Foreign Correspondence

[CoalTrain]

Japan Plans Second Iran Loan to Secure Oil Amid U.S. Protests

http://www.iranexpert.com/2004/japan23february.htm


Japan, the world's second-largest oil importer, said it may give Iran its second loan in three years to secure stable supplies of oil, days after it overrode U.S. protests and agreed to develop an Iranian oilfield.

State-owned Japan Bank of International Cooperation, that provides loans to Japanese companies and overseas governments, is considering giving the loan to Iran's government as an advance for future crude oil supplies, said Masaaki Yamada, a bank spokesman.

Japan gave a $3 billion loan to Iran in 2001 drawing criticism from the U.S. The U.S. opposes any business ties with Iran because of concerns about the Persian Gulf nation's nuclear development program, charges Iran denies. The Japanese government is addressing those concerns, Yamada said. ``JBIC itself is not talking about it directly with the U.S. government; the Japanese government is,'' said Yamada. ``The Japanese government is checking out the international situation regarding Iran. Japanese policy will have to consider many issues including the security of oil supplies.''

Japan's dependence on overseas oil makes the security of oil supplies a key priority for the Japanese government. The government cited this necessity when state-run Inpex Corp. last week agreed with Iran's state oil company to spend $2.5 billion to develop the Azadegan oilfield in the face of U.S. protests. Japan imported $50 billion of crude oil last year to meet almost all its crude oil needs. It bought more than four-fifths of the imports from the politically unstable Middle East. Iran was the third-largest supplier of crude oil.

Iran Concerns

Still, concerns about Iran's nuclear program and U.S. opposition to foreign investments in Iran's petroleum industry make such business agreements with Iran risky, analysts said. ``Political and economic risks are high in Iran,'' said Tsutomu Toichi, a managing director at the Institute of Energy Economics, Japan, a Tokyo-based think-tank. ``In the case of Japan, those risks are acceptable'' because the country has other strategic interests such as securing stable supplies of oil.

The U.S. State Department spokesman Richard Boucher opposed Inpex's agreement last week to develop the Azadegan field saying it's ``concerned about such deals and disappointed that these things might go forward.'' Japan knows ``the fundamental concerns about Iran's nuclear developments, about Iran's support for violent groups that oppose the peace process, Iran's harboring and support of terrorists,'' Boucher told reporters last week after the Inpex agreement. ``All these things remain and haven't changed.''

Separate Loan

Japan Bank's second loan to the Iranian government for securing crude oil supplies is independent of Inpex's decision to invest in the Azadegan oilfield, said the bank spokesman Yamada. When the bank overrode U.S. protests in 2001 and committed to the $3 billion loan to the Iranian government, it had said then that the loan was separate from the negotiations on the Azadegan project that began in the previous year.

Inpex won priority negotiating rights to develop the Azadegan field in 2000 when Iranian President Ali Khatami visited Tokyo to invite Japanese companies to invest in Iran. Japan Bank will consider giving a separate loan to Inpex for developing the Azadegan project when Inpex makes a request, Yamada, the bank spokesman, said in a telephone interview.

``Japanese companies and the Ministry recognize the importance of the Azadegan project because the field has huge reserves of crude oil,'' said Yamada. ``As the public financial institution, we're always ready to consider giving the loan facility when the request is submitted to us.'' Yamada declined to give the amount or tenure of the second loan to the Iranian government or details of the separate loan to Inpex. Iran's government has already drawn down the $3 billion loan the bank gave in 2001.

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