Nippon Oil to pay for Iran crude in yen, not dollars

Nippon Oil Corp., the top Japanese petroleum wholesaler, will start paying Iran in yen instead of dollars for crude oil imports this fall, Chairman Fumiaki Watari said Wednesday.

If Nippon Oil effects the change, it would become the first Japanese oil wholesaler to switch to yen payments for Iranian oil.

"When it is possible, we will directly send yen," Watari said at a regular news conference. He said the change is in response to a recent request from National Iraninan Oil Co.

Iran has asked Japanese oil wholesalers to make payments for oil purchases in yen, not dollars as currently used in most transactions.

Nippon Oil buys around 120,000 barrels a day of crude oil from state-owned NIOC under term contracts, accounting for about 25 percent of Japan's total oil imports from Iran, the second-largest producer in OPEC.

Japan is the world's second-largest importer of crude oil.

Watari said Nippon Oil will make the shift from around October as long as there are no problems in administrative procedures for business transactions.

He denied that the Japanese and U.S. governments have applied pressure on the company not to shift to yen payments.

Iran has sounded out Japanese oil firms since around November about the possibility of either paying in yen or euros. It formally requested the change in writing earlier this month.

Iran's request — also made to other Asian buyers of its oil — is believed to be part of its efforts to increase oil transactions denominated in currencies other than the dollar — and thereby reduce its dollar holdings — in order to avoid a possible seizure of its assets by the U.S. government amid tensions over Tehran's nuclear ambitions.

Oil exports make up about 80 percent of Iran's hard-currency earnings.

National Iranian Oil has been receiving about 70 percent of its oil sales revenues in recent months in non-U.S. currencies, mostly euros, Hojjatollah Ghanimifard, the company's director of international affairs, was quoted as saying by the Oil Ministry's information network.

Ghanimifard said Iran's move away from the dollar is economically motivated.

"Any time a currency in a country's acquired currencies loses its parity value vis-a-vis other currencies, leading to a drop in that country's purchasing power, it would be natural for the country to decide to receive the weaker currency less," he said.

The Organization of Petroleum Exporting Countries has informally discussed whether to continue pricing its oil in dollars or move to a basket of currencies a number of times in the past, particularly when dollar weakness reduced the value of members' revenues from oil exports.