The late Sammy Ofer is flanked by sons Idan, left, and Eyal. The U.S. found… (Ofer Vaknin / AFP/Getty…)
Reporting from Jerusalem — Even as Israel rallies other nations to boycott Iran, its own commercial sanctions against the Islamic Republic are outdated, vague and poorly enforced, say lawmakers and legal analysts in Jerusalem who are pushing the government to strengthen such measures.
The effort took on added urgency last month after an embarrassing U.S. crackdown on Ofer Bros. Group, one of Israel's largest conglomerates, which the State Department found had violated American sanctions against Iran by using a Singapore subsidiary to sell an oil tanker to an Iranian front company.
Ofer-controlled ships have also transported oil to and from Iran several times over the last decade, the Tel Aviv-based company acknowledged.
Israeli lawmakers expressed outrage over the activities, saying they damage the nation's credibility as it attempts to forge an international consensus to block Iran's nuclear program, which Western officials fear is aimed at developing weapons.
The developments also exposed apparent weaknesses in Israel's boycott efforts. Many here believed any kind of trade with Iran was prohibited by Israeli sanctions, but now there's now a debate over whether Ofer's activities, mostly conducted through foreign companies it controls, actually violated existing Israeli law.
"There are some loopholes that we have to look into," said Aryeh Eldad, a lawmaker from the right-wing National Union party who has called for a government investigation of Ofer. "We can't demand that everyone else in the world boycott Iran when one of our leading commercial giants is making regular visits to an Iranian port. It's ridiculous. We should set the example for the whole world, if for no other reason than as a symbol."
Israel's main law banning commerce with Iran stems from a 1939 British Mandate rule against "trading with the enemy," which was originally intended to be used against Nazi Germany and was adopted by Israel upon its independence. Under the law, trade is banned with a list of "enemy states." After a 2000 Israeli Supreme Court ruling, Iran was added to the list, which also includes Lebanon and Syria.
It's a simple and sweeping law, legal experts say, but it has failed to keep up with the globalization of commerce. The law focuses chiefly on Israeli companies and citizens, and on goods exiting or entering Israel, so it's unclear whether foreign subsidiaries or trade that bypasses Israel — such as the kind Ofer engaged in —is covered.
Ofer representatives have denied knowingly violating U.S. sanctions or Israeli law. The company's supporters initially suggested it had special permission from the government to dock in Iran, hinting it was for national-security reasons. The company later backed away from such claims, which the Israeli government still denied.
Critics say current law also does nothing to restrict Israeli companies from conducting business with firms that, in turn, profit from their dealings with Iran. Such measures have been a growing focus of international sanctions policies.
"Israeli law is still focused on Israeli companies doing business with Iran," said Rifat Azam, an international business law expert at the Herzliya-based Interdisciplinary Center. "But the focus should be more on foreign companies."
He noted that while other Western nations have updated and strengthened their sanctions against Iran in recent years, Israel relies mostly on a law crafted before the nation was founded. As a result, he said, U.S. and European sanctions against Iran are tougher and more explicit than Israel's.
"Our situation is somewhat absurd," Azam said. "Our main relevant legislation isn't even ours originally, but was passed by the British Mandate."
In an attempt to beef up sanctions against Iran, the parliament, or Knesset, in 2008 passed a law — backed by then-opposition leader and current Prime Minister Benjamin Netanyahu — restricting Israeli financial institutions from investing in firms that do business with Iran's energy industry or have more than $20 million in trade with firms dealing with Iran.
But the law has yet to be fully enforced, government officials say, in part because of confusion over the meaning of certain terms.
The law also allowed for the creation of a blacklist of banned companies, similar to one used by the U.S. in its recent enforcement action against Ofer. Israel's list has not been finished, according to the Finance Ministry.
Knesset members are working on legislation to clarify and extend the 2008 ban. The proposed new ban would apply not only to financial institutions making investments in firms linked to Iran, but also to all kinds of companies and government agencies, regardless of whether they are based in Israel, that are conducting substantial business with firms also active in Iran.
