Iran Nuclear NewsJapan freezes $10 billion Iran loans on nuclear row

Japan freezes $10 billion Iran loans on nuclear row

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Bloomberg: Japan, the world’s second-largest oil importer after the U.S., halted its $10 billion financing of projects in Iran until the country complies with demands to halt its nuclear program, an official said. By Andy Critchlow and Will McSheehy

Nov. 22 (Bloomberg) — Japan, the world’s second-largest oil importer after the U.S., halted its $10 billion financing of projects in Iran until the country complies with demands to halt its nuclear program, an official said.

“New projects, no thanks,” Fumio Hoshi, senior executive director of state-owned Japan Bank for International Cooperation, told reporters today. Lending will cease until “we have a good outcome from the negotiations between Iran, the Europeans and the U.S.”

Inpex Holding Inc. Japan’s biggest oil explorer, on Oct. 6 said it relinquished control of Iran’s Azagedan oilfield project after a dispute with the country’s oil ministry. Iran may give China and Russia access to the Azadegan field in return for support at the United Nations, which is consider sanctions over Iran’s nuclear program.

The Islamic Republic, which holds the world’s second- largest oil stocks after Saudi Arabia, has refused to end its uranium enrichment program, prompting the U.S. and some European nations to seek the imposition of sanctions by the United Nations Security Council.

The U.S. suspects the Iranian drive to produce enriched uranium is a precursor to building a nuclear bomb, in contravention of the Non-Proliferation Treaty, to which Iran is a signatory.

Iran Needs Yen

President Mahmoud Ahmadinejad’s government needs Japanese investment to help it boost oil output to 4.6 million barrels a day by 2010.

“If the Japanese funding stops, I think the Iranians will have to prioritize their projects by completing those say 80 percent through and delaying those at an early stage,” Manouchehr Takin, senior analyst at the Center for Global Energy Studies, said in a phone interview from London today.

An official at Iran’s Ministry of Finance and Economic Affairs, declined to comment or be named when called today in Tehran. Noboru Tezuka, Inpex’s managing director for Iran, declined to be interviewed today in Dubai.

Japan needs the $2.5 billion Azadegan project to help meet a goal of getting 40 percent of oil imports from assets it controls. Asia’s biggest oil importer got 13.8 percent of its crude from Iran in 2005, making the Middle East nation Japan’s third-biggest source of crude.

Japan Bank, the overseas lender for the Japanese government, has currently more than $10 billion committed to nine projects in Iran, mainly in the petrochemicals and gas industries, he said. Japan Bank for International Cooperation has about $18 billion of bonds outstanding.

Swiss Banks Say No More

The U.S., which already imposes sanctions on Tehran, wants the UN Security Council to punish Iran for refusing to abide by an Aug. 31 deadline to suspend uranium enrichment by imposing an economic embargo.

Credit Suisse Group and UBS AG, Switzerland’s biggest banks, said in January they wouldn’t seek new business in Iran after reviewing the country’s risk situation.

UBS went further than Credit Suisse, saying it would close all its accounts held by individuals and companies resident in Iran, and shut down its trade-financing business in the country.

Total SA, ENI SpA and Statoil ASA are among international oil companies to have completed projects in Iran even though their U.S. competitors are prohibited from working there.

BP Plc is avoiding doing business in the Islamic Republic for fear of retribution from the U.S. which forbids oil companies from investing directly in Iran. BP’s Chief Executive Lord Browne last year described doing business in Iran as “offensive.”

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