Japan sees oil deal with Iran as reflection of its needs

Feb 24, 2004 01:00 AM

Japan's recent mega oil contract with Iran is no surprise. Japan is a country hungry for energy and its policy for purchasing oil and gas has always been an aggressive one.
However, its recent deal with Iran to jointly develop an oil field which will, when commissioned, give Japan around 300,000 bpd of oil, will only meet a fraction of Japan's needs. The development is a joint venture between a consortium of Japanese companies, who will own 75 % of the development, and a subsidiary of the National Iranian Oil Company.

In terms of the economic significance of the deal, this is a normal element of what is expected by Japan. However, the timing of the deal is smack in the middle of US concerns about Iran and its continued indirect pressure on that country.
The fact that Japan, usually perceived as a US ally who has also sent non-combatant troops to Iraq, is dealing with Iran at such a moment in time is what seemingly embarrasses the US.

The reality of the situation is that there is indeed nothing wrong with dealing with Iran, especially if the dealings have nothing to do with illegal activities or prohibited goods.
For Iran the burgeoning oil and gas potential has been tapped relatively slowly. Its progress in securing timely completion of its projects in areas like the South Pars phases has been an embarrassment to Iranian officials. In addition, one of the more troubling elements has been that despite an excellent and progressive law on foreign investments, the result on the ground has been a small trickle.

For Iran the contract comes at a good time, for even in the midst of a controversial election it also demonstrates the willingness of buyers to come in with joint ventures. It also occurs at a time when a host of embarrassing enquiries have begun in Norway into the conduct of Statoil in its dealings with Iran on the many projects that Statoil is involved with.
There again Statoil has actually picked up the momentum of its relations with the Iranian oil sector in large part, putting aside any pressure that might emerge from the enquiries.

In the climate that surrounds the region Japan has been stubborn in countering US criticism and it is highly unlikely that the contract will be cancelled. After all one should not forget that at the height of the Iran-Iraq war, when Iran was considered the enemy, Japan was perhaps the only country that continued to do aggressive business on the oil and gas sector with Iran.
It is, therefore, a long history of working together and Japan is realistic about its requirements and sees the contract as merely a reflection of its economic needs.

It is perhaps important for the US to back down on criticising this deal and perhaps for once see that commercial dealings with Iran are not bad. After all a whole host of US companies are doing business there, albeit through their European companies or, in some cases, through proxy agents.
So why not just lift these sanctions? It is also time to be realistic and see that Iran is a major force in the field of oil and gas and its role in the field of energy economics cannot be a minor one.

Source: Gulf News
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