Japan checks with Europe on cutting ties with Iran

Japan, which has been reluctant to offend Iran by supporting a US call for sanctions, is looking to the Common Market to get it off the hook. The Tokyo government is not prepared to go it alone against its major oil supplier, but it has committed itself to joint action with the European Community.

Japan's stance now hinges on how much unanimity there is within the European Community for tough action.

There is a strong suspicion in Tokyo that the Japanese insisted on linking their decision to that of the EC knowing that it was unlikely the nine european nations would be able to agree on joint sanctions.

Foreign Minister Saburo Okita left Tokyo Sunday to meet with his European counterparts attending an EC meeting in Luxembourg to discuss possible measures against Iran.

Government sources said that, based on the results of the conference and Mr. Okita's contacts with European colleagues, the Japanese Cabinet probably will make a decision before the end of the week on what economic sanctions it will impose as well as other steps it could take to express its solidarity with the United States.

In some respects, the decision has been made easier by events of the past few days.

The Japanese, for example, have been very worried about the loss of Iranian oil if they sided too strongly with the Americans. Japan in recent months has still been getting 10 percent of its crude imports from Iran, even though this is down from the 25 percent recorded in the Shah's time.

But the oil may be shutt off anyway.

Japanese oil industry sources say Iran has been insisting on a price increase of $2.50 to $35 a barrel retroactive to April 1 on all its contracts with Japan signed in the past few months.

Oil and trading companies involved have said they will reject the price increase, even though the National Iranian Oil Company has warned that this will lead to an immediate cutoff of all shipments.

There are indications that the Ministry of Trade and Industry is urging Japanese companies not to give in to Iranian pressure, partly because of the inflationary impact the increases would have on the ailing Japanese economy.

Industry analysts believe the Iranians, through loss of the much-needed revenues, may smart from a cutoff as much as the Japanese. As a result the Iranians may withdraw their demands, some observers say.

To cope with any cutoff, Japanese oil companies are considering a three-pronged emergency plan. This will include drawing on a three-month stockpile, supplementing supplies by tapping the spot market, and possibly asking the US to guarantee Japanese reserves.

Meanwhile, the government has begun implementing a mild form of economic sanctions against Iran.

The Ministry of Trade and Industry has been advising major export industries like cars and steel, as well as trading houses, to refrain from signing new contracts with Iran.

However, this is more a measure to protect Japanese business should the hostage drama lead to chaos in Iran than any specific sanctions supporting the US. But the government's "administrative guidance" (it is nonbinding, but few companies care to incur official wrath by openly disobeying the advice) specifically excludes shipments of raw materials for Japanese businesses operating in Iran as well as equipment and materials for a giant Japanese-Iranian petrochemical complex under construction at Bandur.

The Bandur complex is the most important lever Japan has to influence decisions in Tehran.

Mr. Okita's trip to Luxembourg is also apparently designed to persuade the EC to take Japan's difficulties into consideration in any decision that is taken (although the prime difficulty is a cutoff of oil, which may occur anyway).

Prime Minister Masayoshi Ohira summed up his government's position this weekend by saying Japan would take whatever steps it could in concert with the EC.

"Whatever each country's situation, we all of us must make all-out efforts to find a peaceful solution [to the hostage crisis]." He showed understanding of President Carter's position ("he had no alternative but to announce additional sanctions against Iran") and said Japan should not spare its cooperation with the US.

Despite this, diplomatic sources say there is still no clear sign Japan will undertake anything more than a few cosmetic gestures.