AFP: Japan’s top oil company is slashing crude imports from Iran as a precaution given the risk to supply from the Islamic republic in the deepening crisis over its nuclear programme, analysts said Thursday. by Kyoko Hasegawa
TOKYO, March 16, 2006 (AFP) – Japan’s top oil company is slashing crude imports from Iran as a precaution given the risk to supply from the Islamic republic in the deepening crisis over its nuclear programme, analysts said Thursday.
While privately run Nippon Oil is unlikely to have any political agenda, its move is bound to attract the attention of Iranian leaders who count on Japan as their biggest oil customer, they added.
Nippon Oil said its imports from Iran will be cut 15 percent this year due to a change in brokers and in part due to the international standoff over Tehran’s nuclear ambitions.
Japan, the biggest buyer of Iranian oil, as a result becomes the first country to reduce its exposure to Iran since President Mahmoud Ahmadinejad took office in August, upping confrontation with the West.
“Japan is one of the most conservative countries in the world when it comes to the supply of oil for the refineries,” said Tony Nunan, manager for energy risk management at Mitsubishi Corp.
“With Iran, there’s concern that if there are any sanctions, either imposed by the UN — which we don’t expect — or retaliation by Iran against other sanctions, there could be problems with supply,” he said.
“It could have been that (the contracts were) up for term renewals and Nippon Oil decided to simply reduce its volume at an appropriate time.”
Asia’s largest economy is nearly entirely dependent on foreign oil. It is Iran’s biggest oil customer, taking around a quarter of its exports, although it buys more in total from Saudi Arabia and the United Arab Emirates.
Iran is the second-largest producer within the OPEC oil cartel with an output quota of 4.11 million barrels per day (bpd).
Other major Japanese refineries contacted by AFP said they had no plans to reduce imports from Iran.
Nippon Oil itself played down its decision, saying it would not reduce direct imports, only those done through brokers.
“Trade between Iran and our company will never decrease. It could increase in the future,” Nippon Oil president Fumiaki Watari said, as quoted by a company spokesman.
Japan has defied its main ally, the United States, by maintaining close ties with the Islamic republic over the years.
In 2004, Japan inked a two billion-dollar contract to develop Azadegan in southwestern Iran, considered one of the world’s biggest untapped oil reserves.
On the other side, Nippon Oil’s move could add to Iranian conspiracy theories that the United States is trying to exert pressure via Japan, said Hidenobu Sato, an Iran researcher at the Middle East Research Institute of Japan.
“From a business standpoint, the announcement will have no effect on either Japan and Iran. Iran has many options to sell its oil,” Sato said.
“But how they take the message is another thing,” he said.
Oil prices were flat in Asian trade Thursday as the market balanced a jump in US crude stockpiles against concerns over Iran and Nigeria, where rebels threatened to step up attacks on foreign oil workers and facilities.
Nippon Oil shares shed five yen to close at 891 on the Tokyo Stock Exchange.
Sato also noted that Ahmadinejad is surrounded by officials sympathetic to China, which has been increasingly competing with Japan for desperately needed energy resources in the East China Sea and Siberia.
“Even if Japan reduces Iranian oil imports, Iran knows China would buy as much oil as it produces,” he said.
Ahmadinejad’s populist government has insisted that Iran has the right to nuclear technology while stressing Tehran will remain a stable producer of oil, its main source of income.
Still, Japan is better placed to withstand an oil shock than it was during previous crises in 1973 and 1979, said Akio Shibata, deputy director at the research arm of trading house Marubeni.
“The impact on the Japanese economy is still limited as the energy efficiency of the Japanese economy has increased significantly from two decades ago,” he said.
