Monday, September 07, 2020
Elder of Ziyon
Around 1959, Israel and Iran built gas and oil pipelines from the Red Sea at Eilat to the Mediterranean Sea at Ashkelon, Ashdod and Haifa ports. Known at the time as the Eilat-Ashkelon Pipeline Company, it was mostly used as an alternative for shipping oil from Shah-era Iran to Europe, bypassing the Suez Canal which Egypt's Gamal Abdel Nasser could arbitrarily restrict.
When Iran severed ties with Israel during the 1979 Iranian Revolution, it stopped this arrangement of sending oil through Israel on to Europe.
The pipeline is still in use, fully owned by Israel and under a new company name - the Europe Asia Pipeline Co. Parts of it are bidirectional and oil from Azerbaijan and Kazakhstan is being sent to tankers in Eilat for transport to China, South Korea and other Asian countries.
For Gulf countries like the UAE, peace with Israel could save them huge amounts of money now spent for shipping through the Suez Canal. Supertankers that can dock in Israeli ports have a capacity of double the size of oil tankers that can fit through the Canal, saving hundreds of thousands of dollars per shipment to Europe and North America. Right now this is very difficult because of the Arab boycott - any company that publicly used Israel for oil transport would be banned from business in the Gulf so existing users keep a very low profile and the EAPC's financial records are considered a military secret by Israel.
The current pipeline is 42 inches for crude oil, with a parallel 16 inch pipeline for gasoline or diesel.
The UAE ending its Israel boycott opens up billions of dollars of business to send oil through Israel to the Mediterranean and to make Israel a major energy transportation hub.
There is an interesting wrinkle to the story of the EAPC. At the time of the Iranian resolution, there were hundreds of millions of dollars worth of oil that were already in Israel that hadn't been paid for, and Iran and Israel have been suing each other for the past 25 years in international courts for the lost business. In 2015, Iranian media reported that a Swiss court had ruled that Israel owed $1.1 billion to Iran, but Israel has shown no interest in actually paying especially in light of its countersuits. Perhaps in response to the UAE deal, Iran is again requesting payment of the alleged $1.1 billion from Israel. Iran has little recourse to force Israel to pay to its sworn enemy, however.
(h/t Yoel)
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