EU Foreign Ministers Set Talks on Tanker Insurance for Iran Oil Embargo

March 16, 2012

EU foreign ministers are expected to discuss how the bloc’s Iran oil embargo will impact shipping insurance when they hold a scheduled meeting next week, an industry source said on Friday.

The ministers are due to meet in Brussels next Friday. “They are likely to discuss the matter,” the source, who had been briefed on the issue, said.

Starting in July, European insurers and reinsurers, who provide cover for most oil tankers globally, will be prohibited from indemnifying ships carrying Iranian crude and oil products anywhere in the world in line with the sanctions on Tehran.

Both Japan and South Korea, major buyers of Iranian crude, have been holding talks with the EU over the insurance prohibition out of concern it will make it difficult to secure deliveries of the oil.

New Western sanctions imposed on Iran to punish it for its suspected nuclear weapons program have hampered traders’ ability to do business with Tehran.

The Japan P&I Club will only be able to provide coverage worth a maximum $8 million per tanker, down from the current $1 billion coverage once the EU sanctions comes into force.

Any reductions would force club members who want to continue to import Iranian oil to obtain additional coverage from outside the Japan P&I Club, possibly in China, Russia or the Middle East.

Buyers in India, another big importer of Iran’s crude, are also looking for insurance options, such as a sovereign guarantee or turning to Chinese insurers.

(Reporting by Osamu Tsukimori; Editing by Neil Fullick)

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