An Israeli oil company, the Eilat Ashkelon Pipeline Company, has been ordered to pay US$1.1 billion in compensation to Iran by a Swiss court.
In response, Israel clarified that it will not pay the debt to the Iranians.
"Without referring to the matter at hand, we'll note that according to the Trading with the Enemy Act it is forbidden to transfer money to the enemy, including the Iranian national oil company," the Finance Ministry statement said.
The compensation ruling follows a long-running legal battle between the two countries over the revenues from an oil pipeline joint venture that dates back to before the Islamic Revolution.
The joint venture between the two countries, which began under the Shah of Iran in 1968, was a project for selling Iranian oil to Europe via Israel. The oil was shipped from Iran to Eilat and then transported to the Mediterranean seaport of Ashkelon via the newly constructed Trans-Israel Pipeline.
The jointly owned pipeline was effectively nationalised by Israel after the 1979 Islamic Revolution, after which Iran turned from being Israel’s ally to its enemy, and Iran's assets were expropriated.
Iran launched three international arbitration suits in Swiss and French courts to receive its share of the revenues from Israel's continued operation of the pipeline, estimated to be in the billions of dollars, and Iranian assets that were nationalised.
The ruling relates to the Israel's sale of Iranian oil that it received on credit and never paid for.
The argument stems back to a 1968 agreement between Israel and the Shah's government, under which the Iranian Oil Company delivered 14.75 million m3 of crude oil through the Eilat-Ashkelon Pipeline Co at a value US$450 million to Israel's Trans-Asiatic Oil Ltd.
Edited from various sources by Elizabeth Corner
Sources: International Business Times, Haaretz