In a 2004 Salon magazine article, How Ahmed Chalabi Conned the Neocons, journalist John Dizard reported on the connection between Chalabi and Douglas Feith and Feith's Jerusalem-based law partner, Marc Zell. Dizard explains the centerpiece of the collaboration, in the words of the now-embittered Zell:
Zell outlines what Chalabi was promising the neocons before the Iraq war: "He said he would end Iraq's boycott of trade with Israel, and would allow Israeli companies to do business there. He said the new Iraqi government would agree to rebuild the pipeline from Mosul in the northern Iraqi oil fields to Haifa the Israeli port, and the location of a major refinery." But Chalabi, Zell says, has delivered on none of them.
In the early days of its statehood, Israel and Iran were business partners in a highly lucrative oil transport and supply operation that fell apart in 1979.
Here's how that Iran-Israel oil supply arrangement came about, fell apart, and became the subject of lawsuits which were decided in Iran's favor, but which Israel has not yet paid.
In the immediate aftermath of the second world war, private US companies built an oil pipeline through the Saudi Arabian desert to Sidon, in Lebanon. The original plans called for Haifa to be the Mediterranean terminal point of the pipeline, but those plans had to be changed due to the political instability of the region; zionist forces were harrying British administrators of the Palestinian mandate which included Haifa. Therefore, Tapline was routed through Jordan, over the Golan, and to a newly constructed terminal at Sidon, in Lebanon. (Sidon ceased to be an oil terminal over 20 years ago; the oil facility was replaced by a major, modern power transmission station until it was severely damaged by Israeli bombardment in the 2006 Israeli-Lebanon conflict.)
Israel pursued other avenues to acquire needed oil. Haaretz journalist Yossi Melman narrates the rise and fall of the Iranian-Israel oil supply arrangement, from the initial investment in the pipeline by Baron Rothschild to the as-yet unpaid court decree.
In broad strokes, here's the story:
AlthoughTAPLINEdocuments indicate that two pipelines were planned from Kirkuk, one to Haifa and the other to the Palestine border; they were not built as of 1951.
But in 1951, Iran recognized the State of Israel and began economic and political relations on several fronts. Not least of these relations involved a steady supply of oil to the resources-poor Israel state.
The Eliat-Ashkalon oil arrangement began in the early 1950s, using a tanker-to pipeline transit from Eilat to Be'er Sheva. The pipeline was owned by the Rothschilds, who had financed it. The arrangement carried on until after the 1967 Six-Day War, when the Suez Canal was closed.
At that point, Shah Reza Pahlavi was persuaded by Israelis "to exploit the new situation and set up a joint and expanded oil initiative." With the Suez Canal closed, transport of oil to Western Europe meant a long journey around the Cape of Good Hope. Iran and Israel agreed to form the Trans-Asiatic company, which loaded oil into tankers 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, shortening the trip and reducing costs significantly.
The Trans-Asiatic company was jointly owned by the Iranian National Oil Company and the Israeli government, which gave the Iranian company an "exclusive franchise to transport and store the oil. Most of it was loaded onto tankers bound for Europe, and a small percentage was used for Israel's energy economy.
Trans-Asiatic acquired the Be'er Sheva pipeline from the Rothschilds and, by 1969, built another pipeline alongside it, as well as terminals at Ashkelon.
Melman writes, "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."
The lucrative arrangement fell apart when the Shah was replaced by Khomeini, who severed relations with Israel, including shipment of oil. To replace the oil supply, Israel negotiated with Egypt to ship oil along the same Eilat to Ashkelon to Haifa pipelines.
Although oil commerce between Iran and Israel ceased, Israel continued as a major supplier of weaponry to Iran in her battle against Iraq. Iraq waged its war on credit; by the end of the war, Iraq was $70 billion in debt, a circumstance that directly led to Iraq's invasion of Kuwait, and consequently, Iraq's downfall. Iran, on the other hand, waged war on the pay-go rule, but by 1985, Iran's cash was tight. Iran initiated legal actions against Trans-Asiatic and Israel, claiming upward of $600 million.
Israel's strategy in dealing with the suits was to file counter-claims, to divert, and to foot-drag, at times even refusing to pay arbitrators. Melman writes that " Only recently has the company begun to pay its share of the arbitration."
Iran engaged attorneys from the International Court of Justice in the Hague, and arbitrators from Switzerland.
As Melman reports,
About three years ago, after almost 20 years of discussion, the arbitrator ruled that the three Israel fuel companies would pay Iran a sum of tens of millions of dollars. Originally the Iranians had demanded hundreds of millions, but this demand was reduced after the arbitrators' acceptance of the claims by the Israeli firms that they had suffered severe financial damage as a result of the behavior of the Iranian side. To date the debt has yet to be paid.
A direct arbitration against Trans-Asiatic, for a debt of half a billion dollars for transporting the oil in the pipeline, continues. Another arbitration, for which no details were available, is also taking place. In any case, the discussions in these two arbitrations, according to knowledgeable sources, are far from over.
Comments on Yossi Melman's reporting on this issue in Haaretz show that opinions in Israel run strong: Israel should not pay the damages the courts and arbitrators have judged that she owes to Iran.