Iran Japan

Japan prime minister to visit Tehran, with energy security the main concern

As Japan looks to ensure security in the region, it could play a vital role in negotiating between Iran and the US.

Japan is the third-largest economy in the world, needing a regular supply of energy from reliable sources and routes. 

The diversification of energy resources is, therefore, a key pillar of Japan’s energy policy, in particular as it imports most of its oil from the Middle East. Saudi Arabia is Japan’s main oil supplier and besides Saudi Arabia, the UAE, Russia, Kuwait, Qatar and Iran supply additional oil.  Stability and peace in the region directly affect Japan’s energy security and economy.

Any tension or conflict in the region from which Japan imports energy or on a route it travels may increase the oil price, resulting in a significant negative impact on Japan’s economy as well as other major oil importers. Japan is therefore attempting to play an active diplomatic role in the Middle East to decrease the impact of tensions in the region. As the fourth largest consumer and importer of oil in the world, the largest importer of liquid gas (LNG) and the second largest importer of coal after China, it has no choice but to mediate regional Middle Eastern risks.

Japan’s major oil suppliers

In 2018, Saudi Arabia and the United Arab Emirates were the largest suppliers of oil to Japan with Iran coming in sixth. According to Japan’s Ministry of Finance, its crude imports from Iran dropped 42 percent in April compared to March, reaching 169,000 barrels a day on average. In March, the country imported an average of 292,000 barrels of oil a day from Iran. In February, Japan’s oil imports from Iran reached 76,000 bpd. At the time of Iran’s sanctions waivers the government of Japan extended insurance of state-owned oil imports from Iran for one year. This was the Japanese government’s move to encourage its refineries to continue importing oil from Iran.

Zarif’s Visit to Japan

During the last few months, Iran has begun to actively lobby diplomatically to increase its relations with major Iranian oil buyers; Iran does not want to lose its share in regional and world oil markets. Last month Iran’s Foreign Minister, Mohamad Javad Zarif, visited Tokyo and met with Japanese Prime Minster Shinzo Abe and Foreign Minister Taro Kono.

Taro Kono in his press conference after meeting with Zarid said: “We are very worried about the Middle East and will not hesitate to try to reduce tensions and resolve confrontations.” He emphasised that Iran needs to continue to uphold its commitments under the Iran Nuclear Deal, urging Iran to maintain its implementation. Zarif, at a meeting with his Japanese counterpart, said that Iran continues to honour its commitments under the Iran Nuclear Deal, despite US withdrawal from it. During his trip to Japan, the Iranian foreign minister told reporters that there is no way to negotiate with the United States. Zarif had set the goal of his trip to Japan to confront the “tension” of the United States.

Trump’s Visit to Japan

Japan is one of America’s closest allies. President Donald Trump visited Japan recently meeting with Japanese Emperor Naruhito and Shinzo Abe. Trump, in his joint press conference with the prime minister, asked Japanese businessmen to make more investments in the US. North Korea and Iran were also major topics which Trump focused on in his meeting with Shinzo Abe. Trump in his visit to Japan, said of Shinzo Abe’s visit to Iran: “I know that both Japan and its prime minister have good relations with Iran. We will see what will happen.”

Japan’s private and state-led companies with high technology and enough financial capabilities hold the potential to invest in Iranian infrastructure and oil and gas fields. Iran needs billions to recover its oil and gas production capacity; due to sanctions after the 1979 revolution Iranian oil and gas production capacity dramatically decreased, and without foreign technology and financial capability it will not be easy for Iran to increase oil and gas production capacity. Iran’s petrochemical and refinery sectors also need foreign investment due to ageing infrastructure the majority of petrochemical and refineries need to be repaired.

Shinzo Abe to visit Tehran

The relationship between Tehran and Tokyo has always been peaceful and based on mutual respect. One of the focuses of economic cooperation between Iran and Japan after the expansion of relations between the two countries in recent decades has been the issue of energy and contracts for oil and gas.

Shinzo Abe’s trip to Iran will be the first visit by a Japanese prime minister in over 40 years and has become particularly important regarding intensive diplomacy between Iran and the United States and tensions in the region. The continuation of energy imports from Iran is not the main concern for the Japanese government. The country can easily find an alternative to Iran’s oil and gas condensate, countries such as Saudi Arabia, Kuwait and the Emirates can easily meet the needs of the Japanese energy market. LNG imports from Qatar and the United States could also replace Iran’s gas condensate in the Japanese energy market.

Japan’s energy security will not be affected by US sanctions against Iran’s oil exports. However, any possible agreement between Iran and the United States will be in the interest of Japan. With the abolition of sanctions, Japanese companies can invest in oil and gas fields, refineries, and renewable energy in Iran. The country’s products will also have a greater chance of selling in the Iranian consumer market.

Is it possible for Japan to be mediator between Iran and US?

Japan’s major concern is decreasing the likelihood of conflict and tension in the region. The tensions and conflicts in the energy supply countries of Japan, as well as the routes that bring oil and gas resources to the Japanese market, have a direct impact on the security of energy and economic growth in the country. The major import of Japanese oil from Saudi Arabia, the UAE and Kuwait, and any military engagement in the region, especially in the Strait of Hormuz, directly threatens not only the energy security, but also the economy of the country. Any possible conflict in the region would mean an increase in oil prices, which would not be pleasant for the economy of major energy consumers, including Japan.

Given that the 12 pre-conditions by US Secretary of State Mike Pompeo have not yet been eliminated, if the talks are negotiated with Japan’s possible mediation, it would be difficult to reach an understanding between Iran and the United States in the current situation. If Iran and US officially choose Japan as mediator, it could play an important role.

It should be noted that negotiation without a precondition is different from the new agreement without a precondition. It is hoped that with Shinzo Abe’s trip, the tension in the region will be somewhat reduced.

