Japan’s major oil distributors are considering halting oil imports from Iran in response to U.S. demands, sources familiar with the plan said Thursday.
Oil companies are planning to make up for the shortfall by increasing purchases from other Middle Eastern suppliers, such as Saudi Arabia, since imports of Iranian crude will likely stop by around October, the sources said.
For consumers in resource-poor Japan, the change would mean higher prices for gasoline and related products due to higher procurement costs.
The average retail price for a liter of regular stood higher than ¥150 as of Tuesday, hitting its highest in 3½ years, according to the Agency for National Resources and Energy.
The suspension also comes amid the prospect that transaction settlements will be made difficult because such major banks as MUFJ Bank and Mizuho Bank are considering halting Iran-linked businesses following the U.S. decision to reinstate sanctions against Tehran.
Crude oil from Iran, which traditionally has stable diplomatic relations with Japan, is relatively cheap compared with oil from other countries. It accounts for around 5 percent of Japan’s annual crude oil imports.
The U.S. has been calling for a halt to oil imports from Iran by Nov. 4. Some countries such as China have rejected U.S. calls and Japan is seeking a waiver.
U.S. Secretary of State Mike Pompeo indicated earlier this month that Washington will consider requests from some countries that they be exempted from the U.S.-led ban but it remains uncertain whether Japan will be given an exemption.
U.S. President Donald Trump has hardened his stance toward Iran and withdrawn his country from an international nuclear weapons agreement.
Under the 2015 deal struck between Iran and six major powers — Britain, China, France, Germany, Russia and the United States — Tehran agreed to curb its nuclear activities in exchange for the lifting of crippling economic sanctions.