Japan is talking with the US to try to avoid adverse impacts from Iran sanctions

  • Japan, a major buyer of Iranian oil, is talking with the U.S. to prevent its firms being adversely impacted by the sanctions on Iran.
  • Washington hinted when announcing the renewed sanctions in May that it was not willing to grant waivers, and buyers from Japan, South Korea and India have already started to dial back purchases from Iran.
  • Oil prices did not react strongly to Washington's move to more firmly cut off Iranian exports because it was expected and has been largely priced in.

Japan is analyzing the impact of U.S. sanctions on Iran, which aim to cut Tehran's oil exports out of the market, and will talk with Washington and other nations to avoid Japanese firms being adversely affected, the top government spokesman said Wednesday.

Chief Cabinet Secretary Yoshihide Suga told a news conference that Japan and the United States were in talks about the sanctions on Iran but declined to reveal details.

Japanese Prime Minister Shinzo Abe and U.S. President Donald Trump arrive for a joint news conference at the White House June 7, 2018.
Chip Somodevilla | Getty Images
Japanese Prime Minister Shinzo Abe and U.S. President Donald Trump arrive for a joint news conference at the White House June 7, 2018.

He said Tokyo was also in contact with Iran.

The United States has told countries to cut all imports of Iranian oil from November and is unlikely to offer any exemptions, a senior State Department official said on Tuesday as the Trump administration ramps up pressure on allies to cut off funding to Iran.

Iran is the third-largest exporter among the Organization of the Petroleum Exporting Countries (OPEC), and Japan is one of its major customers along with other Asian buyers including China, South Korea and India.

During the last round of sanctions, which only ended in 2016, several Asian countries received waivers from Washington that allowed them to continue buying limited amounts of oil from Iran.

This time, Washington hinted when announcing the renewed sanctions in May that it was not willing to grant waivers, and buyers from Japan, South Korea and India have already started to dial back purchases from Iran.

The price of oil did not react strongly to Washington's move to more firmly cut off Iranian exports as it was expected and has been largely priced in.

"This more aggressive tack from the Trump administration likely means Japan and South Korea will move more quickly to zero-out their imports (from Iran) too.

On the other hand, China, India, and Turkey will likely balk at significant cuts to imports by November," political risk consultancy Eurasia Group said in a note.

Iranian oil shipments to Japan and South Korea rose after sanctions against Tehran were lifted from 2016, but they peaked at 700,000 barrels per day (bpd) in late 2016 and have fallen to around 200,000 bpd, shipping data in Thomson Reuters Eikon showed.

Japan's Prime Minister Shinzo Abe is considering going to Iran in July for talks with President Hassan Rouhani, Kyodo News reported on June 21, citing unidentified Japanese government sources.