U.S. wins Japan’s consent to cut Iran’s oil imports but India stays in as an importer

Japan said Thursday it will cut imports of Iranian oil, marking a victory for U.S. diplomatic efforts to pressure Tehran into giving up its nuclear program after Washington’s knockback from China.

The pledge was made during a visit by U.S. Treasury Secretary Timothy Geithner, who came to Tokyo after receiving short shrift from Beijing for the campaign to smother Iran's vital oil exports and head off its atomic drive.

“In the past five years, we have reduced... the amount of oil imported (from Iran),” Finance Minister Jun Azumi said during a joint news conference with Geithner.

“We wish to take planned and concrete steps to further reduce this share, which now stands at 10 percent.”

Geithner came away empty handed from Beijing, which refused to bow to U.S. pressure to add its economic might in the campaign to isolate Iran.

EU

However, the U.S. moves have gained traction in the West, with the EU looking to add its not inconsiderable weight.

Denmark, which holds the EU presidency, said Wednesday it was confident European sanctions would be finalized later this month.

The EU decided in principle at the beginning of the month to introduce an oil embargo against Iran, but numerous details remain unresolved.

Europe is collectively the second-biggest destination for Iranian oil exports after China, taking in some 450,000 barrels per day, and the countries most dependent on Iranian oil, like Greece, Italy and Spain, want to delay the start of the sanctions while they search for other sources.

Azumi, whose resource-poor country is heavily dependent on Middle East oil and has maintained relations with Iran in the face of pressure to ostracize the country, said the atomic issue needed to be dealt with.

“The nuclear problem is a problem that the world cannot ignore,” he said. “In this respect, we fully understand actions taken by the United States.”

A statement from Prime Minister Yoshihiko Noda’s office after a meeting with Geithner later Thursday said the two men shared concerns over the Iranian nuclear issue.

But Noda cautioned if implemented wrongly, U.S. sanctions could have a serious impact on the health of Japan’s economy and that of the world.

The statement gave no further details.

The mass circulation Yomiuri Shimbun reported Thursday that Tokyo’s move was an effort to persuade the U.S. to exempt Japanese banks from sanctions.

The paper did not offer any figures on the reduction, but said in exchange for telling oil importers to change suppliers, Tokyo will ask the United States to allow Japanese banks to continue dealing with Iranian authorities.

Under Washington’s measures, foreign firms will have to choose between doing business with the Islamic republic or the United States. Japanese megabanks would be badly hurt if they are hit with sanctions.

The Japanese government believes it would be difficult to impose a total ban on Iranian oil imports, the Yomiuri said.

Foreign Minister Koichiro Gemba is currently on an eight-day trip to Turkey, Saudi Arabia, Qatar and the United Arab Emirates for talks expected to focus on the Iranian oil problem.

The pressure from Washington and the European Union to boycott Iranian crude comes at a time when Japan must make greater use of thermal power plants after a massive earthquake and tsunami sparked a nuclear power crisis last March.

The vast bulk of Japan’s 54 nuclear reactors are now shut down, amid public distrust of the technology and increased safety calls.

India second largest importer

Meanwhile, an Indian oil ministry official denied on Thursday that the government had asked refiners to reduce Iranian oil imports, adding an existing mechanism through Turkey to pay for the shipments was working despite U.S. sanctions against Tehran.

“We have not asked companies to cut imports from Iran,” Sudhir Bhargava, additional oil secretary, told reporters. He added India was looking for alternative supplies and that an existing payment mechanism was working. He didn’t explain why India was looking for alternative supplies.

India, Iran’s largest oil buyer after China, imports about 12 percent of its oil needs, or 350,000-400,000 barrels per day, (bpd) from Iran. The shipments are worth $12 billion annually.

Industry sources told Reuters on Wednesday that the government had told refiners to reduce Iranian oil imports and find alternative supplies. They said New Delhi may not seek a waiver from the latest U.S. sanctions.

India has been struggling to pay for Iranian crude owing to sanctions on dealings with Iran, government officials have said previously.

New U.S. laws authorized on December 31 impose sanctions on financial institutions dealing with Iran’s central bank, the main clearing house for the country’s oil payments. That is widely expected to make it even tougher for importers to pay for Iran crude.

India currently pays for Iran crude through Turkey’s Halkbank, a mechanism government officials have said may be cut off by the latest U.S. sanctions.

An Indian delegation will visit Tehran from Jan. 16-21 to explore alternative routes of payment to try to ensure supplies without breaching sanctions, government officials said on Wednesday.

A government source said on Thursday that India had not sought a waiver from the U.S. sanctions.

“We will decide on the basis of what happens during our upcoming trip to Iran, and whether other suppliers can supply more,” the source said.

Japan and South Korea intend to seek waivers on the sanctions from the United States.

Indian refiners have gradually started raising supplies from other sources such as Saudi Arabia, Iraq and the United Arab Emirates.

Iran, which insists its nuclear program is for exclusively peaceful purposes, has repeatedly said it will not abandon uranium enrichment despite four rounds of U.N. Security Council sanctions demanding it desist.

Tehran has threatened to block the strategic Strait of Hormuz if sanctions are imposed.

Geithner on Thursday said Washington was in the early stages of consulting with allies on how best to isolate Iran.

“We very much appreciate the support Japan has provided, standing with us and the international community in support of this very important strategic objective.”

Meanwhile, Russia said on Wednesday that it opposes U.S., and possible European oil sanctions against Iran, even if Tehran presses ahead with uranium enrichment which Western powers say serves military goals.