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Oil Price Discount Pledged for Pipeline, Israeli Says

February 24, 1988|DAN FISHER | Times Staff Writer

JERUSALEM — Israeli Foreign Minister Shimon Peres received a 1985 promise that Israel would enjoy up to $700 million in oil price discounts for its guarantee not to interfere with a proposed Iraqi pipeline, but he did not pass along the offer to political rival Yitzhak Shamir, his partner in Israel's coalition leadership, an aide to Peres said late Tuesday.

Peres, who was prime minister at the time, did not report the offer because he "evidently did not think it was very serious," the aide said.

The promise was made by Swiss oilman Bruce Rappaport, a principal figure in the $1-billion pipeline venture, during a September, 1985, meeting with Peres. Under the arrangement, Israel would have received $65 million to $70 million in oil discounts annually for 10 years for agreeing not to attack the pipeline being built by Iraq, its long-time enemy.

The failure to inform Shamir of the arrangement raises questions about whether Peres was trying to keep the deal secret from an equal partner in Israel's "national unity" coalition. Although the two men rotate the post of prime minister--with Peres serving in the job during the first half of the four-year term and Shamir currently holding it in the second--the approval of both officials is required for major actions.

The disclosure came a day after the release in Washington of a newly declassified memo to U.S. Atty. Gen. Edwin Meese III, a document that cites an alleged plan to pay Peres' Labor Alignment party a portion of the proceeds from the pipeline project. The memo was written by attorney E. Robert Wallach, a long-time friend of Meese who was hired by Rappaport to work on the project.

The purported payment plan is a primary focus of an investigation of Meese by independent counsel James C. McKay, who is looking into possible violations of the Foreign Corrupt Practices Act. The law prohibits U.S. citizens, firms or their agents from making payments to senior foreign officials or political parties in exchange for under-the-table favors.

Attorney General May Act

The 1977 act also states that the attorney general may, "in his discretion," file civil suit to prevent a violation of the law if one appears imminent.

At the White House, spokesman Marlin Fitzwater said Tuesday: "Ed Meese has been (Reagan's) friend and adviser for years and years going back to California. He knows him to be a man of integrity, and he stands behind him--period." When asked whether Reagan wants Meese to serve in his post as the investigation of him continues, Fitzwater replied: "Oh, absolutely."

Peres, who is now foreign minister, again denied Tuesday that he or his party had been offered any bribe and his aide branded the charge "nonsense."

However, for the first time since the key memo outlining the pipeline plan was disclosed by The Times last month, there were strong signs here that the case may become a domestic Israeli political issue as well.

Call for Official Inquiry

Two rightist members of the Israeli Knesset (parliament) called Tuesday night for the establishment of an official commission to investigate the case, and another senior government source said in an interview: "I think it will start rolling as an internal problem."

Israel Radio devoted nearly half an hour to the story on one of its main evening newscasts, and it was also featured more prominently than previously in the country's newspapers and on television.

Peres' office tried to head off any domestic political fallout by releasing new details on the background of the project showing that it previously had been approved in principle by Shamir, who heads the rightist Likud Bloc. The Labor Alignment and Likud, which are normally arch-rivals, have been joined since September, 1984, in the coalition government.

The aide said that Peres "did not do anything about it (the payment offer). He did not report it. He did not pursue it. . . . Peres' attitude toward the whole construction of the pipeline was based on strategic considerations. He saw it as a contributing element to the stability of the region and he did not think that the offer of discounted oil was of any consequence."

Gives Letter to Rappaport

Peres did pursue Rappaport's request for his help in reviving the project, however, giving the oilman a two-page, handwritten letter addressed to Meese and expressing his continued interest in the project. The text of that letter was also released in Washington Monday.

The Wallach-Meese memo, which said that the alleged arrangement for channeling some pipeline funds to the Israeli Labor Alignment "would be denied everywhere," said the payments to Israel could total $700 million but did not specify what amount of that money would go to the party.

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