By Reza Zandi
Japan’s Prime Minister Shinzo Abe, who just played golf with US President Donald Trump in Tokyo two weeks ago, is heading to Tehran this week to broker easing of strained relations between Tehran and Washington.
The last time a Japanese prime minister visited Tehran was 41 years ago, prior to the victory of the Islamic Revolution back in 1979. Japan has not entered the game without a US permission. But, how could this mediation benefit Tokyo? What would count as a success for Abe in Tehran? Let’s look at the issue from the viewpoint of crude oil.
1. Japan reduced its dependence on oil during the 10-year period from 2007 to 2017, by about 890,000 barrels per day. However, in 2017, this country imported 4.142 mbd of crude oil, or 1.6% of the world’s total oil imports in the same year. The Persian Gulf producers supply the lion’s share of Japan’s oil needs. So, it would be fair to imagine that a widespread tension in the Persian Gulf region, leading to the insecurity and closure of the Strait of Hormuz, could cause serious trouble for Japan’s economy and industries. This is one good reason for the Japanese to strive to reduce tensions in the region.
2. In the early 2000s, I remember well the night Japan’s INPEX signed a contract for developing Azadegan oilfield following months of negotiations. The deal was so important for the Japanese that they offered over $3 billion in low-interest loans to Iran to win the contract. They had planned to gain a toehold in one of the largest oilfields in the world in order to ensure the future of their energy security. As the specter of Iran’s nuclear sanctions loomed, the Japanese immediately abandoned everything and left quickly with a mere US signal. Japan is respectable, but cannot be seen as an impartial mediator!
3. Iranian Foreign Ministry officials have welcomed the presence of Japan’s prime minister in Iran. I think that Mr. Shinzo Abe can temporarily put an oil card on the table to ensure the success of his visit. Prior to the sanctions, Japan imported 130,000 bpd of oil from Iran. In March (two months ago), Japan’s oil imports from Iran stood at more than 290,000 bpd due to non-renewal of sanctions waivers by the United States. Japan is a traditional customer of Iranian oil and losing it would be costly for Iran. Now, if Mr. Abe, fully understanding the status quo, can grant his country extension of US sanctions waivers to continue importing Iranian oil, he can win the confidence of Iranians as a mediator.
4. I have written time and again that the danger of losing Iran’s oil markets under the severe pressure of sanctions is serious. If Iranian oil customers set their refiners to process other crude types, it will no longer be easy for Iran to sell oil to on the market even in the case of removed bans. Therefore, the passage of time under the current circumstances is very destructive to the Iranian oil industry. Particularly, our neighbors keep enhancing their oil and gas output from the joint fields on a daily basis. Certainly, you must have heard about a 53-billion-dollar deal Iraq has recently struck with ExxonMobil. If the Japanese manage to have the oil sanctions on Iran lifted, they can return to oil projects in southern Iran.
5. Talks with the Japanese prime minister would definitely include the issue of oil. The language of oil is international and universal. Everyone understands this language; everyone, including Shinzo Abe and Donald Trump!
The analysis was first published by Shana.