China P&I Stops Coverage For Tankers Carrying Iranian Oil
Major Chinese ship insurer, the China P&I Club, has decided to stop indemnity cover for oil tankers carrying Iranian crude starting in July. This announcement severely narrows insurance options for the country’s main export, which is already being threatened by the payment barriers imposed by recent Western sanctions.
As sanctions become stricter, the China P&I Club feared being a lone entity in the market. Japanese and European insurers have already intended on limiting or stopping their coverage for tankers operating in Iran.
This decision is one of the first indicators that refiners in China, Iran’s top crude buyer, may not be able to obtain adequate shipping and insurance needs to continue to import from Tehran. Other top consumers, like India and Japan, have come across similar issues. Many wonder how Iran will continue to export the majority of its oil.
Crude oil prices are up nearly 14 percent since the start of this year on concerns that Iranian supplies may be disrupted due to Western sanctions. Brent crude traded above $123 a barrel on Thursday, reports Reuters. The China P&I Club, whose members include major Chinese shipping firms like COSCO Group, is the first Chinese maritime insurer to confirm it will end business with tankers operating in Iran.
Additionally, in July, all European insurers will be banned from indemnifying ships with Iranian crude or oil products onboard anywhere in the world, as a result of the sanctions on Tehran. According to a Reuters report, growing pressure by the West has led some Iranian oil buyers to cut imports, but the problem over obtaining maritime insurance could altogether halt shipments to Asian customers. Chinese imports from Iran are already down more than 21 percent in the first two months of 2012 to around 395,000 barrels per day compared to the same period last year.
Many oil-consuming countries are left with few alternatives to continue importing from Iran.