Japan worried but still negotiating with Iran

Reviewed by Hitoshi URABE

Article:
"Japan worried but still negotiating with Iran"
(Reuters) Houston Chronicle
http://www.chron.com/cs/CDA/ssistory.mpl/business/2110259

Related Articles:
"Japan may lose oil contract in Iran: report" Chinaview
http://news.xinhuanet.com/english/2003-09/19/content_1089498.htm

"Shell denies planning bid for giant Iran oilfield"
(Reuters) Forbes
http://www.forbes.com/markets/commodities/newswire/2003/
09/19/rtr1086215.html

Comments:

It all began, just like everything else, with the Iraqi War, or more precisely the sequence of events which led to the incident. A few months ago, the US apparently told Japan that they are unhappy with the negotiations going on between Iran and Japan on Azadegan oilfield exploitation. Then there were reports that Japan's government is asking the Japanese companies involved to back off. Gripes were heard among not only the companies directly related to the project but also others who had thought that the sort of government intervention were undesirable.

What went on behind the doors and curtains in detail in unknown, but the Japanese consortium suspended the discussions with Iranians before the summer, and missed the deadline on June 30 for exclusive rights on commercial negotiation with Iran.

Since then there were speculations in the energy circles that American and European companies began negotiating with Iran to develop Azadegan while rumors of termination of talks with Japan were spread.

The article introduced above reports that Mr, Hiranuma, Japan's Trade Minister, admitted Iran starting negotiations with non-Japanese firms, but talks with Japanese consortium are still going on. The related article above by Forbes is basically in line with this story, but there are other reports such as another related article above by Chinaview, indicating that Japan has in fact already lost the deal.

Japan is a resource poor country. About 80% of it's energy source is imported, of which more than 60% is crude oil, which means that imported oil covers just about half of Japan's total energy needs. Although there have been developments and installations of nuclear power plants during the last 20 years, which increased the nuclear share of energy supply from 11% to 20% during that period, further utilization of nuclear power is virtually hopeless as the favorable sites are already developed and the residents' protests are increasing, which has been fueled by myriads of accidents and cover-ups revealed recently at the existing plants.

Accordingly, import of crude oil is vital for Japan's survival. This is in comparison with the US, where 25% of their energy source is foreign, but most of them are provided by allies such as Canada and the UK, and imports from the Middle East is very little as it is not a trade out of necessity but rather from political considerations.

Japan needs oil and Iran needs foreign capital, which seems to be a perfect match. Many European companies have signed agreements with Iran for their acquisition of rights on oil reserves there.

The US, pursuing its own policy based on security or whatever, would be in no trouble even if Iran, and other Arab nations, stop delivering crude oil. But it is absurd, from economic point of view, for the US to force both Japan and Iran to seek the welfare of their peoples.

Arguably, the US is Japan's one of the closest allies, politically, economically, and militarily. Indeed, because of it, it would be beneficial for the US, too, to have Japan maintain a certain level of business and commercial tie with Iran, which in effect would support Japan's security and independence, a major ally of the US.