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Interview: Japan seeks US sanctions waiver for Iran oil imports top priority

Highlights

Japan sees Iran important for energy security

Securing stable supply sources a priority

Tokyo — Japan is seeking an early exemption from the US on its sanctions against Iran as among the highest priority for the country's energy security as well as local refiners' need for Iranian oil, a top government official told S&P Global Platts Tuesday.

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"Our principle is to get the exemption firmly," Ryo Minami, the newly appointed director-general of oil, gas, and mineral resources at the Ministry of Economy, Trade and Industry said in an interview.

Asked if Tokyo seeks to secure the exemption by November 4, "it would be the sooner the better to get it," he said.

"We have a request from the US to suspend oil imports from Iran but we see Iran as an extremely important country for ensuring Japan's energy security," said Minami, who took the helm of METI's natural resources and fuel department on July 13 after having previously been director for the ministry's oil and gas division over December 2012-July 2015.

Minami said stopping all Iranian oil exports could result in the loss of around 2.5 million b/d of global oil supply, which cannot be absorbed and would trigger a "substantial rise" in oil prices that would not benefit anyone.

"As [Japan] considers to continue importing the crude oil, we intend to tell the US this stance, and we aim to secure their understanding," he said.

While noting Japan's reduction in Iranian oil imports in recent years, Minami added that Japan should be exempt from the US sanction.

EARLY DECISION

Japan imported an average of 165,481 b/d of Iranian oil in fiscal 2017-18 (April-March), down 28% from the previous fiscal year. Iranian imports accounted for 5.2% of Japan's total crude imports of 3.19 million b/d in the fiscal year ended March 31, according to METI data.

Minami's comments came after Petroleum Association of Japan President Takashi Tsukioka said Thursday Japanese refiners have urged the government to seek a US waiver on Iran sanctions with hopes of continuing oil imports at current volumes instead of reducing inflows.

"Certainly we have requests from Japanese companies to negotiate with the US [over Iranian oil imports]," Minami said. "For that sense, this issue has elements of [energy security] policy and the impact on Japanese businesses."

Speaking at a news conference Thursday, Tsukioka called for the Japanese government to make an "earliest possible decision" over its response to the US sanctions on Iran as refiners are making their preparations for lifting of Iranian oil based on various scenarios.

Asked if Japanese refiners face difficulty continuing to import Iranian oil if the government makes no decision in August, Tsukioka confirmed that the refiners would "temporarily" face it, adding that it would be "inevitable to have some impact" on their procurements.

Even in the event of seeing refiners' "temporary response" over the lifting of Iranian oil, the refiners intend to request the government to continue imports, Tsukioka said.

POLICY PRIORITY

Japanese refiners will likely halt loading cargoes of Iranian oil in August, resulting in minimal imports next month as Washington sends mixed signals about whether any of Tehran's oil customers will be able to continue importing after US sanctions snap back in November, S&P Global Platts reported on July 13.

A number of regular Japanese importers of Iranian oil do not have immediate plans to load any barrels from Iran in August, according to sources with direct knowledge of the matter.

The absence of planned loadings in August would result in Japan importing just a few Iranian crude cargoes, which were loaded in July, according to sources.

US President Donald Trump said on May 8 the US would withdraw from the Iran nuclear deal and re-impose sanctions that have been frozen since January 2016 as part of the Joint Comprehensive Plan of Action.

Top US officials have made seemingly contradictory statements in recent weeks about whether the government is considering any relief to allies that rely on Iranian oil imports. The US sanctions snap back November 4 and could block up to 1 million b/d of Iranian oil exports.

Along with the push to secure the US waiver on Iran sanctions, Minami said Japan would still need to secure stable energy supply sources as a policy priority.

In the face of various current geopolitical risks, Minami said: "The importance for securing stable supply sources, including from upstream stakes has increased more than ever before."

"I intend to work on this as among my top priority for the country to secure stable supply sources and [upstream] stakes by acting on resource diplomacy as well as providing financial support to companies," he added.

--Takeo Kumagai, takeo.kumagai@spglobal.com

--Edited by Jeremy Lovell, jeremy.lovell@spglobal.com