Japanese officials Thursday expressed their concern about the possible negative economic impact of increasing U.S. and European pressure on Iran over its nuclear ambitions.
Japan, which depends on Iran for 10 percent of its crude oil imports, is expected to face a request from U.S. and EU leaders to reduce the imports, at a time when more oil-fired thermal power generation is required to help cover the loss of nuclear plants following the March 2011 earthquake and tsunami.
EU governments have just reached a preliminary agreement to ban imports of oil from Iran, and U.S. Treasury Secretary Timothy Geithner will visit Tokyo next week to discuss the issue with Prime Minister Yoshihiko Noda and senior officials.
“We are not considering banning imports,” a Foreign Ministry official said, indicating the government is wary of stepping up pressure on Iran in any coordinated action.
An official at the Ministry of Economy, Trade and Industry said an embargo on Iranian oil would lead to a sharp rise in crude oil prices and added the U.S. must consider the negative impact of such a development on the global economy.
U.S. President Barack Obama signed a bill into law late last month, empowering U.S. authorities to impose penalties on foreign banks dealing with the central bank of Iran to settle oil imports. The move comes as part of U.S. efforts to prevent Iran from securing funds from oil exports.
Iran is among major crude oil suppliers to Japan, which also include Saudi Arabia, the United Arab Emirates and Qatar. The U.S. allows a grace period under the law for Japan and other allies to find alternative oil suppliers.
Iran’s central bank has accounts at major Japanese banks for oil trade settlements. If U.S. sanctions are implemented, the Japanese government may have to freeze those accounts. It means Japan’s oil imports from Iran would “completely stop,” a Finance Ministry official said, suggesting this is a situation the government wants to avoid.
Finance Minister Jun Azumi, who will meet with Geithner during his Tokyo visit, is now expected to call for the exemption of Japanese banks from penalties in the U.S. Such an exemption might come in exchange for the government’s agreement to significantly cut Japan’s oil imports from Iran, an official said.