:: Shingetsu Institute ::

The following is a round-up of stories on Japan-Iran relations that rounds out bilateral occurrences before the official end of the Abe regime.

MOTTAKI-MACHIMURA MEETING IN NEW YORK

On the 23rd Iranian Foreign Minister Manouchehr Mottaki and then-Foreign Minister Nobutaka Machimura held a brief meeting in New York. The Iranian media reports say that Mottaki outlined how Tehran has been cooperating with the International Atomic Energy Agency (IAEA) on this issue, and suggested that any further actions in the UN Security Council were unwarranted by the facts. Machimura is said to have “welcomed Iran-IAEA cooperation and called for the continuation of transparent cooperation between the two sides.”

A similar working-level meeting was also held on September 5th between Deputy Foreign Minister Mitoji Yabunaka and an Iranian vice-foreign minister in charge of economic issues (whose name was only given in katakana on the official statement). The content of that meeting was not reported, but was probably similar to the Mottaki-Machimura meeting.

PURCHASES OF IRANIAN OIL NOW PRIMARILY IN NON-DOLLAR CURRENCIES

It appears that Tehran has succeeded in its bid to be paid mostly in non-US dollar currencies for purchases of its oil. Reuters has published an interview with Hojjatollah Ghanimifard, international affairs director of the state-owned National Iranian Oil Company (NIOC), in which this official announced that about 70% of all oil purchases are now made in Euros and Yen, and that this figure will rise to 80% within a couple of months.

In regard to Japan, Ghanimifard noted, “Nippon Oil is not the only Japanese refinery which has replaced dollar with yen, but also there are some other refineries that have started this replacement.” He said that some of the other companies asked for an additional month or two to make the arrangements.

It does appear that US pressure was overcome in this case, and a recent UPI article says that this may indeed be significant for Iran. They quoted David Kirsch of PFC Energy as follows: “In general, a key motivation is the US informal sanctions pressure that the Treasury, and Undersecretary [Stuart] Levey in particular, put on banks not to do financial transactions with Iran. And increasingly designating banks with ties to certain Iranian entities as unable to perform the U-turn transactions for dollar-denominated transactions… Shifting to euros and yen, overall it does lower some of [Iran’s] exposure to this informal pressure from the US… For them, I think it will make it easier, simply because the banks that it deals with won't be under the threat of the US prohibiting turnaround transactions.”

METI EYES IRANIAN FREE TRADE ZONES

The Iranian press has called attention to some comments by a METI official named Hideki Fujisawa, who recently indicated that his ministry is taking an interest in Iran’s Free Trade Zones (FTZ), including those at Kish Island, Aras, Arvand, Anzali, Chabahar, and Salafchegan. Fujisawa made his comments while visiting the Aras FTZ on the 24th. The Fars News Agency directly quotes him as follows: “Considering Iran's economic and investment conditions as well as the opportunities existing for the development of mutual economic cooperation, expanding ties with such apt countries as Iran is of vital importance for Japan.”

Obviously, however, any major Japanese investments in Iran in FTZs or elsewhere are going to elicit political pressure from Washington. Since Tokyo and METI abandoned the Azadegan oil field last year under such pressure, are they prepared to stand any tougher this time?

In any case, at present Japan is Iran’s fourth-largest trading partner after the United Arab Emirates, Iraq, and China. Ambassador Mohsen Talaei recently stated that Japanese investment in Iran currently stands at about US$3.5 billion and specifically noted that phases six and seven of the South Pars Oil and Gas Project would come into operation later this year.

The Japan Drilling Corporation has been involved in the Pars project since late 2004 under a subsidiary called the Pars Drilling Kish Company.