Iran seeks Japanese help in rebuilding war-damaged oil sector

Iranian President Masoud Pezeshkian has asked Japan to participate in reconstructing infrastructure damaged in recent US-Israeli attacks, including refineries, in exchange for efforts to restore normal shipping through the Strait of Hormuz, IRNA reported on June 1.

“Iran will do everything in its power to normalise maritime traffic through the Strait of Hormuz… and hopes that with the return of normal conditions, greater opportunities will emerge to utilise Japan’s technical and engineering capabilities in reconstruction and development projects for Iran’s damaged refineries, ports and economic infrastructure,” Pezeshkian said during a telephone conversation with Japanese Prime Minister Sanae Takaichi.

The Japanese government says around 40 Japan-linked vessels, including oil tankers, chemical carriers, LNG carriers and car carriers, have been stranded in the Persian Gulf since early March, when Iran almost shut the Strait of Hormuz to shipping a few days after the military assault launched against the country on February 28, a conflict that lasted 39 days.

So far, two oil tankers linked to Japanese energy companies have passed through the strait.

Disruptions to traffic through the strategic waterway, which carries around 20% of global oil and LNG supplies, pushed oil prices from around $70 a barrel to above $100 and triggered fuel and petrochemical shortages in energy-dependent Asian economies in the Persian Gulf region, including Japan.

Before the war, as many as 140 vessels crossed the maritime corridor each day on average. That figure later fell to below 10 ships daily, most of them linked to Iran.

Since last week, however, the Revolutionary Guards have allowed an average of 30 vessels per day to transit through a route designated by Iran, raising hopes of easing tensions, although hundreds of ships remain stranded around the strait.

Pezeshkian said Iran was fully prepared to facilitate maritime traffic and would seek to ensure that “the passage of Japanese vessels is made possible without problems and with greater ease”.

Whether Japan will assist in rebuilding Iran’s damaged infrastructure remains uncertain.

Before the United States reimposed sanctions on Iran in 2018, Japan was a major buyer of Iranian crude and an important trading partner. However, Tokyo swiftly scaled back commercial ties with Tehran after the sanctions were reinstated, citing the risk of US penalties and compliance with the restrictions.

As long as sanctions remain in place, Japan appears unlikely to take part in reconstruction projects in Iran.

In response to Pezeshkian’s request, Takaichi limited her remarks to expressing appreciation for Iran’s cooperation in facilitating the passage of Japanese vessels through the energy conduit.

In mid-March, Israel bombed gas processing facilities in Asaluyeh in Iran’s southern Bushehr province, knocking at least two refineries out of operation.

According to two Iranian lawmakers, the attack wiped out around 30% of Iran’s gas production capacity, equivalent to 300mn cubic metres per day, and caused about $4bn in damage to installations in the Asaluyeh energy hub.