Shipping with the Enemy: Israeli Firm Deals with Iran

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Moti Kimhi / AFP / Getty Images

A picture dated on August 28, 2007 shows Israeli businessman Sami Ofer (R), chairman of Ofer Brothers Group, a shipping transport company, posing for a picture with current Israeli Prime Minister Benjamin Netanyahu (C), then opposition leader, and his wife Sara during a ceremony at Sourasky Medical Center in Tel Aviv. Ofer died June 3, 2011.

Somehow, it fell to the United States to censure an Israeli shipping company for doing business with Iran.

Last month the State Department sanctioned the Ofer Brothers Group, a private company based in the tony beach city of Herzliya, for selling an $8.6 million tanker to Iran through a known Iranian front company based in Monaco. The May 24 order barred the Israeli firm, along with a subsidiary based in Singapore, from obtaining export licenses, private loans north of $10 million from American banks and any loans at all from the U.S. Export-Import Bank.

The more severe penalty, of course, was embarrassment, which extended beyond the billionaire family that owns the shipping company to an Israeli government that has made sanctioning Iran its top international priority and never misses an opportunity to scold the world about the perils that will ensue if Tehran acquires the means to build a nuclear weapon. Israeli officials have been at pains to explain why it fell to Washington to enforce laws against what Israelis regard as a threat to their very existence. "It looks ridiculous when Israel demands that the world impose sanctions on Iran when its own economic giants make deals with a country that is making a determined, fanatical effort to destroy it," wrote Aryeh Eldad, a lawmaker from the right-wing National Union party, in a letter to the attorney general requesting an investigation.

The ordeal has been prolonged by confusion over whether Israel's own laws against doing business with Iran are insufficient or merely unenforced. The Jewish state keeps a very tight hold on the export of arms, says Robbie Sabel, a legal scholar at Hebrew University in Jerusalem. "However on civilian exports, Israeli laws are less detailed. The only real law dates from the British Mandate in the middle of the last century, which forbids trading with the enemy." Iran was added to the enemies list by the finance ministry in 2007, grouped with the countries that sent troops to oppose Israel's establishment in 1948: Syria, Lebanon, Iraq, Saudi Arabia and Yemen. (Original members Egypt and Jordan were removed after signing peace treaties with Israel and 1979 an 1994.) In addition, the Knesset in 2008 passed a law barring Israeli financial institutions from investing in firms that do substantive business with Iran.

How vigorously are either of these laws is enforced? Not terribly, says Sabel. While Washington promulgates tough regulations intended to filter and detect trade with Iran, "we don't have this," he says. "It's never been an issue here. It's not that we thought someone selling something to Iran was strengthening our enemies." In fact, Israeli companies have always had ways around the longstanding boycott that many Arab countries still enforce against the Jewish state. "The general feeling was in Israel that's here's no harm in selling through a Belgian company to an Arab state," Sabel observes.

Israel's government has its own peculiar mercantile history with Iran. In the mid-1980s, it sold anti-tank missiles and other arms to the Islamic Republic at the behest of the Reagan Administration. The transactions were a nearly forgotten element in the Rube Goldberg arms-for-hostages contraption that came to light as the Iran-Contra scandal, and tarnished Reagan's second term. "So we did trade even in contraband with them," says Uzi Even, a nuclear expert at Tel Aviv University and liberal activist.

Nothing quite so ornate is being offered to explain the current situation. But there are hints and allegations. A Knesset committee chair called a meeting to probe the affair, then cancelled it after being handed a mysterious note just as the session was to convene. And while the office of Israel's prime minister has been reticent on the matter, the company was defended repeatedly this week by one former official: Meir Dagan, the last head of the Mossad, Israel's overseas intelligence agency. "There's no law saying you can't dock in Iran," Dagan said Wednesday, a day after complaining the Israeli media had "exaggerated" the Ofers' offense.

The former spymaster's remarks were seized on by Israeli newspapers already quoting indignant sources "close to the brothers" suggesting their company had performed favors for national security services. The daily Haaretz published a list of retired senior military and intelligence officers who had gone to work for the Ofers — a company indeed known for hiring former public officials. The death Friday of Sammy Ofer, the eldest and most powerful brother, at his Tel Aviv home did nothing to discourage speculation, even at age 89. Western intellience sources tell TIME that the Ofers cooperated with Mossad on one occasion, but that the firm was on its own when it ran afoul of U.S. sanctions.

In the end, all that's clear is that the shippers have some powerful friends in Israel. Dagan's defense, after all, came at the expense of his own position on sanctions — he prefers any means short of military strikes. At the same Tel Aviv conference where he defended the transgressing magnates, the retired Mossad chief said, "If anyone seriously considers [a strike] he needs to understand that he's dragging Israel into a regional war that it would not know how to get out of. The security challenge would become unbearable." With reporting by Aaron J. Klein/Jerusalem