What Is the State Hiding in the Israel-Iran Oil Saga?

The confidentiality order protecting the oil pipeline deal between Israel and Iran in the 1970s is about to be updated. Don’t expect the new version to be for the Israeli public’s benefit.

Eliyahu Hershkovitz

The oil leak in an Arava nature reserve in December 2014 revealed a crack not only in the fuel line, but also the veil of secrecy the state has maintained for decades over the Eilat-Ashkelon Pipeline Company (EAPC) and its activities. The series of articles published in Haaretz and TheMarker following the accident highlighted the arbitration process Iran is waging against Israel, demanding millions of dollars from their former partnership in the transport and trade of oil. Iran claims Israel nationalized the company and stole its money.

Iran cut ties with Israel after the Islamic revolution in 1979 and since then has called Israel derogatory names like “the Little Satan.” But it still hopes to enjoy the fruits of the joint investment, which was active during the last decade of the shah’s rule. Israel presented Iran as a present-day version of Nazi Germany but showed up for every arbitration session, even though it dragged its feet and refuses to pay the sum awarded to the Iranians.

The arbitration provided gainful employment for the attorneys representing Israel as arbitrators and its defense team. And, under cover of secrecy, senior officials of EAPC enjoyed extravagant and extraordinary conditions compared to other companies in the public sector. Officials in government ministries involved in the company enjoyed the self-importance of being in on the secret, and harsh state comptroller reports about the company’s operations were censored and buried.

A confidentiality order was imposed in 1968 when the agreement between the Israeli government and the National Iranian Oil Company was signed. Israel pledged to keep the deal secret and enforce this on the media. According to the order, any information “involving the Eilat-Ashkelon Pipeline Company, including investments in the pipeline itself and investments involved in its operations, work on the pipeline, sources of the fuel and its uses, including its sale to foreign entities, are herein declared secret.” The military censor was tasked with enforcing the order.

Even after the business partnership was replaced by legal battles, the order remained in force. Following the 2014 oil leak, the Israel Union for Environmental Defense petitioned the High Court of Justice to lift the confidentiality order and force EAPC to submit to building and planning laws.

Last February, Haaretz revealed that the government has a special account at the Bank of Israel, where it holds the debt money to Iran. The amount in the account is about 1 billion shekels (about $255 million at today’s rates), and details about it appear in the Bank of Israel’s annual reports. Haaretz also revealed Prime Minister Menachem Begin’s 1979 decision not to pay the debt to the Iranian oil company.

The release of this information last year angered then-chief military censor, Brig. Gen. Sima Vaknin-Gil. She asked Attorney General Yehuda Weinstein to launch an investigation against “damage to state security,” although the details revealed were not covered by the confidentiality order.

In response to the environmental NGO’s petition, the state informed the High Court that the confidentiality order was about to change and would conform to the present-day “purpose of concealment.” A committee empaneled by Finance Minister Moshe Kahlon recommended a new formulation, which would release some of the pipeline’s operations from the bonds of censorship.

It may be assumed that the new order is intended to conceal information that might strengthen the Iranians’ case, such as EAPC’s income and profits, or the company’s system of oversight and control.

The state’s insistence on keeping the arbitration a secret shows that the lengthy talks it has been holding with Iran on a legal level are more important to it than revealing its actions to the Israeli public.

The state’s response to the High Court revealed the identity of the government officials involved in the company’s management and maintaining its secrecy. The chairman of the committee that formulated the new confidentiality order is Yair Eidar, responsible for the energy sector in the Government Companies Authority. Also on the panel is the chief military censor or a representative; attorney Efrat Nachalon, from the treasury’s legal department; Gabi Golan, planning and construction adviser to the prime minister; Avner Simhoni, deputy chief of the National Security Council in the Prime Minister’s Office; Omri Epstein of the Justice Ministry department in charge of High Court affairs; and Tami Kaplan of the Foreign Ministry’s legal division.

The new confidentiality order will be presented in coming weeks for approval to the cabinet and the Knesset Foreign Affairs and Defense Committee, and will subsequently be made public.