When Israel and Iran were friends — and built a secret oil pipeline

As Iran’s retaliation to the US-Israel military campaign engulfs Gulf nations, oil prices have spiked. And yet, a lifetime ago, it was oil that brought Israel and Iran together to set up a joint venture in secret. The Six-Day War of June 1967 and the closure of the Suez Canal by Egypt forced Israel to explore other routes to import oil. At the same time, sellers of oil such as Iran, too, needed a different route: the Suez Canal remained shut till 1975. Around 12% of global trade and 30% of global container traffic goes through the canal, which is the shortest sea route between Europe and Asia. The secret pipeline The Suez Canal’s closure led to a joint-venture between Israel and Iran in 1968 that would connect the Red Sea port of Eilat and the Mediterranean port of Ashkelon. However, Iran and Israel shrouded their involvement through entities based in Liechtenstein and Panama, respectively. But the 42-inch-wide and 254-kilometre-long Eilat Ashkelon Pipeline did not evade detection. “Iran is the only likely source of substantial quantities of petroleum for the pipeline,” a declassified daily briefing dated April 25, 1968, given by the Central Intelligence Agency (CIA) to Lyndon Johnson, then the US President, said. “This petroleum will probably go mainly to Eastern Europe. A fleet of supertankers will unload at the deep-water facilities at Eilat; smaller tankers will load at Ashkelon. This will probably be a less costly route than oil carried via the cape (Cape of Good Hope) or even through the (Suez) canal.” Just like the real owners of the pipeline was a secret, so was the selling of the oil that flowed through it, as buyers were wary of making oil purchases from anything connected to Israel lest it anger the Arab countries. “At the Iranian end of the trade, tankers would load oil from Iran in the Persian Gulf and the crew would tell port authorities that they were heading to ‘Gibraltar, for order’,” journalists Javier Blas and Jack Farchy wrote in their 2021 book, The World for Sale. “But the tankers would never appear in Gibraltar. Instead, they would sail in secret to Eilat, unload their oil, and reappear empty in Iran.” Meanwhile, Israel imposed a “complete blackout on reporting information about any vessel picking up crude at its ports to supply European customers, effectively keeping the whole flow in the shadows.” The joint project seemingly worked well for a decade before it was nationalised by Israel following the Iranian Revolution of 1979. The pipeline’s importance today After the 49-year agreement granting Eilat Ashkelon Pipeline Company the right to run the pipeline ended in 2017, its operations as well as those of the ports of Eilat and Ashkelon were transferred to the Europe Asia Pipeline Company Ltd (EAPC), fully-owned by the State of Israel, in 2019. Just how important is the pipeline now? According to its website, EAPC is the “energy gateway of the State of Israel and about 75% of the energy inputs used by the Israeli economy”. While the pipeline has been a secretive venture for more than half a century, the last decade-and-a-half has seen it attract the sort of attention Israel would not have wanted. First, in December 2014, a leak while a portion of the pipeline was being moved led to Israel’s worst environmental disaster which damaged a desert nature reserve. According to a January 2025 report of the State Comptroller of Israel, 119 km of the 254-km long pipeline — or 47% — are in ‘high to very high’ environmental sensitivity areas, with 101 km passing through nature reserves and national parks at various classification levels. The second was the culmination of Iran’s decades-long pursuit of compensation from Israel for taking sole control of the joint-venture pipeline and non-payment for around 2.9 million tonnes of crude oil in 1978. In May 2015, a Swiss court ordered the payment of more than $1.1 billion to Iran. This was upheld in June 2016. Israel, though, said it cannot make any such payment as its laws prohibit its citizens and companies from trading, doing business with, or conducting financial transactions with those classed as ‘enemy states’. Iran was declared an enemy state by Israel under this law in 2011. Siddharth Upasani is a Deputy Associate Editor with The Indian Express. He reports primarily on data and the economy, looking for trends and changes in the former which paint a picture of the latter. Before The Indian Express, he worked at Moneycontrol and financial newswire Informist (previously called Cogencis). Outside of work, sports, fantasy football, and graphic novels keep him busy. ... Read More