Japan wants oil left out of Iran sanctions 
 
Japan will propose that oil from Iran be left out of initial economic
sanctions the international community may impose on Tehran if the country
refuses to suspend uranium enrichment, a Japanese daily reported on Monday.

The Yomiuri Shimbun, quoting government sources, said the move would be seen
as an attempt by Tokyo to safeguard energy ties with Iran -- its
fifth-largest oil supplier -- in the event of sanctions.

A Japanese Foreign Ministry spokesman denied that Tokyo had decided on such
a proposal.

He said Tokyo was not framing its policies on the assumption that Tehran
would turn down a package of incentives offered by the United States,
Russia, China, France, Britain and Germany, for Iran to suspend enrichment.

Resource-poor Japan has been in a tough spot in the diplomatic tussle over
Iran's nuclear ambitions, stuck between a need to meet its energy
requirements and a wish to stand behind the rest of the international
community.

Iran said on Sunday it would not suspend uranium enrichment, a process that
has both military and civilian uses, defying a U.N. Security Council
resolution demanding that it halt the nuclear activities by August 31 or
face the threat of sanctions.

But Tehran said it would formally respond by Tuesday to the package of
incentives.

Iran has insisted that its nuclear activities are aimed at meet its
increasing electricity demand.

Japanese officials have said Tokyo would join any international sanctions
imposed on Iran, adding that resolving the nuclear stand-off takes
precedence over its energy needs.

However, the Yomiuri said Japan was expected to urge that sanctions against
Iran be conducted incrementally, with oil trade excluded from the first
stage, and that the punitive measures should be lifted immediately once Iran
halts uranium enrichment.

Japan has rights to develop Iran's Azadegan field -- tipped as one of the
largest untapped oil reserves in the world -- but negotiations have been
deadlocked since the deal was signed in 2004, when the project was thought
to require an investment of some $2 billion.

Iran has said it would finalize the Azadegan deal by August 22 with Japan's
INPEX Holdings, but Japan's biggest oil explorer -- whose largest
stakeholder is the government -- said no date has been set.

Iran had long been Japan's third-largest supplier of oil, but Japanese
refiners have cut down on Iranian oil following the nuclear stand-off with
the West, and its standing fell to fifth place in June.
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