Iran asked Japanese refiners to switch to the yen to pay for all crude oil purchases, to counter the risk that U.S. dollar transfers may be frozen by increased sanctions.
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.
At stake are payments from Japanese refiners to Iran that rose 12 percent last year to 1.24 trillion yen ($10.1 billion), according to the finance ministry in Tokyo. Iran is Japan’s third- largest oil supplier, behind Saudi Arabia and the United Arab Emirates.
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 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.
The government in Tehran has failed to suspend its nuclear activities after the imposition of two sets of United Nations- sponsored sanctions since December.
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.”
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.