Japan seeks exemption on U.S. sanctions on Iran

(Reuters) - Japan is seeking an exemption from proposed new U.S. sanctions against Iran that could effectively freeze Tehran's use of payments for oil, the Nikkei business daily reported on Tuesday, citing sources.

Japanese Finance Minister Koriki Jojima asked U.S. Treasury Secretary Timothy Geithner at an October 11 meeting in Tokyo for the United States to exempt Japanese banks, the daily said, citing unidentified sources familiar with the matter.

Geithner said the matter was being considered, the Nikkei said.

Japan, the world's third-largest importer of crude oil, has already secured waivers from U.S. financial sanctions imposed last year because it has significantly cut purchases from Iran.

A Japanese government official who declined to be identified played down the Nikkei report.

"It is not my understanding that America is currently working on new sanctions or that (Japan) is seeking an exemption from its application," the official said.

The U.S. Congress overwhelmingly passed a new package of sanctions against Iran in August that aim to punish banks, insurance companies and shippers that help Iran sell its oil.

The bill builds on oil trade sanctions signed into law by President Barack Obama in December that, along with EU prohibitions, prompted Japan, South Korea, India and others to slash their purchases of Iranian oil allowing them to get waivers from Washington.

The West has imposed sanctions on Iran because it suspects it wants to develop nuclear weapons. Iran says its nuclear programme is for civilian purposes.

FREEZE

Other importers of Iranian oil besides Japan are also likely to voice their opposition to the proposed new sanctions, the Nikkei said.

U.S. lawmakers are considering expanding economic sanctions on Iran - measures that already have helped push that country's currency into free fall but have not yet convinced it to abandon its nuclear programme.

Democratic Senator Robert Menendez, a member of the Senate Banking and Foreign Relations Committees, has said he is looking at ways to freeze an estimated 30 percent of Iran's foreign currency reserves held in banks outside the country.

Currently, Japanese buyers of Iranian oil pay Iran for crude imports in yen via accounts set up at Japanese banks by Iran's central bank, and the funds later get transferred to Iran's private banks.

But the proposed new U.S. sanctions would effectively freeze those assets, and if the measures are implemented, Iran would no longer be able to use Japan's oil payments freely, which could further curb Japan's oil purchases from Iran, the Nikkei report said.

The United States is set to implement the new sanctions from February, the report added.

In the first eight months of 2012, Japan imported 191,731 barrels per day of Iranian crude, down more than 40 percent from the same period a year ago, according to Reuters calculations based on data from the Ministry of Economy, Trade and Industry (METI).

The ministry is due to release import figures for September on Wednesday.