Iran-Saudi Rivalry Threatening Japan Refinery Merger

Iran-Saudi Rivalry Threatening Japan Refinery MergerIran-Saudi Rivalry Threatening Japan Refinery Merger

The founding family of Japanese refiner Idemitsu Kosan Company opposes a merger with rival Showa Shell Sekiyu KK because of the latter’s close ties with Saudi Arabia.

Idemitsu Kosan has maintained a close relationship with Iran and descendants of the company’s founder oppose a deal in part because of heightened tensions between the two countries, according to a statement from the Daiichi-Chuo Law Office, which is representing the family, Bloomberg reported.

The descendants own 33.9% of Idemitsu, according to the statement.

“We shouldn’t rush to merge with Showa Shell, which is under direct control of Saudi Arabia and state-owned Saudi Arabian Oil Company while confusion centering around a rivalry between Saudi Arabia and Iran becomes more serious,” according to the statement.

The two companies in November agreed to merge to create a company with about a third of the domestic gasoline market as a shrinking population and a shift to more energy-efficient cars cut fuel demand, which is forecast to decline 8.4% over the next five years.

Idemitsu said in a statement it remains confident integration with Showa Shell is the “best path forward” and that it will continue to hold discussions on the merger.

Showa Shell plans to continue talks with Idemitsu, said a company official who asked not to be identified because of internal policy and declined to comment further.

The former's shares fell 10% to close at 954 yen in Tokyo on Tuesday after Jiji reported the family’s opposition. Idemitsu shares rose 1%.