Japan this week became the first of Iran's oil buyers to make a payment for crude imports under an interim nuclear deal, sources told Reuters on Wednesday, as the West eased a year-long stranglehold on revenues that has crippled the Iranian economy.
Tough international sanctions over the past two years have cut Iran's oil exports in half. U.S. measures imposed a year ago stopped the remaining importers of Iranian oil from transferring cash to Tehran, starving the OPEC member of its principal source of hard currency and forcing Iran to the negotiating table over its disputed nuclear program.
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Tokyo's role in sending the first funds may be a boon for Japanese firms jostling for position with international rivals to invest in Iran's oil and gas sector, should a further agreement end Tehran's international isolation.
It is unclear why Japan was the first of Iran's oil buyers to pay. China, India and South Korea also buy crude from Iran and all have billions of dollars of cash held in Iranian accounts pending transfer.
The Iranian funds were released earlier this week from an account held by the Bank of Japan, three sources told Reuters speaking on condition of anonymity because of the sensitivity of the issue. One of the sources confirmed the amount was for $550 million, while another said it was likely further releases of Iranian funds would be made by Japan as they come due.
A substantial portion of frozen Iranian funds are held at the Bank of Japan, one of the sources said.
The funds were transferred to an Iranian Central Bank account in Switzerland, a U.S. Treasury spokeswoman said earlier this week.
Under a November 24 agreement with six major powers, Tehran gets limited sanctions relief in exchange for steps to curb its nuclear program.
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The interim agreement gives Iran access to $4.2 billion of its oil revenues frozen abroad if it carries out its part of the deal, while parties continue negotiations for a final agreement within a year. The next round of talks starts on February 18.
The West suspects Iran was using the nuclear program to develop nuclear weapons. Iran says the program was to generate electricity and for medical isotopes.
Some payments under the six-month deal, which officially began on January 20, depend on Iran fulfilling its commitment to dilute half of its 20 percent enriched uranium to no more than 5 percent enriched uranium.
Until the interim deal, Iran's importers had been steadily reducing purchases to avoid falling foul of U.S. and European Union sanctions.
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The four Asian buyers together cut oil imports from Iran by 15 percent on the year to an average of 935,862 barrels per day (bpd) in 2013, government and industry data showed.
The decades-long U.S. campaign to isolate Iran has choked foreign investment and barred access to the latest technology to exploit the country's vast oil and gas reserves.
Iranian President Hassan Rouhani said last month that Iran was seeking a comprehensive agreement so it can develop its battered economy, inviting Western companies to seize opportunities now and promising oil executives a new, attractive investment model for oil contracts by September.
Oil and other companies from France and Russia have already responded.
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Iran welcomed a senior French trade delegation to the country on Monday, telling more than 100 executives that the far-sighted among them stood to win the race for business following an easing of some economic sanctions.
A source close to the delegation told Reuters it was the most senior group of executives and financiers to visit Iran since the 1979 revolution.
Japanese banks and other companies have been cautious about approaching Iran because of the fear of running afoul of U.S. sanctions if the current opening falters, bankers and officials said.
Japan's Mitsubishi UFJ Financial Group paid a $9 million fine in 2012 to U.S. regulators to settle charges that it had violated U.S. sanctions with payments to Iran that dated back to 2007.
It will take some time before investment materializes and oil flows return to their pre-sanction levels.
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Iran cannot get its next installment of $450 million on March 1 unless the International Atomic Energy Agency confirms Tehran has done half the necessary dilution of its enriched uranium, according to a Treasury fact sheet.