The signing of a bilateral investment treaty between Japan and Iran, and Tehran’s debt guarantee of up to $10 billion worth of investments by Japanese companies, could be a tailwind for companies considering investments, including midstream petroleum businesses in the Islamic Republic.
This was mentioned by a source at the Japanese Ministry of Economy, Trade and Industry, as reported by Platts–the London-based provider of energy and metals information and a source of benchmark price assessments in the physical energy markets.
Officials at Japan’s Mitsui, Itochu and Inpex have welcomed the new provisions agreed upon between Tehran and Tokyo for alleviating the risks of Japanese companies doing business in Iran.
The investment treaty, signed by Japan’s Minister for Foreign Affairs Fumio Kishida and Iran’s visiting Economy Minister Ali Tayyebnia, is designed to protect investments by Japanese companies across various sectors of the Iranian economy.
The investment treaty was signed following Japan and Iran’s “substantial agreement” of the treaty in October, and Japan’s lifting of key sanctions against Iran, including bans on making new investments in the oil and gas sector using export credits, following the US and EU’s lifting of nuclear-related sanctions against Tehran on Jan. 16.
Possible Japanese investment in Iran could include petroleum, natural gas resource developments, refinery upgrades, petrochemical plants and distribution systems, according to industry sources.
Separately last Friday, METI Minister Motoo Hayashi signed a finance facility framework with Tayyebnia, under which Iran will guarantee up to $10 billion worth of investments by Japanese companies, using export credits by the Nippon Export and Investment Insurance or syndicated loans arranged by the Japan Bank for International Cooperation.
Under the $10 billion finance facility framework, Japanese companies could secure up to around 1.2 trillion yen in finance needed for considering investments in Iran, the METI source said.
Securing large export credits and finance in Japanese yen, this finance facility framework could be helpful for Japanese companies considering investments in Iran, as US dollar payments are still banned even after the lifting of sanctions, sources said.
