Japan Eyes Investment and Oil in Iran, but Closer Ties Far Off

Japan Eyes Investment and Oil in Iran, but Closer Ties Far Off
Japanese Prime Minister Shinzo Abe shakes hands with Iranian President Hassan Rouhani at the U.N. Headquarters, New York, Sept. 27, 2015 (Photo by the Yomiuri Shimbun via AP Images).

During a meeting on the sidelines of the United Nations General Assembly in New York last week, Japanese Prime Minister Shinzo Abe and Iranian President Hassan Rouhani focused on economic ties. They agreed to work closely to conclude recent talks on a mutual investment deal that would facilitate Japanese companies investing in Iran. Abe held out investment as an inducement for Iran to comply with the agreement to limit Tehran’s nuclear program inked between Iran and the six world powers, known as the P5+1, earlier this summer. But Japan is also keen to resume the flow of energy imports from Iran, which were largely curbed as a result of the United Nations Security Council-mandated sanctions in place before the nuclear deal.

With the deal’s finalization, Tokyo is looking to kick-start relations with Tehran and revive previous efforts at investing in Iran’s energy sector. Japan isn’t alone, of course: Russia, China and several European countries have been stepping up their efforts to get an early foothold in the Iranian market as it opens back up to the world. Japan’s motivation to compete for a share of the investment opportunities in Iran is unambiguous. As Yoshihide Suga, Japan’s chief Cabinet secretary, recently explained about the bilateral investment treaty: “The aim of these negotiations is to protect the investment activities of Japanese companies. Japan will take the necessary steps and not be later than other nations.”

One of Japan’s key targets is Iran’s potentially lucrative Azadegan oil fields, near the border with Iraq. According to Iranian government estimates, the Azadegan fields could contain over 30 billion barrels of oil in reserve. Tokyo has been interested in working with Tehran to develop the oil fields for the past two decades and at one point, in 1996, had a nearly 75 percent stake in the southern Azadegan fields through Inpex, a Japanese oil company. That investment gradually dwindled over the years, but Japan still had a considerable 10 percent stake in Azadegan until 2010, when it was forced to pull out of Iran under pressure from the United States as sanctions were tightened.

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