Any conflict in the region and insecurity for oil tankers would be detrimental to all energy producers and consumers in the region. Shinzo Abe’s visit to Tehran will increase Japan’s role and political presence in the region and will enable Japan to play a role in stabilising security in the region. 


https://www.trtworld.com/

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Iran-Gulf Energy Relations in the Time of Trump Sanctions

Analysis: Iran could easily export cheap gas to GCC nations, but only if it improves political relations with arch-enemy Saudi Arabia,

Over the past two years, Iran has bolstered its relations with several Arab countries as the Gulf crisis has deepened.

While the Gulf Cooperation Council [GCC] has in the past tried to present a unified, timely and relevant response to regional developments, these attempts are sometimes individualised by the actions of a member nation.

Iran’s relationship with every member of the GCC is different. Oman, the closest country to Iran among GCC members, maintains its warm political relationship with Tehran in a relatively predictable direction.

Iran-Oman relations faced few challenges either before or after the 1979 revolution. Oman’s policy of establishing close and positive relations with Iran, and a constant emphasis on the development of relations in all political, economic and cultural fields, has led Tehran and Muscat to recognise each other as strategic partners in the Middle East.

Oman also played a mediation role in Iran’s nuclear talks with the P5+1 countries and hosted several rounds of dialogue between Iranian and US foreign ministers.

Tensions between Iran and Saudi Arabia, meanwhile, have built steadily during the Hassan Rouhani era. They have mutually exclusive interests in Syria, Iraq and Yemen. The attack on Saudi diplomatic sites in Tehran and Mashhad also enflamed tensions more than ever.

In Iraq, since the fall of Saddam, Iran’s influence has grown significantly. Along with Iran’s allies in Lebanon, Syria and Yemen, Tehran’s regional expansionism has grown and alarmed Riyadh, which is fearful that growing Iranian influence comes at the expense of its own regional power.

Saudi Arabia has used the current tranche of US sanctions against Iran to produce more oil and take Tehran’s share of the world market. Riyadh is also trying to use its investments in major buyers of Iranian oil, such as India, to persuade them to reduce Iran’s role in their energy markets.

The GCC has always viewed the Islamic Republic of Iran as a fundamental threat to its existence, and from the outset, has taken a hostile attitude towards Iran.

Meanwhile, facing the collapse of the nuclear deal and the new sanctions, Iranian officials have declared they are “ready and interested” to develop bilateral relations with Iran’s neighbours, mainly the GCC.

 

Leveraging energy resources 

Iran’s geopolitical importance is in no small way connected to the existence of huge energy reserves, drawing the attention of global powers to the region. This, along with the strategies of other regional and global powers, largely shapes the foreign policy of the Islamic Republic.

Iran’s main objective is to promote its regional status – and the biggest obstacle to achieving this is the strong US military presence in the region.

Regionalism as a main factor in Iranian foreign policy gives an opportunity for Iran to expand relations with the GCC. Iran, with huge oil and gas reserves, can be an energy supplier (mainly of natural gas) to some GCC members such as Oman, the UAE and Kuwait.

Given the fact that the Gulf countries are Iran’s top priority for gas exports, after negotiations with Oman, there is now the possibility of adding Kuwait to Iran’s list of gas customers.

Ali Reza Kamali, the former CEO of Iran’s Gas Export Company, said the current survey of Iran’s first gas exports showed it would only require the construction of a 200 kilometre pipeline to reach the markets of Oman, Kuwait, the UAE, Saudi Arabia, Bahrain and Iraq.

While in recent years these countries have been believed to have little need for oil imports, they have little in the way of gas – except for from Iran.

If Iran does increase its gas production capacity, there is a possibility of export to the Gulf. Although initial talks for Iranian gas exports to Kuwait have not yet been finalised, the operation of the Iranian gas pipeline to Iraq could provide the foundations for the necessary physical infrastructure to provide gas onwards to Kuwait.

This means the technology and personnel to export gas through Iraq to Kuwait is largely already in place, and this programme could become operational not long after a contract is signed.

Although countries such as Iraq, Saudi Arabia, Kuwait and the UAE do have gas resources, these consist mainly of gas with oil, and they do not have independent gas reserves. These countries are also focused on oil production.

Hamidreza Aragi, the director of Iran’s National Gas Company said that if gas contracts between Iran and neighbouring countries were signed, the security of the countries of the region would be tightly linked.

In terms of economics, politics, population, history of the formation and influence of Saudi Arabia in the Arab world, Saudi Arabia has long sought to expand its influence within the GCC as its most important member.

To enter a new era in Iran’s relations with the Council, both sides would need to be able to shift their concerns towards tangible diplomatic achievements. Iran has also to be more active in foreign diplomacy in order to eliminate problems with its neighbours.

 

To enter a new era in Iran’s relations with the Council, both sides would need ti  be able to shift their concerns towards tangible diplomatic achievements

 

Iran still has huge potential in the petrochemical sector, and exporting more petrochemicals may provide an alternative to exporting LNG while oversupply lowers the value of the LNG market.

Recent political tensions in the region have affected natural gas agreements with Iran’s neighbours, with energy experts believing political tensions between Iran and Saudi Arabia have an overall negative effect on Iran’s ability to conduct business over natural gas agreements with other Arab nations.

Iran enjoys good political and economic relations with Oman; however, foreign factors have delayed the project of Iranian-Omani natural gas pipeline at the planning phase.

Iran should try to reduce tensions with Saudi Arabia to a manageable level, as the relations between Iran and the Gulf Cooperation Council depend on Iran’s relations with Riyadh.

History has shown that ties between the Gulf Cooperation Council and Iran have improved as relations between Iran and Saudi Arabia improve.

/www.alaraby.co.uk

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