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Japan considering alternative oil supplies
by Staff Writers
Tokyo (AFP) Jan 6, 2012

Iran to hold new wargames in key oil waterway in weeks
Tehran (AFP) Jan 6, 2012 - Iran is to hold fresh military exercises in and around the strategic Strait of Hormuz within weeks, the naval commander of its powerful Revolutionary Guards was quoted as saying on Friday.

The manoeuvres are to be held in the Iranian calendar month that runs from January 21 to February 19, the Fars news agency quoted Ali Fadavi as saying.

They will underline Iran's assertion that it has "full control over the Strait of Hormuz area and controls all movements in it," Fadavi added.

The announcement -- which narrowed down a timeframe for the exercises the Guards had previously only given as "soon" -- risked aggravating tensions with the West over the strait.

The waterway is the world's "most important chokepoint" for oil tankers, according to the US Energy Information Administrations. Some 20 percent of the world's oil flows through the narrow channel at the entrance to the Gulf.

Iran's regular navy completed 10 days of wargames to the east of the strait, in the Gulf of Oman, early this week with tests of three anti-ship missiles.

Iran's military and political leaders have warned they could close the strait if increased Western sanctions halt Iranian oil exports.

The navy has also warned it will react if the United States tries to redeploy one of its aircraft carriers to the waterway.

The Revolutionary Guards, who use high-speed skiffs mounted with missile launchers and other lightweight vessels, periodically hold manoeuvres in and around the Strait of Hormuz.

The last ones took place in July 2011 and included the firing of several anti-ship missiles, including two Khalij Fars missiles with a range of 300 kilometres (190 miles).

Fadavi did not give details of the new manoeuvres.

"The 7th in the series of Great Prophet Manoeuvres will be conducted in the area of the Persian Gulf and the Strait of Hormuz. They will have significant differences from the previous ones," Fars quoted him as saying.

Imminent international sanctions on Iranian oil exports aimed at pushing Tehran into giving up its nuclear programme have left resource-poor Japan searching for alternative supplies, officials said Friday.

With virtually no fossil fuels of its own, energy-hungry Japan is heavily dependent on the Middle East, with Iranian oil accounting for nearly nine percent of its power needs in the first 11 months of last year.

Unlike its major allies, Tokyo has maintained a working relationship with Tehran, but the EU and the US are now stepping up efforts to squeeze Iran over what they believe is a nuclear weapons programme under the guise of a civilian power project.

That has led to pressure on Japan to look elsewhere for its oil -- with Tokyo's largest supplier, Saudi Arabia an obvious choice.

An official at JX Nippon Oil & Energy, Japan's biggest petroleum refiner, said it would cope with a ban on Iranian crude oil by "switching to imports from other Middle East countries and other regions including West Africa."

"We are talking with Saudi Arabia and other oil producing countries about measures in the event of a problem arising in Iranian supplies," the official told AFP. "But we cannot give you details on what we are discussing."

Japan's industry minister Yukio Edano said the world's third biggest economy was prepared to "make efforts to minimise the impact (of such an oil embargo) on our country and the world economy."

"We are not at a stage where we should answer a hypothetical question," the minister of economy, trade and industry told a regular news conference. "But, as a matter of course, we are making preparations by taking every possibility into consideration."

Foreign Minister Koichiro Gemba on Thursday left for an eight-day trip to Turkey, Saudi Arabia, Qatar and the United Arab Emirates for talks expected to focus on the Iranian oil problem.

The pressure from Washington and the European Union to boycott Iranian crude comes at a time when Japan must make greater use of thermal power plants after a massive earthquake and tsunami sparked a nuclear power crisis last March.

The vast bulk of Japan's 54 nuclear reactors are now shut down, amid public distrust of the technology and increased safety calls.

US Treasury Secretary Tim Geithner, due to visit Tokyo next Thursday after a trip to Beijing, is expected to press the point further when he meets Prime Minister Yoshihiko Noda and Finance Minister Jun Azumi.

President Barack Obama signed a bill into law at the end of December empowering US authorities to impose penalties on foreign banks dealing with the Central Bank of Iran to settle oil imports.

The central bank has accounts at some major Japanese banks for oil trade settlements, Kyodo news agency said. For Iran, Japan is the third biggest buyer of its oil after China and India.

If US sanctions are implemented, the Japanese government may have to freeze those accounts. That means Japan's oil imports from Iran would "completely stop," Kyodo said, quoting a finance ministry official.

Finance Minister Azumi is expected to call for the exemption of Japanese banks from penalties in the United States. Such an exemption might come in exchange for the government's agreement to significantly cut Japan's oil imports from Iran, Kyodo said.

Kurt Campbell, the US State Department's top East Asia official said Friday Washington was aware of the predicament that Tokyo found itself in.

"The Japanese government has raised some concerns about this legislation. We understand some of the difficulties," said Campbell, who is in Tokyo.

"But I think we all share an interest in making sure that Iran is dissuaded from steps that lead toward unacceptable nuclear options."

Saudi Arabia, which accounted for 30.8 percent of Japan's oil imports in the first 11 months of 2011, is seen as the only oil exporter able to boost production substantially to make up for a crunch in the global oil market.

"Saudi Arabia has ability to produce more and I think we can make do if we have months to spare," JX Nippon Oil & Energy president Yasushi Kimura said in a recent interview with the SankeiBiz digital news.

"We have sounded out Saudi Arabia on what can be done" if the ban is implemented, he said. "If we don't have time to spare, we may discuss the release of state (oil) reserves."

Japan has reserves of 50.2 million kilolitres in crude oil and petroleum products, enough to fuel the country for 116 days.

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S. Korea to seek exemption from Iran oil sanctions
Seoul (AFP) Jan 6, 2012 - South Korea will seek an exemption from new US sanctions that will further restrict Iran's crucial crude oil exports, a senior Seoul official said Friday.

"This is a matter of serious concern for us," the official told AFP on condition of anonymity, noting that Iran is a key supplier of crude to South Korea.

In the first 11 months to November last year, South Korea imported 8.16 million barrels of crude from Iran, amounting to 9.6 percent of its total crude imports.

"We cannot afford to lose this important source of oil and we have to get an exemption from the implementation of the sanctions," the official said.

The new US sanctions are directed at Iran's central bank, which processes most of its oil sales. They will effectively make foreign firms choose between doing business with the Islamic republic or the United States.

But the bill gives President Barack Obama some wiggle room, allowing him to grant 120-day waivers for institutions in a country that significantly cuts its other transactions with Iran.

"Through a significant reduction in transactions with Iran, we want to be granted an exemption. We need talks with the United States to decide what may constitute a significant reduction," the official said.

He said talks would start after the United States and other countries discuss coordination over the new sanctions.

Highly industrialised South Korea, which imports all its crude, is a close ally of the United States, which bases 28,500 troops in the country.

Seoul last month added more than 100 names to a financial blacklist of Iranian firms and individuals, joining a fresh multinational effort to press Iran to scrap its suspected nuclear weapons programme.

But it did not announce a ban on imports of petrochemicals or crude oil.

"We are working toward minimising the negative impacts that (the US sanctions against Iran) could have on our economy," foreign ministry spokesman Cho Byung-Jae said Tuesday.

"We are in talks with the United States regarding the issue."

Kurt Campbell, the US State Department's top Asia official, Thursday admitted that the bill was a source of some concern in South Korea.

"This new legislative provision creates some anxieties in South Korea. We understand this and we're committed to close coordination, cooperation with South Korea going forward on this matter," he told journalists.


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