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Israel says it won’t pay $1.1 billion judgment to Iran

Israel rejects Swiss court’s demand to transfer money to Tehran over pipeline deal that soured when ties were severed in 1979

oil-635x357An Eilat Ashkelon Pipeline Company oil terminal in Eilat (CC BY 2.5Pikiwikisrael)

“Under the laws of trade we cannot transfer funds to an enemy country, ” a statement issued by the Finance Minister said.

Yesterday the Iranian state news agency IRNA said Tao, an Israeli firm registered in Panama, was ordered to pay $1.1 billion compensation to the National Iranian Oil Company, in compensation from a legal tussle dating back to 1989.

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The case relates to a joint venture established in 1968 under the deposed shah of Iran to ship the country’s oil to the Israeli port of Eilat in the Mediterranean for export to Europe.

Iran cancelled the contract after the Islamic Revolution of 1979 because the country does not recognize Israel.

What happened was actually kind of funny when you think about it. Israel had been receiving Iranian oil in its ports at Eilat, transferring it overland to its ports on the Mediterranean for shipment to Europe. This was cheaper for Iran than shipping all the way by sea and paying fees to use the Suez Canal.

Much of the proceeds from the oil deals was used by Israel to cover the costs of defense contracts that it had with Iran. But when the revolution there happened and the new regime cut off all ties with Israel, the Jewish State was left holding a large sum of cash from the oil sales.

Things were so hectic in Iran after the fall of the Shah that it took years fro its government to even notice that it was owed the money.

Since the discovery,  Iran has continued to demand that Israel pay back the funds acquired before 1979.

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