Japan's trade and foreign ministers said on Tuesday they have not yet reached an agreement with Washington on how much Tokyo will cut Iranian crude imports to win waivers from U.S. sanctions designed to starve Iran of oil revenue.

A tanker docks at oil refineries in Yokohama, south of Tokyo August 31, 2005. , Photo: Reuters

Japan is likely to reduce imports of crude oil from Iran by at least 11 percent per year, the Yomiuri newspaper reported, to earn an exemption from sanctions that could shut Japanese banks out of the United States.

The Yomiuri, citing unidentified sources, said Japan and the United States reached an agreement at talks last week, with a formal deal expected by the end of this month.

An agreement on lowering oil imports is essential to protect the Japanese financial sector's operations abroad, but it poses a risk to Japan's economy as reliance on energy imports has increased since last year's earthquake and tsunami triggered the Fukushima radiation crisis, leading to most of Japan's nuclear reactors being kept out of use.

"We are closely negotiating with the United States and are moving forward towards mutual understanding, but it is not the case that we have reached a conclusion," Trade Minister Yukio Edano told reporters.

The United States is pushing ahead with sanctions because it fears Iran might use its nuclear program to develop nuclear weapons.

The European Union has agreed to cooperate with the United States. In response, Iran ordered a halt of oil sales to Britain and France on Sunday in a move symbolic of Tehran's anger with the West.

Iran, the biggest producer in OPEC after Saudi Arabia, denies Western suspicions that its nuclear program has military goals, saying it is for purely peaceful purposes.

SPECIFIC DISCUSSIONS

The United States says it will punish financial institutions that deal with Iran's central bank, the main clearing house for oil revenues. A country can earn a waiver from the sanctions if it significantly reduces trade with Iran.

"Many countries have approached us to discuss their efforts to reduce purchases of Iranian crude which, by statute, could except them from sanctions," a senior official in U.S. President Barack Obama's administration said.

"We are discussing specific cases with specific countries. It would be premature to discuss any of them at this time."

Japan's Foreign Minister Koichiro Gemba also said no agreement has been reached yet. Japan is offering to continue cutting Iranian oil imports but talks are ongoing, a foreign ministry official said earlier.

Japan is the third-biggest customer for Iranian oil. It needs to import more oil to make up for declining use of nuclear power after the Fukushima disaster last March triggered the worst nuclear crisis since Chernobyl 25 years ago.

Public safety fears have prevented the restart of reactors halted for routine checks, and only two of the nation's 54 reactors are still operating. The last of those is due to be shut down by late April.

Japan's imports of Iranian crude fell 11.7 percent last year to 313,000 barrels per day (bpd), accounting for 8.8 percent of total oil imports, and have declined by more than half from 683,000 bpd in 2003.

If Japan cut Iranian oil imports by 11 percent from last year's level, as the Yomiuri reported, that would amount to a reduction of 34,430 bpd.

Cosmo Oil Co has already lowered its Iran crude imports to a little below 30,000 bpd from about 40,000 bpd since January.

Other refiners' imports are seen steady so far this year, but imports are likely to be down further from April, when most annual contracts are renewed. The oil refiners have been awaiting instructions from the Japanese government before launching talks with Iran on annual contracts.

Japan's top refiner, JX Nippon Oil & Energy Corp, a unit of JX Holdings, said it has not received any instruction from the government on Iranian oil, including the reported 11 percent cut, and whether Japan will win waivers. Two other refiners also had heard nothing, industry sources said.

"We are worried because the government is not good at planning ahead," one source at a Japanese buyer of Iranian crude said.

By contrast, China and South Korea, the two other big Asian buyers of crude, increased imports from Iran last year.

Source: Reuters