Japan Threatens to Cancel Loan to Iran Over Military Behavior

Japan has warned Iran that it will cancel a loan that the United States reportedly objects to if Iran dramatically increases its military spending or is found to be supporting international terror, two Foreign Ministry officials said Thursday.

The warning marks the first time that Japan, the world’s second-largest aid donor, has ever made an economic development loan conditional on the military behavior of a recipient nation, said one of the officials, who asked not to be identified.

Approval of the $368-million loan to finance the construction of a hydroelectric power generating plant ended an 18-year hiatus in Japanese loans to Iran.

It was the second time in six months that Japan had differed with American policy in embarking on an aid program. It reopened foreign aid to Vietnam last November; the United States still maintains an embargo on economic transactions with Vietnam.

Secretary of State Warren Christopher, charging that Iran is funding and arming terrorists and trying to develop nuclear arms, won agreement Wednesday in Luxembourg from foreign ministers of the European Community to consider economic sanctions after conducting a joint study of Iran’s arms buildup. Two days earlier, Clinton Administration officials in Washington had expressed concern about the Japanese loan.

One of the Japanese diplomats here insisted that Washington has made no protest to the Japanese government and had been informed of Japan’s intentions before the loan to Iran was approved.

Apart from any U.S.-Japan frictions, Japan’s warning to Iran that the loan could be cut off underscores a new assertiveness in Japan’s aid policy. Former Prime Minister Toshiki Kaifu announced in April, 1991, a “charter” of four principles that would guide foreign aid. But one of the principles--”to pay full attention to the trends of recipient countries’ military expenditures and development and manufacture of weapons of mass destruction and missiles”--has not been applied previously.

China, a nation to which that provision would seem to apply, for example, has been informed of the “charter” only in general terms.

In contrast, Iranian officials were warned repeatedly during negotiations for the loan that Japan would cut off the funds if Iran were found to be violating the charter’s military provision. The warning also was confirmed in written documents exchanged by the two governments when they signed the loan agreement May 29, one of the diplomats said.

The envoys said that Japan is taking “a different approach” from that of the United States toward Iran because “no clear evidence” exists to confirm Christopher’s charges of Iranian support for terrorists or its alleged nuclear arms efforts. Iranian officials denied both allegations to Japan, they added.