Mideast Briefing: The Children of the Cobbler Go Barefoot

June 11th, 2011

Ed Rettig, Director, AJC-Jerusalem

An Israeli-owned company sells an oil tanker to Iran

Lenin reportedly said of capitalists that they “will sell us the rope with which to hang them.” Israel seems to have encountered a contemporary version of this trope with the announcement by the U.S. State Department that it is placing sanctions on a large Israeli company, the Ofer Brothers Group, and its Singapore-based subsidiary Tanker Pacific - among a group of seven companies, including a major Venezuelan firm, targeted under increasingly restrictive U.S. laws barring specified trade with Iran.

According to the State Department’s statement of May 24, “By imposing these sanctions, the Secretary sends a stern and clear message to companies around the world: those who continue to irresponsibly support Iran’s energy sector and help facilitate Iran’s efforts to evade U.S. sanctions will face serious consequences.”

The statement notes: “Tanker Pacific (Singapore), Ofer Brothers Group (Israel), and Associated Shipbroking (Monaco): These companies are being sanctioned for their respective roles in a September 2010 transaction that provided a tanker valued at $8.65 million to the Islamic Republic of Iran Shipping Lines (IRISL), an entity that has been designated by the United States and the European Union for its role in supporting Iran’s proliferation activities…. We believe that Tanker Pacific and Ofer Brothers Group failed to exercise due diligence and did not heed publicly available and easily obtainable information that would have indicated that they were dealing with IRISL.”

To be sure, at the same time four other companies were sanctioned for violations of a far greater scale and scope: “These firms are among the largest current suppliers of refined petroleum products to Iran and all three regularly engaged in deceptive practices in order to ship these products to Iran and evade U.S. sanctions.”

Some observers, noting the obvious differences, wonder why Ofer Bros. was chastised for a single deal worth less than nine million dollars. Some speculate that this public humiliation is aimed indirectly at the Netanyahu government in the aftermath of his recent visit to the United States. Others suggest that it provides an opportunity for the U.S. not only to send a warning to other low-volume traders with Iran, but also to slap Iran with the embarrassing charge of trading with Israel. It is also possible that a message was being sent that even a close ally is not immune to enforcement of the sanctions.

Be that as it may, the announcement stunned the Israeli public. Israeli criticism of the affair generally focused on two points: The apparent lack of due diligence and the role of the Israeli government. Although no one suggests the Ofer Brothers sought to trade with Iran, there is evidence that in addition to the sale of the tanker, thirteen Ofer-owned ships docked in Iranian ports over the last ten years. To be sure, this is a small number, given the size of the fleet Ofer operates and the number of dockings per year. Some of these may have been no more than reporting errors of dockings that never took place. Nevertheless, the reported dockings apparently set off no warning alarms within the Ofer Group and no action was taken to prevent recurrence.

Although the Israeli government firmly denies involvement, press reports have suggested the Ofer Group’s business with Iran assisted Israeli and possibly U.S. intelligence operations there. But the role in the State Department sanctions process of U.S. intelligence agencies - which closely cooperate with Israel in monitoring and countering Iran - casts doubt on this claim. Currently available public information generally supports State’s allegations of a lack of due diligence. At the very least, the Ofer Brothers appear not to have taken sufficient steps to insure that their ships stay away from Iran, and, in the case of the tanker, failed to examine who might be the ultimate purchaser. They now blame the brokerage firm Associated Shipbroking (Monaco), which was also sanctioned by the U.S., for the fiasco. But that does not seem to address the question of due diligence or the larger question of the depth of the commitment of the Ofer Brothers’ firm to the life and death struggle Israel faces with the regime in Iran.

Sadly, the founding patriarch of Ofer Brothers, Sami Ofer, died late on Thursday night at the age of 89 after a long illness. Alongside coverage of his funeral, where many Israeli leaders praised his public-mindedness and commitment to Israel as well as his business genius, the news continued to astonish Israelis by showing how their government dropped the ball. According to published reports, the Foreign Ministry has prepared a draft of a government decision that would formally adopt the American and EU sanctions, and indeed on April 17 the government formally decided to “promote steps in the struggle against Iran’s nuclear plan.” Legislation is pending in the Knesset to this effect and efforts are underway to move the legislation forward with greater urgency. According to news reports, the draft it will essentially copy the U.S. regulations governing trade with Iran. Considering the long period of time the Israeli government has been calling for international sanctions against Iran, not to mention how much is at stake in preventing an Iranian atom bomb, the failure to act at home illustrates the old expression, “it is the children of the cobbler who go barefoot.”