada and holds almost all of EAPC’s shares; and Trans-Asiatic Oil, which trades and markets crude oil.

Peled has set up a committee to examine the future of the firm when the concession expires in two years. The state is doing its own staff work on the future of EAPC after the concession expires. Two months ago, the state rejected a request by the government company Petroleum and Infrastructures, Ltd., which provides services similar to EAPC, to merge with EAPC in 2017.

Publication of information about EAPC is subject to censorship under a 1968 government order. The Israel Union for Environmental Defense petitioned the High Court of Justice to suspend the confidentiality. At the same time, the court is hearing a petition filed by attorney Nitzana Darshan-Leitner, chairman of the Shurat Hadin organization, demanding that the government confirm whether it is conducting an arbitration procedure against Iran. Netanyahu signed a certificate of privilege, stating that disclosure of information on the arbitration would harm Israel’s security and foreign relations.

The state has not yet submitted its responses to the petitions and has requested a postponement in both cases.

The secrecy over EAPC was imposed early on to hide the partnership with Iran, which was then led by the Shah and maintained a strategic alliance with Israel. Today, the argument made by government officials for maintaining secrecy is the fear of losing the arbitration, which would cost Israel billions of dollars.

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