'Japan in final talks to cut Iran oil imports'

Three Japan megabanks to win waivers, according to Japanese business daily, which says cuts could amount to over 20% per year.

By REUTERS
February 23, 2012 02:52
2 minute read.
An Iranian gas platform

Iranian oil platform, Iran flag. (photo credit: Reuters)

 
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TOKYO - Japan is in final talks with Washington on an agreement on cuts in Iranian crude oil imports that could amount to more than 20 percent a year, the Nikkei business daily reported on Thursday, as Tokyo seeks to win waivers from US sanctions.

Japan and the United States will reach a basic agreement by the end of February, sparing Japan's three main banks that currently handle payments to Iran from penalties, the Washington-datelined report said, without citing sources.

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Avoiding sanctions is essential to protect the Japanese financial sector's operations abroad, but cutting oil imports could pose a risk to Japan's economy.

Japan's trade and foreign ministers said on Tuesday Tokyo was close to an agreement with Washington but gave no indication of the size of the cuts in crude imports from Iran. Another Japanese newspaper had earlier reported the two sides would settle on 11 percent.

Cuts of 20 percent would therefore be much larger than anticipated, with Japan's reliance on imports having grown since a 2011 earthquake and tsunami triggered the Fukushima radiation crisis. That led to most nuclear reactors at Japanese power plants being shut down.

A Japanese government official declined to say if Tokyo had tabled a specific percentage target for cuts that would exceed average declines of 11 percent per year that Tokyo points to from 2007-11.

Japan imported 313,480 barrels per day (bpd) of Iranian crude oil in 2011. If cuts of more than 20 percent were agreed, Iranian crude imports would fall by more than 62,700 bpd to less than 251,000 bpd this year, according to a Reuters calculation.

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Washington is pushing ahead with sanctions because it fears Iran might use its nuclear program to develop nuclear weapons.

The European Union has imposed its own embargo on oil imports from Iran, to start from July 1. In response, Iran ordered a halt of oil sales to Britain and France on Sunday in a move symbolic of Tehran's anger with the West.

China, India and Japan, the top three buyers of Iranian oil, together buy about 45 percent of Iran's crude exports and all of them are planning cuts of at least 10 percent.

China's total cuts this year will amount to 14 percent, according to a Reuters calculation.

Iran, the biggest producer in OPEC after Saudi Arabia, denies Western suspicions that its nuclear program has military goals, saying it is for purely peaceful purposes.

The United States in turn has said it will punish financial institutions that deal with Iran's central bank, the main clearing-house for oil revenues, by shutting them out of US markets. A country can earn a waiver from the sanctions if it significantly reduces trade with Iran.

Agreeing to cuts would win waivers for Japan's three megabanks are Mitsubishi UFJ Financial Group, Mizuho Financial Group and Sumitomo Mitsui Financial Group.

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