The US has asked Japan to completely halt oil imports from Iran, going beyond the reductions that were demanded when sanctions were imposed earlier this decade, according to people with knowledge of the matter.
While American government officials made the request during talks with Japanese counterparts in Tokyo this week, no decision has been reached and discussions will continue later, said the people, who asked not to be identified because the matter is confidential. When US President Donald Trump decided to renew sanctions against Iran last month, his administration gave its allies 180 days to reduce purchases from the Opec producer.
The request to stop imports entirely signals a tougher American stance than in 2012, when nations were allowed to continue buying at reduced levels in exchange for waivers from US financial restrictions. Washington going after Tehran’s economic lifeline spurred speculation that Iran’s crude exports will be curbed and helped boost prices to the highest in 3 1/2 years. The issue is also one of the sources of contention at an Opec meeting in Vienna this week.
“The market was more relaxed about the impact of renewed US sanctions on Iran when it was first announced, but now there’s a growing realisation that we could be losing close to 1mn bpd of exports,” said Nevyn Nah, a Singapore-based analyst at industry consultant Energy Aspects Ltd, referring to the total volume of shipments worldwide that could be affected.
Takashi Yamada, director of petroleum policy at Japan’s Ministry of Economy, Trade and Industry, declined to comment as the talks with the US government are ongoing, while an official at the press division of the Ministry of Foreign Affairs wasn’t immediately able to comment. A US State Department spokesman declined to comment.
Japan, Asia’s fourth-largest buyer of Iranian supplies, received 5.3% of its oil requirements from Iran, or 172,000 bpd, in 2017, according to data from the Asian nation’s Ministry of Economy, Trade and Industry.
The nation’s government is probably still negotiating with the American administration to get exemptions from the sanctions, Takashi Tsukioka, chairman of the Petroleum Association of Japan, told reporters on Friday.
The Asian country will likely decide by around early August if, and by how much, it should cut crude imports from Iran, Tsukioka, who is also chairman of refiner Idemitsu Kosan Co, had said last month. Japan will likely take into consideration responses of nations including China, India and South Korea, where the share of Iranian crude in imports is higher, he said.
“Even if the US does impose the strongest sanctions on Iran, the impact will be minimal without everyone on board,” Will Yun, a commodities analyst at Hyundai Futures Corp, said by phone.
For waivers, the US State Department said on May 8 that it’ll consider “relevant evidence in assessing each country’s efforts to reduce the volume of crude oil imported from Iran during the 180-day wind-down period.”
Refiners in Japan, including JXTG Holdings Inc, Cosmo Oil Co and Fuji Oil Holdings Inc, have said previously that they can replace Iranian supplies with oil from elsewhere, including the Middle East even though some of them have plants that are particularly compatible with crude from Iran.
“It could be that the US is initially demanding a big thing before offering Japan a way to go around it in negotiations,” said Satoru Yoshida, a commodity analyst at Rakuten Securities Inc, said by phone from Tokyo. “Even if the US is asking Japan to completely stop Iranian crude imports, which is a very high hurdle, it may lower its demand later.”
Vehicles drive past the Cosmo Oil Co refinery at the Yokkaichi industrial complex at dusk in Yokkaichi, Mie Prefecture (file). Japan, Asia’s fourth-largest buyer of Iranian supplies, received 5.3% of its oil requirements from Iran, or 172,000 bpd, in 2017, according to data from the Asian nation’s Ministry of Economy, Trade and Industry.
