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International Relations

US demands on Iranian oil pose dilemma for Japan

Tokyo caught between Tehran-Washington tensions

Japanese Prime Minister Shinzo Abe and Iranian President Hassan Rouhani speak at the annual World Economic Forum in Davos in 2014. The leaders meet annually at the United Nations General Assembly.   © Reuters

TOKYO -- With the U.S. considering making exceptions to its demand that countries stop importing Iranian oil, Japan is looking to secure its oil supply and pursue business opportunities in the Middle Eastern country without raising red flags in Washington.

U.S. Secretary of State Mike Pompeo hinted at the waivers during his visit to Abu Dhabi on Tuesday.

"There will be a handful of countries that come to the United States and ask for relief," Pompeo said. "We'll consider it." 

While pressing the U.S. to grant a waiver, Japan is expected to explore its own Iran diplomacy, including a possible visit to that country by Prime Minister Shinzo Abe. 

Japan has traditionally been on friendly terms with Iran. They maintained diplomatic ties even after the Iranian Revolution in 1979, the root of current tensions between the country and the U.S. In 1953, Japanese oil distributor Idemitsu Kosan imported oil from Iran, undermining British sanctions over Iran's decision to nationalize its oil industry a few years prior. Japan and Iran will celebrate 90 years of diplomatic ties next year.

Iran possesses the world's largest natural gas reserves and fourth-largest crude oil reserves, making it an important partner for energy-poor Japan. Japan won negotiating rights to develop the Azadegan oil field, which boasts one of the largest reserves in the Middle East, when then-Iranian President Mohammad Khatami visited Japan in 2000. Japan's Inpex acquired a 75% stake in the project in 2004, though it exited in 2010 amid U.S. sanctions.

Japanese companies are also keen to reach Iran's 80-million-strong population and to tap into its growing industrial strength, as demonstrated by its homegrown auto industry. Many business leaders are calling for stepped-up economic relations.

Abe has a personal interest in the country as well. In 1983, he accompanied his father and then-Japanese Foreign Minister Shintaro Abe to Iran in an attempt to mediate the Iran-Iraq War. Since becoming prime minister for a second time in December 2012, the younger Abe has met with Iranian President Hassan Rouhani each year at the United Nations General Assembly.

But the Japanese leader is also aware he needs to keep the U.S. on his side. Abe is expected to strengthen his rapport with U.S. President Donald Trump to lay the groundwork for a trip to Iran. No sitting Japanese prime minister has visited the country since 1978.

Japan has limited options, given its dependence on the U.S. for national security. Its ties with Iran are often swayed by U.S. policies, and Shintaro Abe's 1983 trip was one of the few post-revolution instances of Japan operating outside the influence of the U.S.

The Iran nuclear deal in 2015 was a big plus for Japan. But the Trump administration announced in May that Washington would withdraw from the agreement. The U.S. president is now demanding that countries around the world halt Iran oil imports, and threatening to sanction foreign companies in the U.S. if they do not abide.

Oil imports from Iran now account for just over 5% of Japan's total, down from 15% in 2005. Keio University professor and Iran expert Koichiro Tanaka said Japan can find other sources for the oil. But he stressed that "the Japanese government should pursue its own diplomatic efforts to secure Iranian crude for companies that can't make their own moves, instead of following the U.S., which violated the nuclear deal."

Meanwhile, Iran sees Japan as a key partner in promoting technologically advanced industries and creating jobs for its growing and educated population. It is especially hoping to tap Japanese know-how in manufacturing.

After the U.S. left the nuclear deal, Iran grew close to China and Russia but seems wary of becoming too dependent on these powers. With European companies shying away from the Middle Eastern country over U.S. sanctions, Iran is pushing hard for corporate Japan to maintain a presence in the country.

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