Japan Considers Using Central Bank To Get Around Iran Oil Embargo

Less than a day after the largest bank in Japan agreed to comply with a U.S. District Court order barring it from doing business with Iran, a move that precipitously cut off some 80 percent of all oil transactions between the two countries, bankers and government officials in Tokyo are reportedly trying to find a way to circumvent the commercial embargo.

According to Japanese newspaper Nikkei, a proposed solution involves using the Bank of Japan, the countrys sovereign central bank, to handle cash-for-oil transactions.

Concerns are growing among Japans leadership that oil imports to the energy-scarce archipelago nation may be interrupted after the Bank of Tokyo-Mitsubishi UFJ NYSE: MTU froze some $2.6 billion it held in Tehran in response to a May 2 order from a U.S. federal court in New York.

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U.S. Exempts Japan and 10 Other European Countries From Iran Oil Sanctions

The Obama administration on Tuesday exempted Japan and 10 European nations from the prospect of biting sanctions intended to punish countries that continue to buy oil from Iran, but it left open the fate of other major importers, including China, India and South Korea.

The sanctions, ordered by Congress late last year to intensify diplomatic and economic pressure over Iran’s nuclear activities, have put the administration in the difficult position of threatening to punish some of the United States’ closest allies while it seeks to squeeze Iran’s main source of hard currency.

Secretary of State Hillary Rodham Clinton, who announced the exemptions in a statement, cast them as evidence of the success of the new sanctions because the countries had cut imports. The United States, she said, was making progress in “shrinking Iran’s oil export markets and isolating its Central Bank from the world financial system.”

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Japan to cut oil imports from Iran, says Finance Minister Azumi

Japan is prepared to gradually reduce the amount of oil it imports from Iran, Finance Minister Jun Azumi said Thursday, as the United States seeks to muster international support to put fresh pressure on Tehran over its nuclear program.

Japan imports 10% of its crude oil from Iran at the moment, Azumi said at a news briefing after meeting with U.S. Treasury Secretary Timothy Geithner. The country is ready to decrease that level “in a planned manner,” he said.

“What I told the secretary is that we have already reduced Iranian oil imports by 40% in the past five years,” Azumi said, standing next to Geithner. “The nuclear development issue is an issue that the international community cannot overlook, so we very much understand the U.S. action.”

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