$7.6 billion should there be an accident on an Iranian oil tanker coming to Japan
Last week, the Japanese government’s cabinet ministers both approved and submitted a bill to the Diet that allows insurance coverage to be made on oil imports from Iran. This is in direct opposition to the ban on Iranian oil insurance from the European Union that will take effect on July 1st. If passed by parliament, the bill would permit the government to make payments as high as $7.6 billion should there be an accident on an Iranian oil tanker coming to Japan.
While the European Union is showing no signs of leniency, Japan has requested to be exempted from the ban on insurance of Iranian oil exports. The Japanese government has also made it clear that it has no intentions to stop importing oil from the Middle Eastern nation. The European Union’s ban is just one of many attempts by Western nations to put sanctions on Iran with the hopes of convincing Tehran to abandon its nuclear development program via depleting its revenue sources. While not stopping altogether, Japan has reduced the amount of its oil imports from Iran, despite the sharply increasing demand after halting the use of nuclear power as a result of the Fukushima disaster last year.
Japanese laws require that any shipping companies that intent to enter the island nation’s waters must be covered by liability insurance in the event of damages, oil spills, and fatalities. Previously, this coverage was provided by Japan’s Shipowners’ Mutual Protection & Indemnity (P&I) Association, but they are reinsured by other P&I clubs for large claims. Under the European Union’s ban, which cover’s the largest market for reinsurance, insurers will be prohibited from covering oil tankers from Iran. Without reinsurance from the European Union, Japanese insurers would only be able to cover up to $8 million in damages.
Source: The Japan Daily Press