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Financial Times: Japan curbs Iran oil imports over nuclear concerns

By Carola Hoyos in London and Agencies in Tokyo
Published: March 15 2006 18:49 | Last updated: March 15 2006 18:49
Japan, Iran’s biggest oil customer, on Wednesday became the first country to reduce its imports of Iranian oil because of Tehran’s nuclear dispute with the west.
Nippon Oil, Japan’s largest refiner, will cut its purchases of Iranian crude oil by 15 per cent this year, Fumiaki Watari, Nippon’s chairman, said on Wednesday.
“We have started reducing the percentage of Iranian crude and (are) shifting to other grades,” he said in Tokyo. “Risks related to the country are getting higher.”
The move was announced as the permanent five members of the UN Security Council failed to agree a statement expressing “serious concern” about Iran’s nuclear programme.
US officials have been seeking “creative” ways of addressing the concerns of China, Japan and India about possible disruption to their supplies of Iranian oil in an effort to gain their support at the UN. Tehran has linked the nuclear dispute to its oil supplies., and there are growing worries in the oil industry that the dispute could eventually lead to an interruption in supplies or, at least, a review of contracts.
Several European and Asian oil companies, including Royal Dutch Shell, France’s Total and Japan’s Inpex, have contracts in Iran. “Because of this nuclear issue, Iran is starting to be seen as an unreliable supplier,” said Adam Sieminski, analyst at Deutsche Bank, who added that Nippon’s decision amounted to an “ad hoc sanction”.
So far it is unclear whether other customers – such as South Korea, Spain, France and Italy, which each import at least 100,000 barrels a day of Iranian oil – intend to follow Nippon.
Nippon’s decision, which would reduce Japan’s dependence on Iran by 4 per cent, was a company decision and did not represent an official position of the Japanese government, officials said. Japan buys one in every four barrels of Iran’s oil, importing about 580,000 barrels a day.
Iran is Japan’s third biggest supplier after Saudi Arabia and the United Arab Emirates, providing 14 per cent of Japan’s oil.
Nippon said that it would now rely on producers such as Saudi Arabia, Kuwait, the UAE, Russia and its Asian neighbours to make up the shortfall.
Nippon’s decision is unlikely to reduce Iran’s overall exports because other consumers would pick up the cargos, analysts said. Iran is China’s biggest supplier, with the world’s second largest consumer increasing its purchases to 445,000 b/d in January.
US crude oil futures fell $1.10 to $62 a barrel on Wednesday in early trade in New York after US crude inventories increased more than expected, indicating that there was more supply than consumers could use.

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