Japan faces a cutoff of Iranian oil Monday unless it agrees to a price increase demanded by the National Iranian Oil Co., government sources said today.
They said the shipments will almost certainly cease because Japanese importers, heeding the government's advice, will refuse to pay the extra $2.50 a barrel.
A decision to refuse the price increase is primarily an economic one, government officials said, but they acknowledged that one reason for the rejection is a desire not to undercut American pressure to free the hostages in Tehran.
Both the government and Japanese importers believe the price increase is not justified. The decision does not stem directly from any commitment to honor American requests for economic sanctions against Iran as pressure to release the U.S. hostages.
But officials said one reason for the government's insistence on rejecting the price increase is its pledge several months ago not to buy Iranian oil at inflated prices as part of Japan's cooperation in the hostage case. In mid-December, Japan had been strongly criticized for buying Iranian oil at spot-market prices far above the rate then prevailing.
Japanese newspapers this morning reported the government already is making plans to divert oil tankers away from Iran to other ports next week and to begin using some of the large quantities of oil in storage here.
Japan, which is almost totally dependent on foreign sources for its oil, is importing between 10 and 12 percent of its supplies from Iran.
However, Japan has enough oil in storage to last about 88 days without new imports. According to one estimate, it could survive the 10 percent loss of Iranian supplies for more than two years. Furthermore, the seasonal demand for oil declines with summer approaching.
Iran has said it will cut off oil supplies to any country that support the U.S. sanctions, a point citied by the Europeans in their cautious approach to the U.S. measures. Oil analysts, however, have argued that the present glut in the world oil market presents Iran with a situation in which it may not be able to sell its oil elsewhere if it cuts off its regular Western customers.
Government officials said a long-term loss of Iran's supplies could have a severe effect, though, and they expressed hopes of reaching a compromise before fall.
While Iran has warned repeatedly that it would cut off oil shipments if Japan decides to go along with American-imposed sanctions, the United States has not yet called on Japan to stop buying Iranian oil.
The government currently is considering the U.S. request for other sanctions, including a halt in exports to Iran and a severance of diplomatic relations. Japan is expected to follow whatever factics are agreed on next week by countries of the European Community.
When Iran's national oil company insisted on raising prices by $2.50 to a total of $35 a barrel, Japanese importers Mitsubishi and Marubeni met in Tehran with officials this week and, asked for reconsideration.
The Iranian Oil company refused and issued in announcement stipulating that oil would be sold at the existing price only through Sunday.
Japan's powerful Ministry of International Trade and Industry told the Japanese companies they should not agree to the price increase because the extra cost could not be justified in the light of current world oil prices. t