The Secret Pipeline and the Business of Enemies

It’s always interesting when two nations who are sworn enemies engage in commerce that benefits both. It’s the cornerstone of Capitalist peace theory; trade between nations precludes bloodshed. And it might be true. It might work, for a time. Like picking fleas from a massive wild snarling dog, we can point to the flitting things and say, “This theory is alive. Trade between nations works. It creates peace and prevents them from going to war.” Time and the snarling dog sprint forward. A disagreement erupts, and the peace evaporates. Then we’re left to wonder about our theory.

Israel. Iran. The Eilat-Ashkelon pipeline.

This is the famous secret pipeline that runs through Israel, transporting crude oil from the Red Sea to the Mediterranean. Why is it called the Secret Pipeline? Well, let’s go back to the 1950s when Israel was struggling to exist and needed resources, more than anything, to stay alive. What resources? Oil, of course. Israel had plenty of friends (I won’t name them here) to negotiate supply from Iran. What it didn’t have was a way to transport the oil from port to desert and back again; so first a channel was built, then storage tanks were built, then a 16-inch pipeline, then a booster station followed by a 42-inch pipeline and more storage tanks, and so on and so on, until the Eilat-Ashkelon pipeline was miracle-in-the-making. This pipeline was miraculous for many reasons, not the least of which is: it carried Iranian oil across Israel.

Also, it was owned 50:50 by Iran and Israel.  

To avoid embarrassing Iran in the eyes of the Muslim world, the corporate structure was kept secret. Then, as now, there were ways to do this involving shell companies formed in special economic zones like Liechtenstein, Canada, Panama, etc. If anyone went digging to see who owned the Secret Pipeline, they’d run into a mess of legal documents that pointed to nothing. Those in the know (anyone in the oil business) knew that Iran was the “silent partner” in a 49-year franchise established under the Oil Pipeline Franchise Law of 1968, exempting the partnership from income tax, municipal rates, lease fees and from the requirement to hold public tenders.

So, the two nations were cooperating. Kind of.

1970 was a banner year; at peak, the pipeline transported 10 million barrels of Iranian oil through Israel. Things might have continued this way; the wheels of commerce might have kept spinning, had it not been for the Iranian revolution. The revolution severed Israel-Iran relations entirely. The first drop in oil supply sent Israel into a tailspin; it needed to find other suppliers quickly. Fortunately, men like Marc Rich (who I have written about extensively, who I will discuss in a follow-up post) were able to broker new deals for Israel. Compensatory infrastructure was built. While the Eilat-Ashkelon pipeline existed, the trust, the relationship between buyer and seller, was fractured. This began a legal battle that spans decades, that continues today, about who owns this pipeline really and what international court is willing (or able) to enforce the law.

If you want to bore yourself to tears, study the history of arbitration (Israel’s claims versus Iran’s claims) on the Eilat-Ashkelon pipeline. The media prefers to ignore this dispute between two nations, which, unlike the other disputes, is rooted in law, papered by legal documents, and doesn’t take us into a religious spiritual war that can’t be won by either side.

Decades later, the pipeline remains a “secret.”

In 2014, when workers were moving a section of the pipeline running through the desert in Israel’s southern tip, where it meets Egypt and Jordan at the Red Sea, the pipe ruptured and oil began to gush. After 5,000 cubic meters of crude oil was spilled onto Route 90 and fumes from the oil wafted into Jordan (at which point Jordan deployed soldiers to the border, fearing chemical attack) when the full extent of the disaster was clear—when a nature preserve with gazelles and centuries-old acacia groves became slick rivers of oil—when Israeli citizens began demanding accountability, demanding answers, filing lawsuits, they found themselves running headfirst into a wall. A stone wall. “Everything about the pipeline is secret, even the direction the oil is flowing,” said an Israeli lawyer representing an environmental group, the plaintiff. Why? The Eilat-Ashkelon pipeline has operated since its founding under a blanket decree that shrouds its affairs in secrecy for reasons related to national security. Then, as now, the important thing to understand about national security is that it eclipses the possibility of anything else. Including a pipeline that connects two nations, that benefits both.