TOKYO – The latest round of economic sanctions imposed on the Islamic Republic of Iran, intended to put pressure on the regime in Tehran, may be putting just as much pressure on America's key Asian allies, Japan and South Korea, both of whom are dependent on the Middle East for the vast bulk of their petroleum imports.
In the past, under pressure from Washington, Tokyo and Seoul have reluctantly fallen in line and cut back on doing business with Iran. Just a little more than a year ago, Japan ended its last major investment in Iran. Now, Washington is back with more demands, and both countries are balking.
After meeting with U.S. Secretary of the Treasury Timothy Geithner earlier this month, Japan's finance minister, Jun Azumi, said Japan would reduce petroleum imports from Iran in line with the American policy. He was almost immediately slapped down by Prime Minister Yoshihiko Noda, who said Azumi was speaking for himself. The government has not formulated a position.
An American delegation arrived in Tokyo on Jan. 17 for further talks, which were said to be inconclusive. The two sides are haggling over how far Tokyo has to go in meeting demands to receive an exemption from the main enforcing mechanism, a ban on Japanese banks working in the U.S. that do business with Iran's central bank.
Robert Einhorn, U.S. State Department special advisor on arms control, was in Seoul trying to convince South Korea to cut its petroleum imports and unwind their business dealings with the Central Bank of Iran; no immediate agreement was made. Deputy foreign minister Kim Jae shin said many Koreans worry that reducing oil imports will harm the economy.
South Korea, the world's fifth largest oil importer, buys roughly 10 percent of its petroleum needs from Iran, or about 200,000 barrels of crude per day. Seoul is currently dealing with Iran's Central Bank to clear payments - Indeed, it has said it would actually increase imports slightly in 2012.
Both countries have been down this road before. Azumi noted that Japan once imported about 40 percent of its petroleum from Iran. It is now down to roughly ten percent, or about 260,000 b/d, with the likelihood that, in time, it will be reduced even more.
A little more than a year ago, Japanese oil explorer Inpex, under severe pressure from Washington and from Tokyo, divested its minority interest in the huge, new Azadegan oil field in Iran at a considerable loss. It was the cornerstone of Japan's 'hinomaru (rising son flag) oil' policy of securing energy supplies by investing in Japanese-owned energy deposits in the Middle East.
At one time Inpex owned 75 percent of the Azadegan field; it cut its stake to 10 percent in 2006. Company officials argued that their minority stake was a passive investment, not a case of 'doing business' with Iran and sought an exemption, but their pleas fell on deaf ears.
