LONDON (Nov. 15)
In the spring of 1981, Britain vetoed a private deal under which 13 tanker loads of North Sea oil worth more than $200 million would have been shipped to Israel.
The matter has finally come to light following a prolonged legal battle between two of the companies involved. As a result, the British government is now trying to prevent the European Court of Justice from deciding whether or not Britain’s refusal to supply Israel breaches its commitments as a member of the European Economic Community (EEC).
The dispute stems from a refusal to load a cargo of oil, sold by Sun International, the world’s 12th biggest oil company, to a Swiss subsidiary of Bulk Oil, an international shipping and oil refining concern.
Hearing that the oil was bound for Haifa, British Petroleum (BP) refused to load the first tanker at the giant Sullom Voe terminal in the Shetland Islands, north of Scotland. BP operates the terminal which was officially opened only two weeks before this incident occurred. Instead, the oil was removed by BP for sale on the spot market. Sun has sued Bulk Oil for breach of contract, claiming a total of $15 million in lost profits and interest.
The two companies have also been involved in parallel court battles in Italy and in the United States where the Commerce Department is also probing alleged violations of anti-boycott legislation.
Inquiries by this correspondent show that the deal between Sun Oil and Bulk Oil was nipped in the bud when BP discovered that the oil was bound for Haifa, even though Gibraltar was given as its initial destination. The whole deal was for nearly 900,000 tons of crude oil over a period of 18 months. It would have constituted the first known export of British oil to Israel.
At least six companies were involved in various stages of the deal. The oil had been produced in the North Sea by BP which sold it to Svenska Petroleum, the Swedish state oil company, which in turn sold it to Sun. Bulk Oil had ordered it on behalf of Delek one of Israel’s three main petrol groups, which arranged for it to be transported by Tanker Services, a Haifa chartering agency.
The deal started to take shape early in 1981 when world oil markets were beginning to recover from the shortages caused by the revolution in Iran. The Israelis had previously relied on Iran for nearly half their oil requirements. But the fall of the Shah forced them to seek long-term secure alternatives.
Israel had already turned to Mexico and Egypt for 40 percent and 25 percent of its needs, respectively; it had a United States guarantee that if those supplies were terminated it would not be left without oil.
The contract between Sun and Bulk contained a clause reading: “Destination free but always in line with exporting country’s government policy. United Kingdom government policy at present does not allow delivery to South Africa.” The first shipment was to have been collected by the 50,000-ton Greek-registered tanker George B. Sphikas, commanded by Capt. Triantafiliou.
On May 19, 1981, British Petroleum questioned the vessel’s bill of lading which said “Gibraltar for orders.” This meant the cargo was to go to Gibraltar where the Master would receive further sailing instructions.
Asked to report the final destination, Bulk checked with the vessel’s Israeli charterers and was instructed to designate Haifa.
VESSEL NOT ALLOWED TO LOAD
On May 24, the George B. Sphikas reached the sea lanes off the Sullom Voe Harbor but was told that it would not be granted entry. While further telex messages were exchanged by the parties concerned, the ship steamed around slowly. Finally, on May 30 it was told to leave the area, with its tanks still empty.
In refusing to load her, the British oil authorities were following guidelines first issued on January 31 by the then Energy Secretary, Tony Benn.
At the time, Benn had been asked in Parliament how he was dealing with the threat to oil supplies caused by the cessation of Iranian exports. He replied: “The Government will expect oil companies exporting North Sea crude to do so in the markets of our partners in the International Energy Agency and in the European Community. This expectation in no way cuts across the maintenance, to the extent possible, of any existing patterns of trade outside those regions.”
Although Benn had not named Israel, he had effectively excluded it because Israel was not a member of either of the organizations he mentioned and was not an existing customer. He did not exclude Finland which, although belonging to neither the IEA nor EEC, was an existing customer. Ironically, although this ruling was issued to deal with an international oil shortage, it was to remain the basis of British oil export policy even though the oil market has since been transformed from famine to feast.
The policy was restated as recently as last month when the question was raised at a London meeting between Peter Waker, the present Energy Secretary, and his Israeli counterpart, Yitzhak Modai.
British officials strongly deny that it is intended to discriminate against Israel, pointing out that although other countries are affected by it only Israel continues to protest publicly. They also point out that Britain sells Israel coal.
Benn told this correspondent last week that he was aware, when first announcing the guidelines four years ago, that Israel would be excluded but he had first ascertained that the U.S. had guaranteed Israel’s oil supplies.
Despite British assurances, Israel’s oil purchasing agents believe that the elaborate formula for refusing to supply Israel is intended to protect major British oil companies with stakes in the Arab world, primarily British Petroleum.