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Preliminary data released Thursday by the Japanese Ministry of Finance showed that imports of Iranian crude oil from the country fell by 42 percent in April, falling to 169 100 barrels per day (bpd). The decline comes one month after Iran's crude oil imports totaled 292,209 bpd. The March rally came after imports resumed in February as local refiners increased their purchases to meet contract requirements. Iran's February crude imports reached 76,057 barrels per day, the first Iranian crude oil import in four months.
Anemia of hydrocarbons
However, the real story behind these numbers is that Japan is bowing to fear that the United States is demanding that it stop deliveries of Iranian crude oil because of ongoing sanctions in the United States against Iran's energy sector. In April, Japanese refiners suspended oil imports from the Islamic Republic after President Trump strengthened geopolitics between Washington and Tehran by not extending sanctions exemptions beyond May 2 to oil imports in eight countries, including Japan. Japan, with only 127 million inhabitants, is the third largest economy in the world and the third largest importer of crude oil. Japan also remains the world's largest importer of liquefied natural gas (LNG), ahead of China and South Korea. Japan is also the third largest importer of coal behind India and China.
Trump's decision to suspend exemptions from Iran's oil sanctions has surprised major oil importers as well as the markets, as most of them are counting on continued waivers to keep more barrels on world markets so to offset the current reduction in the OPEC + offer to remove 1.2 million bpd. Related: Saudis push up oil prices in Asia as demand grows
The removal of petroleum import exemptions puts Japan in a difficult position as it needs to maintain close relations with the United States, not only to maintain strong economic ties, but also to ensure that US military cooperation is strengthened against a growing and increasingly aggressive China as Beijing expands its influence in the country. The South China Sea, strongly contested, as well as the East China Sea, where the land claims of the two countries overlap.
For Japan, the dilemma is that the country is anemic in hydrocarbons and produces virtually no oil and gas. Japan imports more than 80% of its oil and gas from abroad. Japan has limited domestic energy resources and currently produces less than 10% of its total energy consumption in Canada, according to the latest energy sector badysis in the United States by the Energy Information Administration (EIA) the United States.
Washington trade pressure
The United States also calls Japan to the table for what it calls trade imbalances. During his state visit to Japan on Sunday and Monday, President Trump has shown himself severe in trade, but has also given leeway to his counterpart and Japanese ally, Prime Minister Shinzo Abe . Trump said Washington would not seek a bilateral trade deal in Tokyo until the July upper house elections, which the Japan Times said would apparently reflect Abe's willingness to avoid pressure to to reduce tariffs, which could affect farmers. Nevertheless, Trump criticized Japan over the "huge" trade imbalance between the two countries and said there would be announcements regarding bilateral trade "probably in August".
Abe said on Monday that Japan would cooperate with the United States and also play a constructive role in helping to ease tensions with Iran as its country respected Washington's sanctions against Tehran and its hope of re-establishing rapidly imports of Iranian crude.
By Tim Daiss for Oilprice.com
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