Indian tankers granted insurance to carry Iranian oil
United India Insurance Co., has agreed to provide Protection and Indemnity (P&I) coverage to Indian tankers carrying oil from Iran, according to reports issued on Tuesday, Ship & Bunker reports.
Since July 1, 2012 European covers for shipping companies carrying fuel or petroleum products of Iranian origin ceased under sanctions levied by the U.S. and the EU in protest of Iran's nuclear program.
Reports from New Delhi indicate that India has given state run insurers approval to provide limited cover to Indian ships transporting Iran's oil allowing refiners to avoid any interruption in supply resulting from constraints on Iranian vessels struggling with Western sanctions.
Indian insurance firms are allowed to provide ship owners carrying Iranian oil $50 million P&I coverage, although this is a fraction of the typical $1 billion P&I coverage that a very large crude carrier (VLCC) will have.
"We (shipowners) had asked for and have been offered a P&I cover of $50 million," a senior executive at state-run Shipping Corp. of India Ltd. said.
In comparison, Japan's government provided insurance of up to $7.6 billion for Iranian oil shipments to maintain trade with Iran.
Asian countries have been looking for ways to work around the problem as Iran accounts for a significant part of their oil imports although South Korea has indefinitely halted all oil imports from Iran.
The embargo forced China and India to ask Iran's oil shipper NITC to deliver crude in its vessels.
However, over half of Iran's fleet is currently being used as floating storage for oil it is struggling to sell because of the sanctions, making it difficult to deliver to its top two crude buyers.
India is one of 20 countries who received a six month waiver from the sanctions by decreasing its purchase of Iranian oil by more than a fifth, and is expecting to load around 300,000 barrels per day this month.
The U.S. government previously exempted Singapore and China from the sanctions allowing Singapore, the world's largest bunkering port to purchase Iranian crude and fuel oil.
For the year ended March 31, 2012 shipments to India from Iran fell 5.7% compared to the prior year, and India intends to cut Iranian imports by 11% to 15.5 million tonnes this fiscal year.
Anil Devil, Chief Executive of the India National Shipowners' Association said "This is a classic case of how three Indian industries, insurance, shipping and oil are coming together for the nation and its energy security."