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Bank of Tokyo-Mitsubishi freezes Iran transactions

05/17/2012 | 06:11am US/Eastern
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Bank of Tokyo-Mitsubishi UFJ, which handles most of Japan's payments for oil imports from Iran, said on Thursday it had frozen transactions with Iranian banks after being ordered to do so by the New York District Court earlier this month.

The head of the Japan's banking lobby group said the action could affect crude imports, although the country's biggest refiner said it was not facing a problem paying for Iranian oil.

The move stems from a U.S. court decision in 2007 that ordered Iran to pay more than $2.6 billion to survivors and victims' family members of the 1983 bombing of a U.S. Marine barracks in Lebanon, a bank spokesman said.

The bank filed an objection to the court ruling on Wednesday, another spokesman said.

Among Japan's three biggest banks only Tokyo-Mitsubishi UFJ received the order, banking sources in Tokyo said on Thursday. Tokyo-Mitsubishi UFJ was targeted because it accounts for almost all Iranian assets handled by Japanese banks, they said.

Banking sources said the rest of the trade was handled by Sumitomo Mitsui Banking Corp (>> Sumitomo Mitsui Fin.).

"Iranian oil accounts for more than 10 percent of Japan's oil imports. If banks can't make settlements for Iranian oil, this will affect the nation's energy policy," Yasuhiro Sato, president of Mizuho Financial Group (>> Mizuho Financial Gr.) and chairman of the Japanese Bankers Association, said on Thursday at a monthly press briefing.

"The issue needs to be addressed by concerned parties including the government," Sato said.

The banking unit of Mitsubishi UFJ Financial Group (>> Mitsubishi UFJ Fin.) did not comment on the amount of assets it has frozen. A spokeswoman at rival Mizuho said the bank had not received a freezing order.

Although the court case is unrelated, the development comes as western governments are imposing further sanctions on Iran to stop the country from pursuing what they say is a nuclear weapons program, a claim the Islamic republic denies.

TIGHTENING SANCTIONS

An EU ban on importing Iranian oil, which takes effect on July 1, will also prevent European insurers and reinsurers from covering tankers carrying its crude anywhere in the world.

Sanctions imposed by the United States earlier and the measures being introduced by the EU have cut oil shipments to Japan, one of the biggest buyers of crude from the Islamic republic.

The move against Bank of Tokyo-Mitsubishi UFJ has not affected payments for Iranian oil at the moment, Japan's top oil refiner, JX Nippon Oil & Energy Corp. said on Thursday.

A JX Nippon Oil spokesman declined to discuss other details, including whether it was considering an alternative payment mechanism.

There have been hundreds of billions of dollars in default judgments against Iran levied by U.S. courts in favor of Americans, and in most cases Iran has ignored the legal proceedings in the United States.

This case was brought by relatives and survivors of the 1983 attack on a barracks in Beirut housing U.S. and French members of a multinational peacekeeping force.

A judge in Washington ruled in 2007 that Tehran had provided financial and logistical support to the militant group Hezbollah in carrying out the suicide bombing that killed 241 soldiers.

The U.S. Senate will consider new Iran sanctions on Thursday with the chamber's Democratic leader, Harry Reid, set to seek approval of a new package of oil and economic sanctions aimed at further pressuring Iran to abandon its nuclear program, a Democratic leadership aide told Reuters.

(Additional reporting by Nobuhiro Kubo and Taiga Uranaka; Writing by Aaron Sheldrick; Editing by Alex Richardson)

By Ayai Tomisawa

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