Japan is close to agreement with Washington on the size of cuts refiners must make in imports of Iranian crude oil to win waivers from US sanctions, two ministers said on Tuesday after a media report the two sides would settle on an 11 percent cut.The Yomiuri newspaper, citing unidentified sources, said Japan and the United States reached an agreement at talks last week about the size of cuts to crude imports from Iran, with a formal deal expected by the end of this month. 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.
Reliance on oil imports has grown since a 2011 earthquake and tsunami triggered the Fukushima radiation crisis, leading to most nuclear reactors at Japanese power plants being shut down. "We are closely negotiating with the United States and are moving forward towards mutual understanding, but it is not the case that we have reached a conclusion," Trade Minister Yukio Edano told reporters.
Washington is pushing ahead with sanctions because it fears Iran might use its nuclear programme 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.
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. The United States says 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.
"Many countries have approached us to discuss their efforts to reduce purchases of Iranian crude which, by statute, could except them from sanctions," a senior official in President Barack Obama's administration said.
"We are discussing specific cases with specific countries. It would be premature to discuss any of them at this time."
Japan's Foreign Minister Koichiro Gemba also said no agreement has been reached yet. Japan is offering to continue cutting Iranian oil imports but talks are ongoing, a foreign ministry official said earlier.
One reason Japan may be reluctant to support publicly a reduction in Japan needs to import more oil to make up for declining use of nuclear power after the Fukushima disaster last March triggered the worst nuclear crisis since Chernobyl 25 years ago. Japan is the third-biggest customer for Iranian oil, although its imports of Iranian crude fell 11.7 percent last year to 313,000 barrels per day (bpd), accounting for 8.8 percent of total oil imports. They have declined by more than half from 683,000 bpd in 2003, partly because Iranian oil is more expensive than other Middle Eastern crude. If Japan cut Iranian oil imports by 11 percent from last year's level, as the Yomiuri reported, that would amount to a reduction of 34,430 bpd.
Cosmo Oil Co has already lowered its Iran crude imports to a little below 30,000 bpd from about 40,000 bpd since January, industry sources say.
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