Japan Seeks Waiver From US Sanctions on Iran

Japan is weighing various ways of securing a waiver on new U.S. sanctions against Iran, with reducing Iranian oil imports and dealings with its central bank possible options, government sources said on Thursday.

Tony Waltham | Robert Harding World Imagery | Getty Images

One of the sources told Reuters that Japanese officials will discuss U.S. sanctions on Iran as well as Europe's debt crisis with U.S. Treasury Secretary Timothy Geithner when he visits Japan next week, although a deal on sanctions is unlikely at that time.

"It's too early to expect a deal with the U.S. at this stage," the source said. "We will exchange information and convey our concerns about the impact the new sanctions could have on oil prices, and the Japanese and world economy."

U.S. President Barack Obama signed into law last month new sanctions against financial institutions dealing with Iran's central bank, which if fully implemented could hamper Tehran's ability to sell oil on international markets.

Under the law, the president can move to exempt institutions in a country that has significantly reduced its dealings with Iran and in situations where a waiver is in the U.S. national security interest or otherwise necessary for energy market stability.

Iranian oil accounts for nearly 10 percent of Japan's crude imports and Tokyo is concerned that the new sanctions could drive up prices, dealing a blow to its economy. Foreign Minister Koichiro Gemba voiced those concerns in a meeting with U.S. Secretary of State Hillary Clinton last December.

The Japanese government will present Washington with a "menu" of possible options in exchange for a waiver by the end of February, the source said on condition of anonymity because he was not authorized to speak to media.

One of the options could be a cut in crude oil imports from Iran and financial transactions with the Iranian central bank to exempt Japanese financial institutions from the new sanctions Washington plans to impose against Tehran, the source added.

Another government source said it was too early to talk about any specific plans and Tokyo would continue to consider various options.

A former senior trade ministry official said there was a good chance Tokyo could obtain a four-month waiver to keep importing Iranian oil while industry worked to reduce the amount, given the adverse impact an oil shortage would have on the economy.

"I think the Japanese government is trying to extend the exception as long as possible. I think that is the position of the Japanese government, but I don't necessarily think it's easy for Japan to do this," he said.

"Probably at least a one-time extension would be possible. The question is whether a second or third extension would be possible."

Gemba, addressing reporters on Wednesday before he left for Turkey, Saudi Arabia, Qatar and United Arab Emirates, said one of the aims of the trip was to ensure Japan's energy security, a possible hint that Tokyo would look for alternative sources of oil.

Geithner will meet with Japanese Prime Minister Yoshihiko Noda and Finance Minister Jun Azumi on Thursday after visiting China on Tuesday and Wednesday, the Treasury Department said.

The U.S. sanctions target both private and government-controlled banks - including central banks - and would take hold after a two- to six-month warning period, depending on the transactions.