JIN-474 -- Iran-Japan Relations

J@pan Inc Newsletter
The 'JIN' J@pan Inc Newsletter
A weekly opinion piece on social, economic and political trends
in Japan.
Issue No. 474 Wednesday July 16, 2008, Tokyo

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Iran-Japan Relations

When President Khatami visited Tokyo in 2000, he was the first
Iranian leader to visit Japan since King Reza Shah Pahlavi in
1958. At the time, he and the Japanese premier, Mr Mori, made
plans for friendly relations and greater economic cooperation.
Things seemed to tick along fairly smoothly and by 2004 a
consortium of Japanese companies, in the form of Inpex Holdings,
had invested in a billion dollar project to develop the Azadegan
oil field. However, by 2006, under increasing geopolitical
pressure, notably from the US, the deal broke down resulting in
Inpex reducing its stake in the project from 75% to 10%.

On the diplomatic front, relations deteriorated further in 2007
when Satoshi Nakamura was kidnapped. With high media coverage
putting on extra pressure, the Japanese government made repeated
pleas to the Iranian government to rescue Nakamura from his
captors. One interesting facet to this incident is that the
drug-smuggling group who kidnapped Nakamura demanded the release
of its members from prison in return for freeing the hostage -
they were obviously aware of the importance of Japan to Iran's
diplomatic strategy. Ultimately, Tehran did deliver and Nakamura
returned to Japan in June this year.

Most likely, Tehran and Tokyo are both keen to pursue better
bilateral relations but there are geopolitical obstacles to
overcome. For example, in the Azadegan project mentioned above,
the perception of the US hand in the death of the deal was sore
felt, particularly on the Iranian side. When the new Iranian
Ambassador was appointed earlier this year, one Iran-based news
source reported: 'Although Iran has signed several major energy
agreements with Tokyo and is one of its main energy suppliers,
Washington has been stepping up efforts to punish Japanese
companies which sign lucrative deals with Tehran.' Furthermore,
in an exclusive interview with us, Iranian Ambassador to Japan,
Dr Abbas Araqchi, stated: 'The US administration has created
several hindrances in the expansion of economic cooperation
between Iran and Japan. The potential for further cooperation
between Iran and Japan exists and we hope our Japanese partners
further develop their presence in the Iranian market.'

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[...Article continues]

According to official Iranian statistics, the volume of
bilateral trade between Japan and Iran reached US$14.3 billion
in 2007 and Dr Araqchi expects this to increase to US$20 billion
in 2008 as a result of rising oil prices. However, the political
dynamic could make it difficult for closer interaction between
Japanese investors and their Iranian partners – the US would be
unlikely to tolerate any divergence from its own policy
concerning Iran's nuclear activities, not to mention the
domestic inclinations against proliferation prompted by
historical experience and Tokyo's tough stance on North Korea.
The nuclear program is also apparently not all bad news for
Japan - Iran's recent missile tests were widely hailed as the
reason behind the rise in Japanese Government Bonds on the
Nikkei last week as investors flew to safety.

At the people-to-people level, things look more positive. There
are 5,227 Iranians officially registered as living in Japan and
around 300 Iranian students. According to Ambassador Araqchi,
academic exchanges between the two countries 'play a vital role
for further deepening of our relations.' Culturally, there has
also been some interesting collaboration in areas such as cinema
- for instance, the 2003 movie 'Kaze no Jutan' (The Wind Carpet
- www.cafegroove.com/movies/kazeju/). Japan is also active in
Iran holding events such as Noh theater performances and
recently hosting a ceremony at its embassy in Tehran at which
it presented equipment for a charitable project, for the benefit
of children with intellectual disabilities.
(www2.irna.com/en/news/view/line-22/0806264510110751.htm).

Despite the geopolitical pressure (or gaiatsu – 'outside
pressure'), it seems there is a genuine element of both the
Japanese and Iranian governments that wants to improve
relations. Strategically, Iran has interests in attracting
Japanese investment and in its potential to act as a break on
US aggression. Conversely, Japan is still dependent on Iran for
energy security and could potentially benefit from pursuing
commercial opportunities there. Ambassador Araqchi is optimistic
for the future, declaring: 'We would like to expand our regional
and international cooperation with Japan. At the same time, we
are looking forward to seeing further expansion of economic,
technological and cultural cooperation with our Japanese
partners.'

Peter Harris
Editor-in-Chief

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