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Japan loads last Iranian oil cargo ahead of US sanctions waiver expiry

Tokyo — A Japanese lifter has started loading what appears to be the last Iranian oil cargo arriving in Japan in early April ahead of the approaching US sanctions waiver expiry amid uncertainty over whether the waiver will be extended beyond May, sources familiar with the matter told S&P Global Platts Thursday.

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The loading comes after Japan and the US held the latest round of talks regarding Iranian sanctions in Washington on Monday, when the two sides agreed to continue their discussions, according to the Ministry of Foreign Affairs.

It was the second round of formal bilateral talks on Iranian sanctions after Washington had issued a 180-day significant reduction exemption to eight countries including Japan on November 5 last year. Tokyo had reiterated its basic principle that the US sanctions should not affect Japanese companies' activities in the latest talks, according to MOFA.

"Our policy goal remains to get all countries to stop purchasing Iranian crude as quickly as possible," a US State Department spokesperson told Platts Wednesday.

"Each of those jurisdictions had already demonstrated significant reductions of the purchase of Iranian crude over the past six months, and indeed two of those eight has already completely ended imports of Iranian crude and will not resume as long as the sanctions regime remains in place," the spokesperson said.

Japanese refiners will closely monitor the outlook of Japan-US talks over extending the Iranian sanctions waivers, while securing alternative supplies from other Middle Eastern suppliers and the US, after suspending their intake of Iranian barrels ahead of the sanctions waiver expiry, said Takayuki Nogami, chief economist at Japan Oil, Gas and Metals National Corp.

LAST LOADING OF IRANIAN OIL

The VLCC Kisogawa arrived at Iran's Kharg Island on Wednesday to load Iranian oil, according to Platts trade flow software cFlow. The Kisogawa is under a time charter with refiner Showa Shell, according to a VLCC broker in Japan.

A Showa Shell official declined to say Thursday whether the latest loading of Iranian oil will be its last ahead of the US sanctions waiver expiry. Fuji Oil, which is co-loading Qatari oil on the Kisogawa, is still considering an additional intake of Iranian barrels during the current sanctions waiver, a company spokesman said Thursday.

Other Japanese buyers of Iranian oil -- Idemitsu Kosan, JXTG Nippon Oil & Energy and Cosmo Oil -- have already finished their loading of Iranian oil during the current sanctions waiver period, according to sources familiar with the matter.

Cosmo Oil's latest Iranian oil cargo on the VLCC Gen-Ei is now scheduled to arrive in Yokkaichi in central Japan on April 2, according to cFlow. The super tanker, which is loaded with around 900,000 barrels of Iranian Heavy crude oil, is calling at Sakai for discharge after Yokkaichi, a source familiar with the matter said.

The Gen-Ei and the Kisogawa will be Japan's first discharge of Iranian oil over a new fiscal year since the government introduced its shipping insurance for protection and indemnity cover in 2012.

The Japanese government is currently making good progress towards renewing its Iranian oil shipping insurance on April 1 beyond its expiry at the end of the current fiscal year on March 31, a government source said.

Without the US extending Japan's sanctions waivers anytime soon, Japanese refiners and shipping companies would need to complete all of their Iranian oil transactions by the end of April ahead of the country's Golden Week national holidays, sources said.

Showa Shell and Fuji Oil -- Japan's main buyers of Iranian crude -- resumed their loading of Iranian oil in January on the VLCC Kisogawa, becoming the country's first refiners to resume imports in four months after clearing confusion surrounding shipping, insurance and banking rules.

-- Takeo Kumagai, newsdesk@spglobal.com

-- Meghan Gordon, newsdesk@spglobal.com

-- Vickey Du, newsdesk@spglobal.com

-- Edited by Wendy Wells, newsdesk@spglobal.com