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Sanctions Start to Hit Iran Oil Shipping to Asia

International sanctions are beginning to hurt Iranian regime’s oil shipping to Asia
International sanctions are beginning to hurt Iranian regime’s oil shipping to Asia
The Wall Street Journal, London, 28 Feb 2012 - Sanctions have started impeding the shipping of Iranian oil as far as Asia, the latest threat to Tehran’s hopes to find new outlets for its crude oil ahead of a European Union embargo.
Some Asian shippers say they won’t sail to Iran due to insurance problems stemming from sanctions, and Japan’s largest tanker fleet owner is considering stopping Iranian oil sailings after its insurance club said it will limit its coverage of Tehran’s crude because its reinsurance policy follows European regulation.
Bengt Hermelin, chief executive of Singapore-based tanker company Samco Shipholding Pte., said Tuesday that the impact of sanctions on insuring ships ‘will prevent owners, including Samco, from calling Iran.’
Ratcheting up pressure against Iran’s nuclear program, the EU last month escalated sanctions with a full embargo on Tehran’s oil and a ban on new shipping and insurance for its crude cargoes. Tightening U.S. banking sanctions also have the potential to affect insurance programs, because they are carried out in U.S. dollars.
The impact of the western sanctions are rippling beyond U.S. and European borders because the International Group of P&I Clubs, which pools resources for tanker insurance clubs for 90% of global oil tonnage and is dominant is Asia, is headquartered in London and subject to EU laws.
Frontline Ltd. and Teekay Tankers Ltd., two of the world’s largest tanker owners based in Bermuda, a U.K. dependency that often applies U.K. laws, said earlier this month they were stopping Iranian oil purchases.
Although Samco operates out of Asia, its 11 supertankers are covered by Gard P&I Ltd., a member of the International Group of P&I Clubs. Gard declined to comment on the impact of sanctions on its insurance program.
Meanwhile, shipping companies are considering following suit in a region where Tehran hopes to find clients to make up for lost European sales.
Japan’s Mitsui O.S.K. Lines, the country’s largest tanker owner, said it may be unable to ship Iranian oil if it can’t insure the cargoes.
‘We will not be able to provide transport services if P&I insurance coverage is not available,’ a spokeswoman for the company said. ‘We will observe future events and carefully determine our response.’
While saying it can still cover Iranian oil voyages, the Japan Ship Owners’ Mutual Protection & Indemnity Association, which covers Mitsui’s tankers, said Monday that its coverage will be limited by the EU sanctions because its reinsurance program is based in London.
Shipping Corp. of India is also concerned its sailings to Iran could be affected by the sanctions’ impact on insurance, though India’s government said is looking at solutions to circumvent the problem.
‘It goes without any doubt that if no cover is available to shipping lines, shipping of Iran’s crude will be affected unless alternative sources of cover are made available,’ said Sunil Thapar, director bulk carriers and tankers at the company, adding that its ships are covered by insurance clubs based in the EU.
India’s shipping secretary K. Mohandas said Tuesday that India will consider steps including providing sovereign guarantees to local shipping companies to ensure Iranian oil shipments remain covered.
Despite Asian nations not banning Iranian oil purchases, sanctions on shipping could prove another Achilles’ heel for Iran’s attempts to find new buyers in Asia, where it already sells over half of its 2.2 million barrels of daily exports. Already, the U.S. has used a planned prohibition to settle oil trades with Iran’s central bank as a stick to force buyers such as Japan and Korea to cut their purchases of oil from Tehran.
Buyers of Iranian oil could hire Iranian-owned vessels, which are insured locally. Abdolsamad Taghol, general manager of planning at NITC, Iran’s largest oil-tanker company, which is privately owned, said in a recent interview that the use of Iranian vessels to ship crude is on the rise in Asia, mitigating a decline in Europe following sanctions.
But an oil-shipping expert said that based on its capacity of 10.5 million deadweight tons and the typical length of Asian voyages, NITC couldn’t cover all Iranian oil exports.

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