Japan secretly proposed Iranian oil and U.S. grain swap in a failed mediator bid

Japan secretly proposed Iranian oil and U.S. grain swap in a failed mediator bid
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TEHRAN – The administration of Japanese Prime Minister Shinzo Abe, in a bid to ease tensions between Iran and the United States, secretly proposed the barter of Iranian crude oil for U.S. grain via Japan last year, according to government sources.

Two sources confirmed to Kyodo News that the proposal was formally made in June 2019 when Abe made a visit to Iran — the first by a Japanese prime minister in 41 years — in an attempt to serve as a mediator between Iran and the United States.

In his June 12 meeting with Iranian President Hassan Rouhani, Abe officially proposed the barter deal, worth several billion dollars, and it was initially received positively by Tehran and Washington.

The plan envisaged circumventing U.S. sanctions on Iran by exchanging U.S. corn and soybeans procured from the United States by Japan for Iranian crude oil, and to transport these after obtaining American approval.

As Japan saw it, U.S. sanctions could be avoided as the non-monetary transaction would prevent Iran from investing any oil profits in its military.

But the diplomatic endeavor, primarily aimed at persuading Iran to agree to a dialogue with the United States, was ultimately unsuccessful as Japan could not overturn Iranian insistence that U.S. sanctions be lifted first before there can be any such dialogue.

Besides Iran’s deep mistrust of the United States, the inconsistent policy of the U.S. administration of Donald Trump was also regarded as a factor in the failure of the Japanese mediation effort, according to sources.

At the time the proposal was made, Washington was in the middle of a trade war with Beijing and seeking buyers for its crops, especially corn and soybeans, while Iran needed an oil export outlet due to the crippling sanctions, as well as to boost its dwindling grain stocks.

Abe’s proposal was preceded by secret talks between Iran and Japan earlier that month in which Tehran asked Tokyo to add medication and machinery to its package.

Despite being keen to resume crude oil exports, Iran doubted the United States would accept the Japanese proposal and insisted on a U.S. commitment in this regard.

The Japanese side was initially confident in persuading the United States but gradually became less so.

The Trump administration had imposed an embargo on Iranian crude oil in May 2019, causing Iran to lose a pillar of its national income and lash out in anger.

Iran had vowed then that no country will be allowed to export “even a drop of oil” via the Strait of Hormuz, the narrow body of water that separates the Persian Gulf from the wider world, if Iran itself cannot freely export its oil.

That threat was backed up by a series of mysterious attacks on oil tankers, which were widely blamed on Tehran.

The Japanese proposal was also discussed when Rouhani visited Japan in December 2019 and met again with Abe, at which time he learned that the Japanese were unable to narrow the gaps between Tehran and Washington.

Even though the Japanese proposal ultimately failed, a government source said the proposals of friendly countries were “seriously considered.”

In September last year, for example, France also tried to mediate with a plan to provide a credit line to Iran of $15 billion.

A government source pointed out that “the Japanese proposal was better studied and formulated than the French proposal.”

In late 2019, there were also moves to encourage Iran to consider both the Japanese and French proposals as a set to increase the chances of a deal.

“Both proposals failed because of U.S. noncooperation, despite Washington’s initial green light,” the source said.

Source: Japan Times – Kyodo

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