Iranian oil shipments to Japan may be blocked after the bank handling payments on the transactions was ordered by a U.S. court to freeze assets belonging to the Persian Gulf nation, according to two refinery officials with knowledge of the matter.
The National Iranian Oil Co., the country’s state-run oil company, will stop Japanese refiners from picking up cargoes until it can find alternative ways to access payments received through accounts at the Bank of Tokyo unit of Mitsubishi UFJ Financial Group Inc., the officials said, declining to be identified because of company policies. All of Japan’s purchases of Iranian crude are handled through the unit, they said.
A district court in New York told Mitsubishi UFJ this month to freeze at least $2.6 billion of Iranian assets held at the bank, Tomohiro Kosaka, a Tokyo-based spokesman for Mitsubishi UFJ, said today. The court found that Iran was involved in a 1983 explosion in Beirut that killed more than 200 U.S. Marines. The U.S. and European Union are set to start sanctions in July to pressure Iran over its nuclear program, which they say is aimed at producing nuclear weapons.
A person answering the phone at NIOC’s Singapore office said no one was immediately available to comment on the court ruling.
Motion of Complaint
Mitsubishi UFJ filed a petition of objection yesterday to the New York court, said Shinya Matsumoto, a spokesman for the lender in Tokyo. The petition said freezing Iranian assets would affect bank accounts in Japan.
The Ministry of Economy, Trade and Industry, which oversees the country’s energy security, is discussing the freeze of Iranian assets with other agencies, including finance, to find ways to continue Iranian imports, said a government official who declined to be identified.
Further supply from Iran depends on how the second-biggest producer in the Organization of Petroleum Exporting Countries will weigh the risk of not recovering proceeds from oil sales against increasing crude stockpiles in the country, said one of the two refiners.
Much of the unsold March production ended up in onshore and floating storage in April. Estimates for floating storage now range from 20 million barrels to 35 million barrels, compared with 8 million barrels in March, the International Energy Agency said. An additional 20 million barrels to 25 million barrels has reportedly been stored in onshore facilities in recent months, the agency said.
Iran, which typically provides a 30 day payment window after loading cargoes, may give Japan a period of grace for crude oil payments, the refiner official said, citing Iran’s past flexibility over payment terms to India.
When Indian importers were unable to pay on time because of sanctions, Iran kept supplying them even as they amassed $5 billion in unpaid invoices.
Iran, which is facing four sets of UN sanctions, says its nuclear project is for peaceful, civilian purposes.