The conflict between Middle East oil suppliers Iran and Saudi Arabia is playing out between the founding family of one of Japan’s largest refiners and its board.

Idemitsu Kosan Co. agreed last July to buy a stake with 33.3 percent voting rights in Showa Shell Sekiyu KK from Royal Dutch Shell Plc, for 169 billion yen ($1.64 billion). Idemitsu has close ties with Iran and shouldn’t be associated with Showa Shell, in which state-run Saudi Arabian Oil Co. owns a stake, a lawyer for Idemitsu’s founding family said. The family “wants the company to let go of the stake,” he said.

Tensions between two of the world’s biggest oil producers have risen in the Middle East as both seek regional influence and compete for customers globally. The public disagreement between the Idemitsu family and the company’s board comes as Japan has revamped its rules for companies and investors placing more emphasis on independent directors and their duties to shareholders.

“We are not saying Idemitsu should only deal with Iran,” said Takujiro Hamada, 74, a lawyer for the Idemitsu family, said in an interview in Tokyo on June 30. “It’s uncertain how relations in the Middle East will develop after Saudi Arabia ended diplomatic relations with Iran. Merging with Showa Shell, which is an affiliated company of the Saudis, is similar to setting foot in a minefield.”

Nissho Maru Incident

Hamada is one of three representative directors along with descendants of Idemitsu’s founder in Nissho Kosan KK, the biggest shareholder of Idemitsu with a 16.95 percent stake. The Idemitsu family controls 34 percent of Idemitsu and they may be able to block the deal, which needs more than two-thirds of votes at a special shareholder meeting.

Saudi Arabia’s state-owned Saudi Arabian Oil Co. owns a 14.96 percent stake in Showa Shell, according to data compiled by Bloomberg.

Idemitsu will continue to communicate with the founding family, a spokesman for the company said by phone, asking not to be identified because of internal policy. He declined to comment further.

The Japanese refiner has maintained a close relationship with Iran since the so-called Nissho Maru Incident in 1953. At the time Idemitsu sent tanker Nissho Maru to load gasoline and diesel oil amid a conflict between Iran and the U.K. after the Middle East country nationalized the oil industry.  

Source:
courtesy of BLOOMBERG

by Tsuyoshi Inajima Emi Urabe ana Shigeru Sato

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