Japanese Media: Oil Imports from Iran Likely to Stop Next Month

Japanese media reports that Tokyo has failed to convince the U.S. to grant exemptions for Japan regarding oil imports from Iran. According to these reports, Japan is expected to halt oil imports from Iran in October. The Japan Times reported on September 2 that major oil consumers in Japan, under U.S. pressure, are likely to stop importing oil from Iran next month and seek alternative energy sources. The Japan Times noted that since Iranian oil is cheaper than that from other countries, replacing it with other sources would mean increased costs and, consequently, higher fossil fuel prices in Japan. The Jiji news agency also published a similar report on Sunday, stating that the likelihood of Tokyo obtaining U.S. exemptions is very low. Similar reports have emerged in other reputable sources in recent days. Last week, the Nikkei media institute reported that Japanese companies are withdrawing from Iranian oil exports due to Washington's pressures and U.S. sanctions against Tehran. Donald Trump, the U.S. President, abandoned the Obama administration's nuclear deal with Iran and five other countries, claiming it was inconsistent with national security. Trump's order to reinstate sanctions has also been implemented. The first round of sanctions returned in mid-August, and the second round is set to return in mid-November. U.S. officials say they are working to reduce Iranian oil exports to zero. Washington has called for new negotiations with Iran, which would include a range of Tehran's actions, including its regional activities, missile program, and other issues. The Supreme Leader of the Islamic Republic has expressed opposition to negotiations. Iranian government officials, including the Foreign Minister, have stated that there is no guarantee that any potential negotiations would lead to results that would be sustainable. Japan is one of the main importers of Iranian oil. Last month, Ryu Minami, the Director-General of Oil and Gas Affairs at Japan's Ministry of Economy, told S&P Global that Japan is seeking a temporary exemption for importing Iranian oil after the U.S. sanctions return. Ryu Minami stated, 'The U.S. has requested that we stop importing oil from Iran, but Iran is extremely important for ensuring the security of our energy sector.' This Japanese official noted that stopping Iranian oil exports is irreplaceable and will lead to a 'significant increase in oil prices.' However, recent reports indicate that Tokyo's efforts to obtain exemptions have been fruitless. The Nikkei website states that companies like JXTG, Fuji, and Showa Shell Sekiyu will face oil shortages and will have to source this shortage from Saudi Arabia and elsewhere. The Japan Times reports that these companies must decide early this month whether to continue importing oil from Iran until necessary actions are taken, although transferring money for oil to Iran is already facing many difficulties. According to Japanese government statistics, in 2017, Saudi Arabia was the largest oil exporter to Japan, supplying 39% of this energy source, while Iran ranked sixth, providing about 5% of the oil. Nevertheless, the Japanese government and companies are concerned that replacing this amount of oil will mean increased prices for fuel and other petroleum products. The Japanese government has not yet issued an official statement or report regarding the outcome of negotiations with the U.S. and whether any exemptions will apply to its companies.