Israel’s Eilat Port Expected to Close Due to Unpaid Taxes

 

Israel’s only southern seaport, Eilat on the Red Sea, is expected to officially suspend commercial operations this weekend due to the financial collapse of the company holding the port concession. A report in the Globes newspaper says the government is meeting to discuss the situation after the bank accounts of the debt-ridden port operator were seized by the local municipality.

The news report says the port’s operator owes between $178,000 and $208,000 in taxes to the Eilat municipality. In addition, since the start of the war in Gaza and the attacks by the Houthis, the operator has not paid its concession fees to the state. Those are said to be more than $890,000. As a result of the unpaid taxes, Globes learned that the municipality had seized the port operator’s bank accounts.

The Port of Eilat has largely been closed for commercial operations for approximately 20 months since the onset of the fighting in Gaza. It was always a smaller commercial port for Israel, but provided an important link as it is south of the Suez Canal. The port was developed by the government in the 1950s but had difficult periods based on the regional instability, including when Egypt closed nearby waterways.

The current operator won the concession as the only bidder in 2012, receiving a 15-year contract with an option to extend for 10 more years. Eilat reportedly flourished, becoming profitable in recent years. It was handling half of all the auto imports into Israel as well as exports of potash, fertilizers, and minerals. It was also handling oil, while the operator had promoted the potential for container operations as well as live animal imports.

By March 2024, there were reports that the port operator had laid off half of its workers. Income from auto imports, Globes reports, was down 100 percent. As the Houthis gained greater distance with their missiles and drones, attacks have also become more frequent in the area around Eilat. 

Operations will officially stop, according to Globes, on July 20. It reports that tugs and other port vessels will be idled, and all operations will stop in the commercial port. Israel, however, had recently named a new operator for the recreational port, which is a separate operation.

One of the main impacts will be on the Israeli Navy, which is using Eilat as a base of operations. The Navy used Eilat recently to launch and support attacks on the Houthis in Yemen.

“If the situation continues, a decline in the port’s equipment and long-term damage to the continuity of its functioning is expected as a result of the shutdown of cranes, electrical systems, etc.,” warns a letter from the National Emergency Authority obtained by Globes.

The news report says the Israeli government was due to convene a meeting to discuss the situation and possible alternatives to prevent the closure. Globes reports that the Israeli government last month was discussing compensation to the port operator of approximately $4.5 million. However, it says it was being conditioned on payment of the $892,000, the company is in arrears on its concession fees.

The company told Globes it was working on a settlement with the municipality and denied the reports that the operations would be suspended. Israel considers Eilat a strategic asset, further raising the likelihood that the government will intervene to keep the operation going.