Chinese Insurer Halting Coverage for Tankers Carrying Iranian Oil
By REUTERS
Published: April 5, 2012
nytimes.com
SINGAPORE — A major Chinese ship insurer will halt indemnity coverage for tankers carrying Iranian oil, beginning in July, two of the insurer’s officials said Thursday, amid tightening Western sanctions against Iran and after similar action in Japan.
The decision by the insurer, the China P&I Club, is the first sign that refiners in China, Iran’s top customer for crude oil, may struggle to obtain the shipping and insurance to keep importing from Iran. Iran’s other top customers — India, Japan and South Korea — are running into similar problems, raising questions on how Tehran will be able to continue to export the bulk of its oil.
The price of Brent crude oil is up 16 percent since the start of this year on concerns that Iranian supply may be disrupted because of Western sanctions.
The China P&I Club, whose members include shipping companies like Sinotrans and Cosco Group, is the first Chinese maritime insurer to confirm that it will halt business with tankers operating in Iran.
“Many ship owners want to join our club and want our club to cover this risk, but considering all these regulations from the United States and the E.U., I know the China P&I club will not do that,” said an official in Hong Kong with the insurer, which provides coverage to more than 1,000 vessels.
“The China P&I club will not take the risk. We have asked our members not to go there. If they go there, they take their own risk,” added the official, who like other industry officials contacted for this article was not authorized to speak with the news media and asked not to be identified by name.
Starting in July, European insurers and reinsurers will be banned from indemnifying ships carrying Iranian crude and oil products anywhere in the world, in line with sanctions on Tehran.
Most of Iran’s 2.2 million barrels a day of oil exports are sold in Asia, where China, India, Japan and South Korea are the four biggest buyers. These customers have either reduced imports or pledged to do so in the face of growing pressure from the West aimed at compelling Iran to halt its nuclear program.
Asian ship owners will be further limited in their search for insurance to replace their Europe-based coverage, as the China P&I Club had been seen as one alternative. It was not clear whether other Chinese ship insurers were also planning to reduce tanker coverage.
“I really don’t know what will happen,” said a Chinese industry official in Beijing. “We are talking about $1 billion” a tanker. “No single insurance company can handle that.”
China P&I Club is not a member of the International Group of P&I Clubs, an association of customer-owned ship insurers that cover 95 percent of the world’s tankers against pollution and personal injury claims. The Chinese insurer has applied to join the club.
The main Japanese shipping insurer said last month that it would be able to provide only a fraction of coverage.
European insurers provide coverage for the majority of the world’s oil tanker fleet. Industry officials say ship owners who can still legally trade with Iran will be hard-pressed to find sufficient alternative insurance, which is also likely to be less comprehensive.
An official with the China P&I club held out hope that the European Union would decide on a last-minute easing of the sanctions. “As far as I’ve seen with these new published sanctions, it seems to us that there might be some room for compromise,” said a club official in Beijing.
On Wednesday, officials in the Japanese oil industry said insurers were in talks with Japanese buyers of Iranian oil to cut cargo insurance coverage for transporting Iranian crude oil.
Japan and South Korea have lobbied for exemptions, but insurance and shipping executives say a complete ban now appears likely.
Japanese refiners are planning to reduce Iranian imports yet again in April, as they shy away from renewing annual contracts, showing continued commitment to sanctions against Iran. Japan’s imports from Tehran fell about 28 percent in the first two months of the year, to 322,900 barrels a day, from the level of a year earlier, according to the Ministry of Economy, Trade and Industry.
The cuts by Japan have earned Tokyo an exemption from the United States, along with 10 E.U. countries, from financial sanctions because they have significantly cut purchases of Iranian oil. Soon after the exemption, the Japanese finance minister, Jun Azumi, said that Japan would continue to cut imports of Iranian oil.
Tokyo wants Japan’s crude oil buyers to reduce Iranian imports 10 percent to 20 percent a year, Akihiko Tembo, the chairman of the Petroleum Association of Japan, said in March.
A version of this article appeared in print on April 6, 2012, in The International Herald Tribune
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