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Inpex Holdings Inc. and National Iranian Oil Co. are still in talks in Tehran over a $2 billion project to develop Iran’s Azadegan oil field and the negotiations are not going to collapse, a senior Japanese trade official claimed on Thursday.

Vice Economy, Trade and Industry Minister Takao Kitabata said it is his understanding that Japan’s Inpex and National Iranian Oil Co. are in tough negotiations and that the talks are likely to continue for a “very long time.” He said the talks will continue because the project will benefit both Iran and Japan.

Kitabata’s comments came a day after Iranian media reported that Inpex, in which the Japanese government holds a 29.35 stake, had lost its concession in the oil project, quoting Gholamhosein Nozari, managing director at National Iranian Oil.

Some officials in the Japanese government said that Nozari’s statement was a bluff designed to give the state oil company an advantage in the talks.

A senior official with the Ministry of Economy, Trade and Industry admitted that the bargaining between Tokyo and Tehran has been quite tough partly because Iran is faced with international censure for continuing its uranium enrichment program, which many countries believe is part of a quest for atomic weapons.

“Still, I believe that does not mean that our negotiations have collapsed,” the METI official reckoned.

“But the deadline for the talks has been extended many times, and the Iranian government seems to be compelled to assume a tough posture against Japan because of the domestic criticism that it is being too accommodative toward Tokyo,” the official said.

Inpex has yet to start the development work, citing a delay in Iranian operations to remove land mines left over from the Iran-Iraq war and the possible imposition of U.N. economic sanctions on Tehran over its nuclear ambitions.

Iran has threatened to turn to China and Russia if Japan doesn’t get started on the oil field project.

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