Geithner welcomed Tokyo’s cooperation, an encouraging sign for U.S. foreign policy after China rebuffed U.S. sanctions aimed at starving Iran of the oil revenues that provide the country of 74 million people with a vital economic support.
Iran faces the prospects of cutbacks in oil sales to China, Japan and India, its top three buyers who together take more than 40 percent of its crude exports. The European Union, a major buyer, has committed to banning imports of Iranian oil.
Japan Finance Minister Jun Azumi said Iranian crude makes up 10 percent of Japan’s overall oil imports.
“We would like to take action concretely to further reduce (that) in a planned manner,” he said after meeting Geithner.
“On the other hand, we need some time in non-crude oil related areas, so I asked the Secretary to take Japan’s situation into consideration.”
Cutting Iranian crude imports would not be without risks for Japan. The country relies on imports for its energy needs and has to import more fuel to make up for waning use of nuclear power following last year’s nuclear disaster in Fukushima.
Anxiety over Iran’s nuclear programme, which it says is not for military use, could also push up oil prices and harm the global economy.
Indeed, Japan Prime Minister Yoshihiko Noda voiced concern to Geithner about the potential impact of the U.S. sanctions on Japan and the world economy.
President Barack Obama authorised a law on December 31 imposing sanctions on financial institutions that deal with Iran’s central bank, the country’s main clearing house for oil payments.
Japan’s government hopes to secure a waiver from the sanctions for Japanese banks by reducing Iranian crude imports, something it has started discussing with the domestic oil industry, the Yomiuri newspaper reported.
However, sources at two major Japanese oil refiners that buy Iranian crude said they had not yet been approached by the government.
Azumi didn’t elaborate on what he meant by “non-crude oil related areas,” but one potential issue is its repeated intervention to weaken the yen to boost exports.
Azumi said he had meaningful discussions on currencies with Geithner but declined to reveal the details. Geithner also declined to comment on Japan’s intervention.
CUTTING OFF IRAN CENTRAL BANK
Geithner travelled to China and Japan this week to discuss the global economy and seek cooperation on stricter sanctions on Iran, an OPEC member and the world’s fifth-largest crude exporter.
Iran denies Western suspicions that its nuclear programme has military goals, saying it is for purely peaceful purposes.
Washington has rejected Iran’s assertion and has pressed ahead with new sanctions.
The latest law would freeze financial institutions that deal with Iran’s central bank out of U.S. markets. The United States can waive some institutions if it deems it necessary for energy market stability or if the institutions’ home country significantly reduces trade with Iran.
“We are exploring ways to cut Iran’s central bank off from the global financial system. We are in the early stages of consulting with Japan and our other allies,” Geithner said.
“We appreciate the support that Japan has provided.”
Japan asked the United States to waive its banks in return for cutting Iranian oil imports, but Japan must decide how it will lower imports and then it is up to the U.S. government to debate whether a waiver will be granted, a Japanese finance ministry official told reporters.
Japan will present Washington with a “menu” of possible options in exchange for a waiver by the end of February, a government source told Reuters last week.
The tightening noose of U.S. sanctions has set off an Asian round of diplomacy with Middle East oil producers. Japan’s Foreign Minister Koichiro Gemba asked OPEC kingpin Saudi Arabia and fellow cartel exporter the United Arab Emirates to supply the Asian buyer with more oil.
China’s Premier Wen Jiabao will visit Saudi Arabia, the UAE and Qatar in a trip beginning this weekend. The prime minister of South Korea, another major buyer of Iranian crude, is due to visit the UAE and Oman from Friday.
China gave no hint on Wednesday of giving ground to U.S. demands to curb Iran’s oil revenues, rejecting Washington’s sanctions on Tehran as overstepping. Iran is China’s third-largest crude supplier.
U.S. officials sounded more optimistic, saying they will focus more on China’s actions than on its public statements.
However, China has reduce crude purchases from Iran for January and February as it dispute contract pricing terms.
The European Union is more sympathetic to U.S. pressure on Iran. EU foreign minister are expected to agree on a ban on imports of Iranian crude oil on January 23.
Japan is concerned the new sanctions could drive up oil prices, dealing a blow to its economy, which is recovering from an earthquake, tsunami and nuclear power disaster in 2011 that has left it more reliant on imported energy sources. Reuters