Iran Oil Sanctions Exemption Cheers Japan

By MARI IWATA

http://online.wsj.com/article/SB10001424052702304636404577295104273175364.html?mod=asia_home

TOKYO — Japanese officials said the U.S.'s decision to exempt Tokyo from new sanctions on Iran reflects Washington's recognition of the nation's efforts to reduce its dependency on Tehran's oil.

Japan will continue to cut its Iranian oil imports "considerably," Chief Cabinet Secretary Osamu Fujimura said Wednesday at a news conference. "We have explained to the U.S. that this trend will accelerate in the future and that we will carry out our reductions considerably."

The exemption comes as a relief for Tokyo, which is seeking to avoid any confrontations with its major ally amid growing concerns about China's military clout.

Officials also pledged to keep reducing oil purchases from Iran, but didn't specify how or by what extent. Industry Minister Yukio Edano said Japan's crude imports from the Islamic Republic have fallen by 40% in the past five years. He added that the imports wouldn't be reduced to zero anytime soon.

The U.S. said it is exempting 11 nations, including European Union members and Japan, from tough new sanctions against Iran, saying they are reducing their dependency on Iranian oil.

Akihiko Tembo, chairman of the Petroleum Association of Japan and oil refiner Idemitsu Kosan Co., said he welcomed the U.S. decision, but that the issue of sanctions proposed by the EU on insurance for Iranian crude shipments still needed to be solved.

"We have to keep watching developments," he said, noting that Japanese companies generally buy insurance from domestic insurers for crude-oil shipments, but that 80% to 90% of such insurance is sold in reinsurance markets.

"Europe is the world largest reinsurance market. If they stop buying, it would be a big problem," Mr. Tembo said.

Foreign Minister Koichiro Gemba said later in the day that the government is in talks with the EU about its proposed sanctions against insuring Iranian crude-oil shipments, and said "We aim to prevent any impact on stable oil supply to Japan."

In a bid to pressure Iran over its suspected nuclear-arms development, the U.S. has said it would take steps against foreign financial institutions in the U.S. that have dealings with Iran's central bank—the clearing house for the country's oil transactions.

Iran has said its nuclear program is for peaceful means.

Japan's oil imports from Iran fell 12% in January compared with a year earlier, much steeper than the 2.1% decline in the total import volume in the month, data from the Ministry of Finance showed.

Japan imported 3.6 million barrels of crude oil per day in 2011, with Iranian crude accounting for 8.7%, down from 9.8% in 2010, according to the MOF. Any cut in imports of crude oil is a vital issue for Japan, which depends entirely on imports for the oil it consumes. Crude imports have taken on greater significance as Japan drastically curbs its reliance on nuclear energy following the Fukushima Daiichi nuclear crisis last year.

Meanwhile, China's Foreign Ministry on Wednesday defended the nation's crude-oil purchases and said it opposes unilateral sanctions. At a daily news briefing, spokesman Hong Lei said China buys its crude oil "through normal channels, which is understandable, reasonable and justified. It isn't in violation of any Security Council resolutions or impaired interests of any third party or international community."

He added, "China always opposes the practice of one country imposing unilateral sanctions against another based on its domestic laws and will not accept such unilateral sanctions to be imposed onto a third country."

China said Wednesday its imports from Iran fell by more than 40% to 1.15 million tons due to a business dispute between Iran's state oil company and one of the two Chinese companies that imports Iranian oil. The two sides have since reached a new agreement. Last year Iran was China's No. 3 source of exported crude, after Saudi Arabia and Angola.

The Obama administration on Tuesday said it won't impose sanctions against Japan or 10 European Union nations that have moved to pare Iranian oil purchases, a move that reflects U.S. efforts to squeeze Tehran's finances without upsetting global energy markets.

—Carlos Tejada in Beijing contributed to this article.