Japan's main private ship insurer on Monday resumed normal coverage for tankers carrying Iranian oil, said an official with the Japan P&I Club (JPI), the same day the European Union suspended some economic sanctions against Tehran, Reuters reported on Jan.21.
The return to private shipping insurance came after Iran halted its most sensitive nuclear operations under a deal with world powers, winning some relief from economic sanctions that had slashed its oil revenues and crippled its economy.
As part of the six-month deal, the EU suspended its prohibitions on the provision of insurance and transport in relation to Iranian crude oil, while the United States paused its efforts to reduce Tehran's oil shipments.
The international P&I Club, of which JPI is a member, resumed normal coverage of $7.6 billion per ship, including $1 billion for oil spills, as EU reinsurance became available again for the first time since mid-2012, the JPI official said.
That means Japanese buyers of Iranian oil will not have to rely on Toyko's sovereign scheme to provide the same level of liability coverage for tankers carrying the crude.
Japan oil buyers were the hardest hit by the shipping insurance provisions because they chose to continue to use Japanese tankers for deliveries. India, South Korea, and China, at least partially, all began relying on Iranian shippers and insurance providers for their oil deliveries from Tehran.
Japan temporarily halted its Iranian imports in July 2012 to avoid running afoul of the shipping and insurance sanctions, waiting for the government's $7.6 billion sovereign liability guarantee per tanker to keep oil trade with Tehran going.
Buyers in India and South Korea said they are still waiting for further information from insurers and their governments before making any changes to how they have been receiving Iranian oil under the sanctions regime.
Sovereign scheme to stay for now
Western world powers believe that Tehran's now curbed nuclear programme had been aimed at making weapons. Iran has said it is for peaceful power generation.
Japan's sovereign scheme will stay in place for the time being, but will no longer be liable for insurance payments now that buyers can obtain JPI coverage, a government official said.
The government is not ready to scrap the sovereign scheme just yet, as the sanctions relief is regarded as temporary, the official said.
Japan's parliament would have to authorise any extension of the scheme past the fiscal year ending March 31.
The easing in U.S. sanctions will allow Iran's six current customers - China, India, Japan, South Korea, Taiwan and Turkey - to maintain their purchases at the current reduced levels for the six-month duration of the interim nuclear deal between Iran and world powers, the U.S. Treasury Department said.
The sanctions put in place in 2012 slashed Iran's crude exports to about 1 million barrels per day (bpd) from a pre-sanctions level of around 2.5 million bpd.
Japan's Iran crude imports will likely stay steady in the short term following the easing of sanctions and the switch in insurance providers, Yasushi Kimura, president of the Petroleum Association of Japan (PAJ), told reporters on Monday.
Japan's imports of Iranian oil in January-November 2013 fell by 4.6 percent from a year earlier to 178,539 barrels per day (bpd), trade ministry data showed last month.
Japan's Iranian crude imports in 2011, before the tough sanctions were put in place were 313,480 bpd. Japan cut its Iran imports by nearly 40 percent in 2012.