Japan cuts back Iran oil imports to appease U.S.

February 23, 2012

Japan’s largest oil company will scale back its imports of crude oil from Iran in line with discussions between Tokyo and Washington on steps to penalize Tehran for its nuclear development program.

JX Nippon Oil & Energy Corp. said it expects to reduce its oil imports from Iran by 10 percent. The measure is in response to sanctions by Washington over Iran's nuclear ambitions.

JX currently imports about 90,000 barrels of crude oil a day from Iran. The volume accounts for about one-third of Japan’s entire crude oil imports from Iran. Of those 90,000 barrels, annual contracts for 10,000 barrels will expire in April. JX will not renew those contracts.

Instead, it will import the same amount from Saudi Arabia or elsewhere to maintain total daily imports of 90,000 barrels.

Another Japanese company, Cosmo Oil Co., has not renewed part of its contract with Iran since last month. As a result, the firm has reduced its imports from the country by 10,000 barrels, from about 40,000 barrels a day.

Showa Shell Sekiyu K.K., which imports almost the same amount of crude oil from Iran as JX, is moving to cut imports of crude oil from Iran. It plans to buy from Saudi Arabia or other countries as soon as the Japan-U.S. negotiations reach an agreement.

According to Finance Ministry trade statistics, Japan’s total crude oil imports from Iran stood at about 300,000 barrels a day on average in 2011, accounting for 9 percent of Japan’s entire crude oil imports.

At the end of 2011, however, Washington decided to prohibit foreign financial institutions that make transactions with the Iranian central bank for settlements on crude oil purchases from doing businesses in the U.S. domestic market.

The U.S. government made the decision to intensify sanctions against Iran if it does not abandon its nuclear development program. Countries which reduce imports from Iran will not face any sanctions from Washington.

Japan has reduced its crude oil imports from Iran by 40 percent over the past five years. By further reducing imports from Iran, the Japanese government is asking the U.S. government not to impose any prohibitions on Japanese financial institutions.

(This article was written by Kazumasa Takenaka and Tetsuo Kogure.)

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