Ban on providing insurance for tankers carrying Iranian oil
Britain is seeking to persuade fellow European Union members to postpone by up to six months a ban on providing insurance for tankers carrying Iranian oil, arguing that it could lead to a damaging spike in oil prices, European diplomats said.
A European Union ban on importing Iranian oil, which takes effect on July 1, will also prevent EU insurers and reinsurers from covering tankers carrying Iranian crude anywhere in the world from July.
The impact of the measure is likely to be felt strongly in London’s financial district, the centre for marine insurance.
Iran exports most of its 2 million barrels of oil per day to Asia. The four main buyers – China, India, Japan and South Korea – have yet to find a way to replace the predominantly Western insurance shipping cover provided by London insurers.
The sanctions seek to stem the flow of petrodollars to Tehran to force it to halt a nuclear programme that the West suspects is intended to produce weapons.
Some Indian and Chinese firms have already asked state insurers to step in and provide coverage by offering government guarantees.
The situation is more complicated for Japan and South Korea, which have already cut imports of Iranian oil under pressure from Washington, but need Western protection and indemnity (P&I) ship insurance to continue importing the remaining volumes.
“Britain will be pushing the EU to postpone the ban on P&I insurance by six months,” said one diplomatic source.
“The main reason is pressure from Japan and South Korea as they would struggle to buy oil after July 1,” the source said.
He said Britain feared oil prices could rise sharply as a result of disruptions caused by the lack of insurance after July 1, as Japan and South Korea would be forced to bid aggressively for alternative supplies to meet their needs.
A second European diplomatic source said he was aware of the British initiative.
Both sources said that Britain’s proposal had yet to win support from other EU members, including France, which has been pushing for the toughest stance on Iran.
It was not yet clear when the measure could be debated by EU officials as a meeting to review the embargo on Iranian oil has been rescheduled from the middle of May to an unspecified later date.
Negotiations between Iran and major world powers on nuclear issues resumed in Turkey in April after a 15-month hiatus. Another round of talks is scheduled for May 23 in Baghdad, but Iran has said it wants a softening of sanctions first.
Source: Reuters
