Declining Trend of Iran's Oil Exports to Japan Due to Company Caution

Despite the lifting of economic sanctions on Iran in January this year and Tehran's hope for increased oil exports, Japanese oil companies have approached this matter with caution, leading to a declining trend in oil imports from Iran. According to the Japanese newspaper Nikkei, since last summer when negotiations aimed at lifting sanctions began, Japan had been preparing to increase its oil purchases from Iran. However, despite the support of the Japanese government, imports from Iran have not met expectations. According to the Ministry of Trade and Economy of Japan, oil imports from Iran increased by one percent in January, when sanctions were lifted, reaching nearly six million barrels. However, this growth quickly diminished, dropping to one percent in February and showing a negative growth rate in March. In April, imports fell by 70 percent compared to April of the previous year. Reuters statistics also indicate that Japan increased its oil imports from Iran by only 1.9 percent in the first five months of this year compared to the same period last year. The United States and the European Union lifted economic sanctions against Iran in January in exchange for limiting Iran's nuclear program. Since then, Iran's oil production has increased to pre-sanction levels, currently producing about 3.6 million barrels per day. China and India have increased their oil imports from Iran. The Nikkei newspaper further states that even after the EU intensified sanctions against Iran in 2012, Japan continued to import oil from Iran. The Japanese government has created a new mechanism to compensate oil importers from Iran for losses related to tanker incidents. Such losses are usually covered by private reinsurance companies. This year, the government increased the maximum compensation amount per tanker to over 900 billion yen (8.92 billion dollars) compared to 800 billion yen last year, and the number of tankers covered by this method increased from 15 to 19. According to a manager from the company 'JX Nippon Oil and Energy', which is one of the oil importers, 'compared to other types of oil, Iranian crude oil is not competitive in terms of price.' Moreover, some sanctions remain in place. Insurance companies insure tankers and oil that these tankers carry through the Persian Gulf. However, sanctions related to oil payments in dollars still remain. Reuters also recently reported that five months after the sanctions against Iran were lifted, the rapid growth rate of the country's oil production and exports is quickly declining. It is expected that Iran's oil exports in July will decrease compared to June due to competition with Saudi Arabia and Iraq for market share, but exports will be 70 percent higher than the previous year. Bloomberg also reported that Iran's oil exports, which exceeded two million barrels per day in April and May, decreased by nearly 20 percent in the first three weeks of June. It is expected that Iran's oil exports in July will be around 2.14 million barrels per day, down from 2.31 million barrels per day in June. This decline is mainly due to a drop in gas condensate exports to South Korea and a decrease in crude oil exports to Europe.