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Last Updated: Tuesday, 1 July, 2003, 11:49 GMT 12:49 UK
Japan hangs fire on Iran oil deal
Iranian President Mohammad Khatami
Japan is holding back from concluding a giant oil deal with Iran amid concerns about Iran's nuclear programme.

The $2bn deal to develop the massive Azadegan oil field was intended to be part of resource-poor Japan's attempt to diversify its energy supplies and alleviate concerns about dependence on the Gulf states.

But as US accusations that Iran is seeking nuclear weapons multiply, pressure is building - both overtly and behind the scenes - for energy contracts with Iran to be put on hold.

Yasuo Fukuda, the Japanese government's chief spokesman, made the difficulties clear during a news conference on Tuesday.

This would be a particularly unfortunate time to go forward with major new oil and gas deals
Richard Boucher, US State Department spokesman
"Crude oil is very important to Japan, but on the other hand the nuclear development issue has become a serious international concern," he said.

"I don't think there will be a contract ignoring (these concerns)."


The deadline for the conclusion of the contract between the Japanese consortium - which includes state-backed Japan Petroleum Exploration Co (Japex) and trading house Tomen Corp - was the end of June.

But its expiration does not, the government said, mean the deal is off - only that it will take rather more effort to achieve.

Iran insists its nuclear ambitions are limited to energy generation, and Japan says that if that can be proved then the deal can go ahead.

Japex already has a 20% stake in an exploration deal on two other oil fields, led by Royal Dutch/Shell.

But thus far, Iran has been unwilling to allow international inspectors in to verify its claims, although the head of the international nuclear watchdog is due in Tehran for talks later this month.

This reluctance, the US insists, only reinforces its claims that Iran - which President George W Bush branded as part of an "axis of evil" 18 months ago - is already working towards a nuclear weapon.

US companies face sanctions if they invest in Iran, even at second hand.

"We would be opposed to such investment at any time," said US State Department spokesman Richard Boucher said on Monday.

"But it is certainly true that given recent revelations about Iran's nuclear programme and efforts being made through the International Atomic Energy Agency (IAEA) to deal with the threat Iran poses, this would be a particularly unfortunate time to go forward with major new oil and gas deals."

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