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Iran-Japan Oil Deal on Hold - 2003-07-03

A $2 billion oil deal between Japan and Iran has been put on hold because of U.S. opposition. Japanese executives have missed a deadline to sign the agreement with Iran's oil ministry.

Negotiations on an energy agreement between Tokyo and Tehran have effectively been frozen because of Washington's concerns about Iran's nuclear program.

The International Atomic Energy Agency said last month that Iran is violating the Nuclear Non-Proliferation Treaty and the United States is pushing for Tehran to return to compliance. There are suspicions Tehran is trying to develop nuclear weapons.

Under pressure from the Bush administration, Japan missed a deadline Monday to sign a deal to develop the Azagedan oil fields. Japan's state-owned oil companies and a large Japanese trading company won the right to negotiate to develop the fields three years ago under an agreement with Iran.

U.S. Secretary of State Colin Powell and other top Bush administration officials have recently warned the Japanese government that signing the deal would send the wrong message to Tehran.

Japanese government spokesman Yasuo Fukuda said Wednesday that Japan would not be able sign the contract with Iran and overlook concerns over Iran's nuclear program.

Japan is a close U.S. ally and a strong supporter of the U.S. war on terrorism and the invasion of Iraq. It also talks frequently with Washington on North Korea's nuclear weapons program. President Bush has described Iran, Iraq and North Korea as an axis of evil for their efforts to develop nuclear and other weapons of mass destruction.

Middle East specialist Sadao Sakai at Ryukoku University thinks the deal between Japan and Iran will eventually succeed because of Japan's thirst for oil and the agreement's potential importance to the Japanese economy.

Tokyo, unlike Washington, maintains diplomatic relations with Iran, which is one of Japan's top sources of crude oil. The frozen deal with Tehran is a key plank of Tokyo's future energy strategy.

Japanese government sources say oil company executives will continue to talk with Iran about the agreement while Tokyo watches how Tehran reacts to international requests to open its nuclear facilities.