Newsletter No. 397
News-Analysis
October 6, 2006

 

The following newsletter has been contributed by J. Sean Curtin (Shingetsu Member No. 30). In addition to what he writes below, the very latest reports suggest that Inpex will stay involved in Azadegan, but with only a 10-15% stake, rather than the current 75%. The reports coming from each side are contradictory, but events are clearly moving quickly.

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AZADEGAN OILFIELD NEGOTIATIONS FLOUNDERING

From J. Sean Curtin in London:

The latest indications coming from the stalled Azadegan oilfield negotiations appear to suggest that they might be near collapse, something Tokyo has strongly denied, claiming that they will continue for some time. If they do fall through then no doubt Beijing will eagerly step in to take over the Japanese concessions. This would represent a significant blow to Japan’s energy security plans, and it is hard to believe that Abe would let it happen. If he does, this would signal a radical departure from Koizumi’s policy which pursued the deal for reasons of national interest despite tremendous pressure from Washington. No doubt neo-cons in the Bush administration would warmly applaud Abe, but such an outcome would probably have a wider impact on Japan’s standing in the Middle East.

Below are two recent Kyodo News reports:

TOKYO DENIES ANY BREAKDOWN IN TALKS OVER IRAN’S AZADEGAN OIL PROJECT

TOKYO, Oct. 5 -- A high-ranking Japanese government official on Thursday insisted that negotiations between Japanese and Iranian oil companies over the development of Iran’s giant Azadegan oilfield are still underway. The comment came in response to a Wednesday report by Iranian Fars News Agency that quoted Gholam Hosesin Nozari, managing director at the National Iranian Oil Co., as saying Japan has lost its concession in the development project.

Some in Japanese government circles argue that Nozari’s statement is a bluff designed to conduct the bilateral talks to Iran’s advantage. A senior official with the Ministry of Economy, Trade and Industry admitted that the bargaining between Tokyo and Tehran has been quite tough partly because Iran is faced with international censure for continuing its uranium enrichment program, which many countries fear might lead to the development of nuclear arms. “Still, I believe that does not mean that our negotiations have collapsed,” the METI official added. “But the deadline for the talks has been extended many times and the Iranian government seems to be compelled to assume a tough posture against Japan because of the domestic criticism that it is being too accommodative toward Tokyo,” the official said. Tokyo intends to carefully analyze information coming from Tehran to keep the project going, government officials said.

Inpex Holdings Inc. has yet to start the development work, citing a delay in Iranian operations to remove land mines left over from the Iran-Iraq war and the possible imposition of United Nations economic sanctions on Tehran over its nuclear project. Inpex holds a 75 percent concession in the oil field in the southwestern part of Iran with estimated crude oil reserves amounting to 26 billion barrels under the $2 billion deal struck with the state-run Iranian oil corporation in February 2004.

Senior Japanese officials have suggested Japan would comply with decisions by the U.N. Security Council if it included Azadegan in economic sanctions against Iran. Iran is the third-biggest crude oil exporter to Japan after Saudi Arabia and the United Arab Emirates. Iranian oil accounted for 13.8 percent of Japan’s crude oil imports in 2005.

JAPAN-IRAN TALKS OVER AZADEGAN OIL FIELD TO LAST LONG TIME: METI

TOKYO, Oct. 5 -- Japanese and Iranian oil companies are still in talks in Tehran over a $2 billion project to develop Iran’s Azadegan oilfield, and the talks are likely to continue for a “very long time” given a long list of negotiation items, a senior Japanese official said Thursday.

Vice Economy, Trade and Industry Minister Takao Kitabata said he is aware that Japan’s Inpex Holdings Inc. and National Iranian Oil Co. are conducting tough negotiations, but that he does not expect the talks to collapse because the project would benefit both Iran and Japan.

Kitabata’s comments came a day after Iranian media reported that Japan has lost its concession in the development project, quoting Gholam Hossein Nozari, managing director at the National Iranian Oil.