Iranian state news agency IRNA said Wednesday that the court had found Israel's Trans-Asian Oil (TAO) liable for payment of USD 1.1 billion to the National Iranian Oil Company (NIOC).
It said that NIOC and an Israeli company had signed an agreement in 1968 to transport Iranian oil to the Jewish state across the Red Sea.
But after the 1979 Islamic revolution which overthrew Iran's pro-Western shah, the new regime cancelled the contract because it did not recognise the Jewish state.
The Israeli finance ministry today issued a carefully- worded statement which neither confirmed nor denied the IRNA report.
More From This Section
"Without commenting on the substance of the matter, we should remember that in accordance with the laws on trading with the enemy, it is prohibited to transfer funds to the enemy, which includes the National Iranian Oil Company," it said.
"It is highly doubtful that Israel will actually pay the debt," said an expert quoted by Israeli defence analyst Yossi Melman in Maariv newspaper today.
Israel considers Iran its deadly foe and accuses it of seeking to develop nuclear arms and of financing attacks by Gaza-based Hamas and by Lebanon's Hezbollah.
The premier is an implacable foe of any easing of international sanctions on Tehran as part of a nascent deal meant to prevent it acquiring nuclear arms.
In a January editorial, the left-leaning Haaretz daily wondered if Netanyahu's campaign to isolate Iran could be to some extent influenced by the festering financial dispute, which has been the subject of arbitration for two decades.
"The legal battle has kept the highest people in government very busy, but Israelis have been left in the dark," it wrote.