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Staff writer

Tokyo will resume medium- and long-term trade and investment insurance for Japanese companies doing business with Iran, amid growing signs of a thaw in hostile relations between Tehran and Washington, government sources said Thursday.

While the Ministry of International Trade and Industry has not determined when the insurance will be resumed, it will be between later this month and autumn, the sources said. “We wanted to make the resumption much earlier but could not do so because a consensus has not been reached within the Japanese government,” a MITI source said. “The Foreign Ministry has so far been reluctant toward the resumption.”

The government has continued short-term trade insurance for Iran business but suspended medium- and long-term insurance for the last several years, primarily for fear of provoking an angry response from the United States — Japan’s most important ally — and thereby hurting Japanese-U.S. relations.

The MITI-run insurance system is aimed at reducing risks Japanese businesses face in activities with foreign countries, mainly developing ones. Such risks include damage to Japanese assets resulting from emergencies such as civil strife and confiscation of Japanese property.

Unlike short-term trade insurance, which covers only business transactions up to two years, medium- and long-term insurance enables Japanese companies to make full-scale investments in Iran without fear of huge losses resulting from emergencies.

Iran underwent the Islamic Revolution, led by the late supreme leader Ayatollah Khomeini, in 1979 and fought an eight-year war with Iraq in the 1980s. It is unclear whether resumption of medium- and long-term insurance will immediately encourage Japanese firms to boost their investments in Iran. U.S. sanctions call for punishment of non-American firms that make certain levels of investment in Iran’s oil and other energy fields.

Although the U.S. recently waived such punishment for a massive oil project involving European, Russian and Malaysian companies, this does not mean Japanese companies will also be exempted, the sources said.

The government hopes insurance resumption will be “one step” toward achieving full normalization of official economic cooperation between the two countries, one source said.

The U.S. administration of President Bill Clinton has accused Tehran of sabotaging the Middle East peace process, sponsoring international terrorism and producing nuclear arms and other weapons of mass destruction.

In the face of enormous pressure from the U.S., which has pursued a policy of “dual containment” against Iran and Iraq, Japan froze fresh official yen loans to Iran in 1994, one year after resuming low-interest loans for the first time in 18 years.

In May 1993, Japan provided 38.6 billion yen in the first of three planned installments of a 160 billion yen loan program for a hydroelectric power project on the Karun River in southern Iran.

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