Israel and Iran: the forgotten alliance

Considering today's enmity between Israel and Iran, it's hard to believe that shortly after Israel's gaining of independence, Iran was one of the first nations to recognise it and became its closest Muslim ally in the Middle East, up to the Khomeiny era.

By Yossi Melman

In spite of the belligerent declarations of Iran's leaders - President Mahmoud Ahmadinejad repeated his mantra this week that he expects the Zionist entity to collapse in the near future - Iranian representatives are holding negotiations with Israeli representatives. These are not only indirect negotiations, but real meetings. These meetings have been going on for about two decades, and concern laborious international arbitration regarding the debts between the two nations.

There are three separate litigations, which are taking place simultaneously in several European countries, all of them pertaining to a complex legal and business entity called Trans-Asiatic Oil Limited, and relating to one of the biggest secrets between Israel and Iran: the past oil connections between the two countries. Three years ago one of the arbitrations ruled that Israeli fuel companies have to pay the Iranian National Oil Company tens of millions of dollars. All the parties made efforts to maintain the secrecy of the decision and every other detail connected to the subject.

The Eilat-Ashkelon Pipeline Company is born

From the time that Iran de facto recognized Israel in 1951, increasingly close relations developed between the two countries, until the 1970s when they reached a point of strategic partnership. This partnership had four main components: Iranian assistance for the immigration operations for Jews from Iraq; Israeli-Iranian cooperation in the area of intelligence (the Mossad, the Shin Bet security services and the Israel Defense Forces helped to establish, train and operate the Iranian army and the units of Sawak - the Iranian security service. In exchange, Israel's intelligence organizations received Iranian assistance in gathering information and operating agents in Iraq to assist the Kurdish revolt); agreements for military cooperation; and the supply of Iranian oil to Israel.

Beginning in 1975, the military cooperation focused on an Iranian investment of $1.2 billion in several research and development initiatives of Israeli armaments. These initiatives, whose code name was Tzur, included the establishment of a Soltam munitions plant in Iran, the development of the Lavi fighter plane, the development of a sea-to-sea missile based on Gabriel technology, and according to foreign sources, the development of an upgraded ground-to-ground missile, whose range at the time was about 600 kilometers. By the time Ayatollah Ruhollah Khomeini came to power in 1979, ending the cooperation, Israel had managed to transfer the plans for the missile to Iran.

The supplying of Iranian oil to Israel began already in the early 1950s. The oil was transferred in tankers to Eilat, and from there was channeled to Be'er Sheva in a pipeline with a diameter of about 40 centimeters. The pipeline and its installation were funded by the Rothschild family, who were its owners. After the 1967 Six-Day War and the closing of the Suez Canal, Israel (whose prime minister at the time was Levi Eshkol) convinced the Shah, Mohammed Reza Pahlavi, to exploit the new situation and set up a joint and expanded oil initiative. The Shah agreed to the idea.

Thus Trans-Asiatic Oil was established, a company under joint ownership of the Israeli government, through the Finance Ministry, and the Iranian National Oil Company. The Israeli government gave the company an exclusive franchise to transport and store the oil. The main fear of Iranian opponents of the initiative was that if the cooperation were to be exposed, the Arab countries would use it to criticize Tehran. Therefore, in order to maintain secrecy, the company was registered in Panama. The owners of Trans-Asiatic, as they appear in the Israeli Registrar of Companies, are the Eilat Corporation and another company, both of which are also registered in Panama.

In Israel, Trans-Asiatic operated as though it were a foreign company. It acquired the pipeline to Be'er Sheva from the Rothschild family and laid a larger pipeline, with a diameter of about one meter (42 inches), alongside it, from Eilat to Ashkelon, where they also built terminals for loading and unloading the oil. The construction of the terminals was completed in 1969. The closing of the Suez Canal made it difficult to supply oil to Europe from the Persian Gulf. The tankers were forced to sail on a long route around the Cape of Good Hope. The idea behind the establishment of the company was to shorten the sailing routes and the supply time, and thus of course earn more money. The tankers loaded oil in the ports of Iran, sailed to Eilat, where they unloaded the cargo at a special terminal that was built for that purpose, and the oil transported in the pipeline to Ashkelon. Most of it was loaded onto tankers bound for Europe, and a small percentage was used for Israel's energy economy. The Iranian National Oil Company sold the oil to Trans-Asiatic below the market price, and granted it credit for three months.

In its heyday, Trans-Asiatic was an economic empire with a turnover of billions of dollars. It established a subsidiary, the Eilat-Ashkelon Pipeline Company (EAPC), which owned the two pipelines, and a storage container farm to store the oil in Ashkelon and Eilat. It purchased or leased a fleet of 30 huge tankers. In its successful years, about 54 million tons of oil were transported in its pipelines.

But after 10 years of flourishing activity came the crisis. The Shah's rule was weakened. About two months before Khomeini came to power, the Iranian National Oil Company stopped selling oil to Trans-Asiatic, in effect paralyzing it. One of Khomeini's first acts when he came to power was to sever relations with Israel completely. The many Israeli companies and businessmen who had worked in Iran in construction, communications, infrastructure, drugs and commerce had left already during the twilight days of the Shah's rule. The Iranians still owed money to some of them, such as Ya'akov Nimrodi, who had built desalination plants on Kish, the Shah's pleasure island. All the joint initiatives in the areas of security and oil were discontinued. Full article here...