February 20, 2012 / 11:34 PM / in 6 years

CORRECTED-UPDATE 1-Japan to win exemption from Iran sanctions by U.S.-media

(Corrects last paragraph to show sanctions took effect in December)

* Japan to cut Iran crude imports by at least 11 pct per yr -media

* Japan, US likely to reach formal agreement by end-Feb -media

TOKYO, Feb 21 (Reuters) - Japan is likely to win an exemption from U.S. sanctions by reducing its imports of crude oil from Iran by at least 11 percent per year, the Yomiuri newspaper said on Tuesday.

The two countries reached an agreement at talks last week, with a formal deal expected by the end of this month, the report said, citing unnamed sources.

The United States, angry over Iran’s nuclear programme, wants Japan, to cut back on Iranian imports.

Japan is the third-biggest customer for Iranian oil. It needs to import more oil in the wake of the Fukushima nuclear crisis, and the country’s refiners have yet to make significant cuts, awaiting the Japanese government’s instructions.

The United States says it will punish financial institutions that deal with Iran’s central bank, the main clearing house for oil revenues. A country can earn a waiver from the sanctions if it significantly reduces trade with Iran.

Japan’s Iranian crude imports fell 11.7 percent last year to 313,000 barrels per day, accounting for 8.8 percent of total oil imports. Japan’s Iranian imports have declined by more than half from 683,000 bpd in 2003.

The U.S. sanctions, which President Barack Obama signed into law in December, would penalise financial institutions for undertaking transactions with Iran’s central bank, exposing the U.S. operations of Japanese banks that deal with Iran. (Reporting by Osamu Tsukimori; Editing by Michael Watson)

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