A joint multi-billion dollar project between Japan and Iran raised questions over the seriousness of Washington's military threats against the Islamic Republic, Ibrahim Nafie writes Developments surrounding the Iranian nuclear question often leave one dumfounded. Take for example the recent announcement that the Iranian government and the majority-owned Inpex Company are about two weeks away from a final agreement over a joint project to develop the Azadijan oil field, said to be the largest untapped oil field in the world. Certainly the Japanese would know that their investment -- and such a huge one at that -- in the Iranian petroleum industry would not go over well in Washington, which has been pushing for sanctions against Tehran because of the latter's refusal to halt its uranium enrichment operations. Obviously, Japan's need for oil must be greater than its fear of upsetting the Americans. After all, Japan's high-powered economy is almost entirely dependent upon imported oil. Japan is the second largest importer of oil after the US and the third largest global consumer of oil after the US and China. It is also obvious that Tehran is fully aware of this and that the Azadijan deal will deliver a powerful message to the effect that international interests sharply conflict with Washington's desire to impose sanctions on Iran. Not that it's an entirely foregone conclusion that the deal will go through. Inpex had signed a preliminary agreement with Iran over the development of the gigantic oil field in 2004, but subsequent negotiations had since ran aground over various financial aspects. It was only very recently that Iran's delegate to OPEC signalled a major breakthrough with his announcement that the two sides had reached an agreement over pricing. If a final agreement is reached, the Azadijan oil field, which is said to contain 26 billion barrels of oil of which nine billion could be extracted, would go into production in 2008. The tensions that have prevailed in US- Iranian relations since the Iranian revolution have greatly hampered Iran's petroleum producing capacities. Iranian petroleum production is currently operating at a maximum of four million barrels a day, whereas even in the mid-1970s, under the shah, the country could produce 60 million barrels per day. Instrumental in this decline was the D'Amato sanctions law, passed by Congress, prohibiting international petroleum firms from investing more than $40 million a year in Iran, thereby turning off the taps to the much higher levels of investment needed to develop Iran's oil and gas industries. More recently, the collision course between the US and Iran over the nuclear issue and the prospect of new restrictions have caused international firms to balk before committing themselves to major investment in oil fields that had been discovered some time ago. The Japanese have found a formula for overcoming this wariness. The formula can be summed up in the Japanese foreign minister's statement to the press: "The two issues [the development of new oil sources in Iran and the Iranian nuclear programme] are entirely separate, however important they both are." The importance of Iranian oil resources to Japan was underscored by the Japanese defence minister shortly before the Iranian foreign minister's visit to Tokyo at the end of 2003. Referring to the talks then in progress over the Azadijan field, he said, "I don't think we should abandon the deal just because that's what America wants." The $2 billion deal to develop the southern portion of the Azadijan oil field is the largest international oil agreement with Iran since the 1979 Revolution. It helped Japan make up its mind that Tehran had signed the additional protocol of the Nuclear Non-Proliferation Treaty. It also helped that Iran is Japan's third largest oil supplier. In March 2004, in the wake of the signing of the preliminary agreement over Azadijan, the Japanese state-run Bank for International Development announced that it along with four other commercial Japanese banks would be offering a $1.2 billion loan to Iran in exchange for oil supplies. A bank spokesman said the loan would be presented to Iran officially and that this was the second time Japan lent Iran money in exchange for crude oil, the first time being in 2001 to the tune of $3 billion. He simultaneously stressed that the new loan had nothing to do with the preliminary Azadijan development agreement signed a month previously, adding, "the loan will be given to Iranian national petroleum firms, which will supply quantities of oil to Japanese commercial firms which, in turn, will reimburse the bank for these supplies." That the final agreement over the Azadijan development project had stalled due to differences over financial questions may have given Japan a two-year respite from American pressures. In all events, to Japan another type of pressure now seems to have proved weightier, especially in view of the rising global demand for oil and the fact that the price per barrel has more than doubled since 2004. Still, one can not help but to wonder. Is Japan being audacious in giving precedence to its own national security concerns at this crucial time in the controversy over the Iranian nuclear programme? Or could it be that it had secretly come to some kind of understanding with Washington? After all, it is difficult to imagine that Japan would risk sinking billions of dollars into a project in a country that might soon face international economic sanctions, not to mention the possibility of a military strike. The former alternative would signal that major international powers are drawing away from the US on the question of Iran. If Japan had been given some kind of go-ahead from Washington, then this would indicate that Bush's threats of military action against Iran are only so much hot air. Naturally, neither message would be lost on the Iranians.
