Japan and the US could be headed for a showdown over Japan's plan to improve economic ties with Iran. Japan's Ministry of International Trade and Industry is expecting to open talks soon with Iran to procure more stable crude oil supplies.
A ministry official told OGJ the specific agenda has yet to be decided, but the focus of the talks would be on crude supplies and other energy-related topics.
MITI's plan to approach Iran was partly attributed to Tokyo-based Arabian Oil Co.'s (AOC) failure earlier this year to renew its 40-year concession at Khafji oil field in the Saudi side of the Neutral Zone between Saudi Arabia and Kuwait. The MITI official noted the loss of the Khafji concession emphasized the need to develop ties with alternative crude oil suppliers, including Iran.
While no dates had been set, MITI and Iranian officials are expected to begin discussions on cooperation in oil, gas, electric power, energy conservation, and solar power industries. Minister of International Trade and Industry Takashi Fukaya has said Japan hopes to begin wide-ranging talks with Iran this summer on cooperation in the energy sector prior to a visit to Tokyo by Iranian Pres. Mohammed Khatami this fall.
US sanctions?
Although the MITI source declined to comment on the US's Iran Libya Sanctions Act-which raises the possibility of imposing sanctions on non-US companies that invest in Iran-Japan's moves are likely to arouse concern in Washington.
Indeed, a senior US official told OGJ that it is possible that Japanese companies could be subject to sanctions but added that US policy towards Iran "is in a state of flux at the moment as we try to put relations on a more normal footing. That means that how we would react to closer economic ties between Japan and Iran is an open question. However, we are also well aware of Japan's precarious energy situation."
Japan shares a number of US concerns over Iran, the MITI official said, adding, "We believe that developing closer economic and political ties with Iran gives us greater leverage. At the same time, we realize that Iran will eventually become reintegrated into the international community, and we want to be in a strong position when that happens."
On Feb. 27, AOC, Japan's largest crude producer, gave up its right to produce oil in the offshore Khafji and Hout fields (OGJ, Mar. 6, 2000, Newsletter). The concession represented the premier oil production interests of Japan, which is almost totally dependent on imports for its crude needs. AOC will now bank on a Neutral Zone concession with Kuwait that expires in January 2003. The venture is AOC's remaining commercial crude interest outside Japan.
The MITI official said the ministry would like to secure alternative producing rights in oil-exporting countries, but its approach would vary according to the situation in each country. Japan has been steadily increasing its crude imports from Iran.
