Iran Asks Japan to Pay Yen for Oil,
MEGUMI YAMANAKA / Bloomberg News 13jul2007
TOKYO — Iran asked Japanese refiners to switch to the yen to pay for all crude oil purchases, after Iran's central bank said it is reducing holdings of the U.S. dollar.
Iran wants yen-based transactions ``for any/all of your forthcoming Iranian crude oil liftings,'' according to a letter sent to Japanese refiners that was signed by Ali A. Arshi, general manager of crude oil marketing and exports in Tehran at the National Iranian Oil Co. The request is for all shipments ``effective immediately,'' according to the letter, dated July 10 and obtained by Bloomberg News.
The yen rose on speculation for an increase in demand for the currency, the result of Japan's annual 1.24 trillion yen ($10.1 billion) of oil imports from Iran. Central bankers in Venezuela, Indonesia and the United Arab Emirates have said they will invest less of their reserves in dollar assets because of the weakening currency.
``What else can Japan do but to accept the request, once the oil producer sent its wish?'' said Hirofumi Kawachi, an analyst at Mizuho Investors Securities Co. in Tokyo. ``The tensions between the U.S. and Iran are escalating, and it's Iran's measure to hedge risk.''
A spokesman for Iran's oil ministry in Tehran said he could neither confirm nor deny that the letter had been sent. Most Japanese oil refiners have until now used U.S. dollars to pay Iran for oil, said the spokesman, who declined to be identified by name because of government policy.
The yen advanced to 122.07 per dollar at 2:30 p.m. in New York, from 122.42 late yesterday.
Iran is cutting its U.S. dollar reserves to less than 20 percent of total foreign currency holdings, and will buy more euros and yen as tensions with the U.S. increase, Central Bank Governor Ebrahim Sheibany said on March 27.
The United Nations Security Council is preparing for another round of sanctions against Iran because of the nation's nuclear research.
The Islamic republic, holder of the world's second-largest oil and gas reserves, has refused to halt uranium enrichment that it says is for use in nuclear power plants to produce electricity. The U.S. says Iran seeks instead to develop an atomic bomb. Enriched uranium can be used to make nuclear fuel or build nuclear weapons.
Iran isn't alone in wanting to drop the dollar for pricing oil. Russia has been examining plans to price the Urals oil export blend in rubles to curb currency risks. The nation plans to open the Energy Stock Exchange in St. Petersburg in the first half of next year to trade oil in rubles, UBS AG reported June 14.
`New Payment Mechanism'
Iran asked the refiners to use the yen exchange rate quoted at the Bank of Tokyo Mitsubishi UFJ on the date oil cargoes are loaded. The use of yen-based letters of credit for oil ``has finally been approved'' by the Iranian central bank and the NIOC, according to the letter, titled ``New payment mechanism for Iranian Crude Oil Cargoes.''
Japan imported 1.59 million kiloliters of Iranian crude oil in May, the least since June 2006, according to government data.
Only Saudi Arabia and the United Arab Emirates are larger oil suppliers to Japan than Iran.