Japan to resume banking ties with Iran: Envoy

Tokyo will be the latest of Iran oil importers that is intending to restart banking relations with cash-stripped Iran. China, India and South Korea have already put in place special payment channels.

27 February 2019
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Tokyo will be the latest of Iran oil importers that is intending to restart banking relations with cash-stripped Iran. China, India and South Korea have already put in place special payment channels.

Japanese Ambassador to Iran, Mistugu Saito, (left) shakes hands with Governor of Central Bank of Iran (CBI) Abdolnaser Hemmati in Tehran on Tuesday. (Photo: IRNA)

Japan will resume bilateral banking relations with Iran, the country’s envoy says as several Japanese refiners loaded Iranian oil in recent months before the US sanctions waiver window shuts down.

“Japanese companies that have been actively engaging with Iran over the past months, continued their presence in the country,” Japanese Ambassador Mitsugu Saito told Abadolnaser Hemmati, Governor of Central Bank of Iran (CBI) in Tehran on Tuesday.

The two officials discussed Iran oil payment clearance through Japanese banks as well as import of goods and humanitarian commodities. 

They also agreed that a banking delegation from Iran travel 'soon' to Japan to work out and accelerate implementation of details of such mechanism.

The Japanese envoy welcomed the move and stressed that resumption of banking ties between Iran and Japan could usher in a 'new round of commercial and economic activities between Tehran and Tokyo.'

Japanese Showa Shell, Fuji Oil, Cosmo Oil and JXTG Nippon Oil & Energy were the first refiners to lift some five million barrels of Iranian heavy crude in January and February before the country’s 180-day sanctions waiver to purchase energy from Iran ends early May.

Head of the Japanese diplomatic mission in Tehran expressed hope that such oil purchases from Iran help expand economic ties between the two countries. He had earlier said his country would continue to buy Iranian blak gold

Cosmo Oil will load around 900,000 barrels of Iranian heavy crude oil in early March, sources with direct knowledge of the matter told S&P Global Platts Tuesday.

Cosmo Oil is now scheduled to load around 900,000 barrels of Iranian heavy crude on a Very Large Crude Carrier (VLCC) around March 4-5 and discharge the cargo in Japan around March 27-28 after calling at Ras Tanura in Saudi Arabia, and Zirku Island in Abu Dhabi, the sources said.

Cosmo Oil's scheduled loading of Iranian heavy crude, however, will likely be the last loading of Iranian barrels before the current US sanctions waivers expire without clarity for extension beyond May, the sources added.

The report adds that Japanese refiners are planning to load Iranian crude by March and expect to halt the liftings in April if there is no news of a US waiver extension, Petroleum Association of Japan president Takashi Tsukioka said Friday.

Idemitsu Kosan has also said it intends to resume its purchases of Iranian crude oil during the current US sanctions waiver.

All transactions under the US State Department's current "significant reduction exemptions" must be completed by May 4. Fresh waivers would start May 5 for countries that the US determines have been able to significantly reduce Iranian imports in the previous six months., according to S&P Global Platts. 

With Japan's resumption of Iran oil purchases, all but two of the eight countries that were granted the waivers have bought, although in significantly lower portions, the Iranian crude. Only Italy and Greece have totally refused to import any heavy crude from Iran. 

South Korea, one of Iran's biggest Asian customers, imported 227,941 tonnes of Iranian crude in January, or 53,676 barrels per day (bpd), data from the country's customs office showed. This was well down on 950,013 tonnes of Iranian crude a year earlier.

The main sticking point has been the clearance of Iran oil payments in the wake of unilateral US sanctions that have choked financial transactions with Iran. Earlier, Tehran worked out payment channels with India, China and South Korea. So, should Japan put in place a special monetary mechanism, it could come as more relief for the Middle Eastern country. 

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