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Japan oil industry likely to cut Iran imports in 3 months

Japan oil industry likely to cut Iran imports in 3 months

Japan under pressure to cut Iran oil imports; Hopes import cuts will lead to waiver from sanctions law; US officials touring Asia to muster support for sanctions; Could help clear up some confusion over Japan policy

January 19, 2012 2:25 by

Japan is likely to cut Iranian crude purchases in about three months, the head of an industry body said on Thursday, a reassuring message for U.S. officials touring Asia to muster support for sanctions aimed at starving Iran of oil revenue.

The remarks by Akihiko Tembo, president of the Petroleum Association of Japan (PAJ), could also help clear up some doubts about Japan’s response to the sanctions after conflicting comments by policymakers.

Last week the prime minister had distanced himself from a pledge by the finance minister to reduce Iran’s crude imports.

“I think each buyer is considering this in a practical way and making efforts to reduce nominations (for Iranian crude) as much as possible and find alternatives,” Tembo said in a regular press briefing. He is also chairman of Japan’s No3 refiner Idemitsu Kosan.

“I think there will be less planned volumes than before in a three-month time.”

US Treasury and State Department officials in Tokyo have held meetings with Japanese officials since Wednesday to explain a US law intended to curb Iran’s ability to build a nuclear weapon.

Like other Asian buyers of Iranian oil, Japan is under pressure to cut imports from the world’s fifth-largest crude exporter to secure a waiver from the sanctions. The Foreign Ministry said on Thursday Japan had reiterated in meetings with US officials that it wanted a waiver from the sanctions.

The United States says it will punish financial institutions that deal with Iran’s central bank, the main clearing house for oil revenue. A country can earn a waiver from the sanctions if it significantly reduces trade with Iran.

Still, cutting Iranian imports carries risks for Japan. The country’s reliance on imported energy has increased since the Fukushima nuclear power plant disaster last year.

Finance Minister Jun Azumi said last week that Iranian crude makes up 10 percent of Japan’s overall oil imports.

The country imported more than 300,000 barrels per day of Iran crude in the first 11 months of 2011, mostly through long-term contracts, making it one of Tehran’s top global customers.

The three-month timeframe would coincide with April, the start of term contracts for most Japanese buyers of Iranian crude, suggesting it would cut back on those purchases.

US officials also travelled to South Korea earlier this week. So far, the meetings have not yielded details on the extent to which countries have to reduce Iranian oil imports to earn waivers and whether buying Iranian oil at a cheaper price is excluded as an option.

However, the Obama administration is now focusing on pressing buyers to cut imports of Iran crude to secure waivers rather than securing lower prices.

“This is basically a question of import volume,” a Japanese foreign ministry official told reporters after the meeting with the U.S. delegation.

“We didn’t talk about multiplying import volume by price. The US side didn’t present a list of options.”

Asia’s biggest buyers of Iranian crude, China, India and Japan, are scrambling to try to respond to the new US law.

Last week, Azumi promised Japan would take “concrete” steps to reduce reliance on Iranian crude. But Prime Minister Yoshihiko Noda quickly knocked the suggestion down, saying it was Azumi’s “personal opinion”.

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

Washington has rejected Iran’s assertion and is pressing ahead with new sanctions.

Iran has threatened to close the Strait of Hormuz, used for a third of the world’s seaborne oil trade, if pending Western moves to ban Iranian crude exports cripple its lifeblood energy sector, fanning fears of a descent into wider Middle East war.

Japan’s refining industry has had no problem with banks over settling Iranian crude payments, PAJ’s Tembo said.

Japan’s imports of Iranian crude in the first 11 months of 2011 was 12.3 percent lower than the same period a year earlier, trade ministry data shows. It is also down by more than half from 683,000 bpd in 2003. (By Osamu Tsukimori and Stanley White; Additional reporting by Risa Maeda; Editing by Neil Fullick)

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