Indian Ships To Lose Insurance After EU Sanctions Against Iran
Sources report that Indian shipping firms will now have difficulty getting replacement insurance coverage to continue importing Iranian crude oil after the new European Union (EU) sanctions go into effect.
The Shipping Corporation of India is the country’s largest tanker owner. They will lose EU insurance for all of its oil tankers that operates in Iran after July 1st, when European insurers will be banned from covering any ships carrying Iranian oil.
Indian maritime companies are the most likely to be affected in Asia by the sanctions, as China and Japan are both insured by domestic providers. These three countries are Iran’s biggest crude oil buyers. It will be extremely hard for Indian shipping lines to transport the Iranian crude unless other arrangements are made fairly quickly. Many maritime companies, including A.P. Moller-Maersk and Samco Shipholding, have stopped any new deals with Iran.
All but one of the international P&I clubs, which cover 95 percent of the world’s tankers against pollution and personal injury claims, are covered by the sanctions. Therefore, India only has limited options including: Japan’s P&I club or insurers based out of China, Russia, the Middle East, Singapore or Hong Kong. Iranian insurance coverage is not an option as sanctions against the country's financial system make it impossible to collect payment should there be a claim. The most likely alternative is China, which has a big enough market to provide the necessary insurance coverage.
Europe and the U.S. are enforcing stricter economic sanctions against Iran in the hopes of isolating the country and halting its atomic program, which many fear will be used to develop nuclear weapons. Iran, the world’s fifth largest oil exporter, says the nuclear program is solely for peaceful purposes.
Reuters reports that the sanctions have made it more difficult for Iran to sell its crude, and it will export a six-month low volume of fuel oil to East Asia in March. Volumes are likely to drop further as the EU embargo approaches. As fewer insurers are able to offer cover, rates could go up significantly for tankers carrying Iranian crude.