Japanese trade with Iran under pressure

Nippon – Resource-poor Japan has made great efforts to forge good relationships with oil producing countries in the Middle East. Iran, boasting the world’s fourth largest crude oil reserves and the world’s largest natural gas reserves, has long been an important oil supplier. However, the US economic sanctions placed on Iran due to suspected nuclear weapons development are affecting the trade relationship between Japan and Iran.

In 2000, Japan acquired priority in negotiation rights for development of the Azadegan oil field, which has an estimated 26 billion barrels in reserves. Expectations for a Japanese-developed oil field were high; however, US opposition led to negotiations faltering. In 2004, Japan finally entered an agreement with the National Iranian Oil Company, making a 75% investment in development of Azadegan. Tightening US economic sanctions on Iran , however, meant an increased risk of the company being targeted for sanctions, so in 2006 Japan reduced its stake to 10% and then in 2010 withdrew completely.

Japan is very much a net importer in its trade relationship with Iran. Imports from Iran in 2017 totalled ¥400 billion, with more than 98% being mineral fuels such as crude oil. Of the remaining imports, 0.7% was in textile yarn and products and 0.4% was in foodstuff. Japan exports to Iran totalled ¥98.5 billion and included 35.4% in transportation equipment for vehicles, 20.4% in general machinery, and 11.4% in steel, nonferrous metals, and metal products.

As a major Middle East country with a population of around 80 million, Iran’s huge potential market has drawn interest from countries across Europe. In July 2015, six countries lifted economic sanctions on Iran following the Iran nuclear deal and Japan also began planning to expand trade, which had been in stagnation. However, since President Donald Trump withdrew the United States from the deal, the situation has once again become unclear.

The trade results for 2017 show that the amount of Iranian oil imported has shrunk to 5.5% of Japan’s total crude oil imports. Moreover, with distributors facing embargo measures, from October 2018 Japan has halted oil imports from Iran and is moving toward obtaining supplies from Saudi Arabia and other countries.

Main Events of Japan-Iran Relations

1929 A Japanese legation is established in Iran.
1958 The Shah of Iran Mohammad Reza Pahlavi visits Japan.
1960 The crown prince and princess of Japan (the current reigning emperor and empress) visit Iran.
1978 Prime Minister Fukuda Takeo visits Iran (no Japanese prime minister has visited since).
2000 President Mohammad Khatami is the first Iranian president to visit Japan (the first head of state to visit since 1958) and talks with Prime Minister Mori Yoshirō. Japan acquires priority in negotiation rights for the Azadegan oil field.
2004 Inpex Corporation and National Iranian Oil Company enter an agreement to develop the Azadegan oil field. The Japan side contributes 75% of the total investment of $2 billion.
2006 The UN Security Council passes a resolution demanding Iran suspends its uranium enrichment program and warns of economic sanctions. Japan reduces its stake in the Azadegan oil field from 75% to 10%.
2008 Prime Minister Fukuda Yasuo and President Mahmoud Ahmadinejad hold a summit meeting in Rome (the first summit meeting since 2000).
2010 Japan withdraws completely from development of the Azadegan oil field.
2013 Prime Minister Abe Shinzō and President Hassan Rouhani hold talks in New York (as of 2018, these summit meetings in New York have been held for six consecutive years).

Compiled by Nippon.com based on data from the Ministry of Foreign Affairs website and various news reports.

(Translated from Japanese. Banner photo: Azadi Tower in Tehran. A monument built in 1971 to mark 2500 years of the Imperial State of Iran. © Pixta.)