Doubt hovers around Iran’s capability to oil shipping and insurance
Azerbaijan, Baku, June 27/Trend D.Khatinoglu/
China and India, two major buyers of Iranian oil, have called on Iran to take over the responsibility of carrying and insuring oil consignments to the two countries. In other words, as per the terms of Cost, Insurance and Freight, the National Iranian Oil Company shall
pay all the transportation and insurance costs.
CIF means the seller pays for the expenses of getting the freight loaded, the insurance, and the freight.
Two experts of economic and oil market affairs, in an interview with Trend Agency, have seriously expressed doubt on Iran's capability to cover transport and insurance services to the export-bound oil cargoes.
Hooman Peymani, the head of the energy security department at the institute for energy studies of Singapore National University, says that Iran may be able to transport a portion of export-bound oil to China and India in the short term, but its capacity is limited and it will not be able to go on in the long run.
According to him, the main problem is the insurance coverage of oil tankers. Some 90 percent of insurance policies for oil tankers are issued by European firms. The other 10 percent have their own specific problems.
Peymani believes that Iran may hire tankers from other countries. There is no shortage of tankers in the world. The issue is the insurance coverage of the tankers.
He pointed out that Iranian insurance companies are likely to be imposed by international sanctions. If so, even India will have to give up from insuring Iranian oil cargoes.
According to Peymani, Iranian insurance companies may offer discounts to Iranian tankers based on international regulations, i.e. they may give insurance coverage at a lower rate than the value of tankers and cargoes, as well as life insurance. But, the issue will not be possible in the long term.
In this line, EU economic advisor Mehrdad Emadi, told Trend Agency that Iranian insurance companies have not the potential both to provide giant tankers with huge costs of insurance and are not members of the international oil shipment insurance syndicate. So, offering insurance service by Iranian companies to Iranian tankers is actually uncertain.
Emadi says that Iran has not the capacity to provide transport insurance services to Iranian tankers due to two reasons. China buys 450,000 barrels of oil per day from Iran. Indian state-run companies also buy 220,000 barrels of oil per day from Iran. So, Iranian tanker fleet should have the capacity to transport at least 700,000 barrels per day in order to send a tanker with one million barrels to China and India everyday.
According to him, a portion of the Iranian tanker fleet has been used to store oil which has not been sold due to international sanctions. In fact, Iran's underground oil store facilities are already full and the rest of the unsold oil has occupied spaces on the tankers.
Even if state-run and private insurance companies accept the risk of issuing insurance policies for Iranian tankers, Iranian insurance policies will not be accredited, because Iranian insurance companies are not members of the international oil shipment insurance syndicate. So, Iranian tankers may be seized and this issue will have severe legal consequences for the country. China and India have called Iran to pay the costs related to insurance and transportation of oil cargoes.
This issue shows that customers of Iranian oil want to load Iran with all the risks of
buying its oil.