Japan, Australia Count Cost of Sanctions against Iraq

Article excerpt

JAPAN'S anguished decision to punish Iraq with a trade and oil embargo has sent an instant tremor through the Japanese economy and overturned its tame posture in Mideast politics.

By joining other nations in a boycott, Japan will likely suffer a jump in interest rates and inflation as well as damage its carefully managed relations with the Arab world, say many Tokyo analysts.

In addition, an estimated 761 Japanese citizens are stuck in Iraq and occupied Kuwait, threatened by possible Iraqi retaliation.

Japan's decision, made late Sunday, reverses a earlier vow not to join the United States-led boycott until after the United Nations had agreed to take action.

A Foreign Ministry spokesman said only a Security Council resolution would "give us the legal basis we need to proceed (with sanctions against Iraq)."

But a phone call from President Bush on Aug. 4 to Prime Minister Toshiki Kaifu "had some relevance" to Japan's move to join the boycott sooner rather than later, say Japanese officials. A letter from all 100 members of the US Senate, sent on Friday, had also urged Japan to join the boycott.

"We are now in a completely new situation," said Makota Watanabe, the Foreign Ministry's director-general for the Mideast and Africa.

Japan was criticized after the 1973 and 1979 oil crises for not fully supporting its Western partners, seeking instead a long-term stable oil supply from Arab nations. Officials said their three-day delay in making a decision in favor of a boycott was caused in part by the need to study its economic effects. Almost totally dependent on imports for oil, Japan will lose about one-eighth of its supply by blocking oil from Iraq and Iraqi-controlled Kuwait.

In addition, Japan stands to lose about $4.6 billion owed by Iraq to both the government and private banks. Japan also plans to stop non-oil exports to both Iraq and Kuwait. Such trade amounted to over $1.1 billon last year.

Japanese oil merchants were scrambling to make up for the loss even before the decision was made. …

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