Iran offers huge discounts to handle oil tankers’ insurance problem - expert
Baku, Azerbaijan, March 3
By Umid Niayesh- Trend:
The Islamic Republic is offering over a $4 discount for each barrel of its crude oil delivered to Europe and the Mediterranean to handle the insurance problem of its oil shipping, Gal Luft, co-director of the US Institute for the Analysis of Global Security (IAGS), told Trend March 3.
Iran says that it is still facing problems regarding insurance of its oil shipping, as many of oil buyers demand insurance covered by members of the International Group of P&I Clubs for Iranian tankers, which is currently not available.
Tehran is using Kish P&I, backed in part by the government for insurance on existing shipments.
Luft added that in order to offset the risk, Iran is offering European buyers a discount of $4-$6 a barrel, which is above and beyond what most Gulf exporters are willing to offer.
Iran's Oil Ministry was not available for an immediate comment regarding the official discounts.
Iran is trying to obtain agreement of the International Group of P&I Clubs for insurance coverage, meanwhile so far only nine members of the group have agreed with covering insurance risk of the Iranian tankers, meanwhile Tehran needs to satisfy all 13 members of the organization to settle the problem.
The organization's 13 members protect more than 90 percent of the world's crude carriers against risks, which include spills.
According to Luft, some insurers and re-insurers are still dealing with residual internal risk assessment procedures and therefore have not jumped back into the market.
However he believes that the problem is likely to resolve itself as traders become more comfortable with Iranian crude.
The sanctions had cut Iranian crude exports from a peak of 2.5 million barrels per day (bpd) before 2011 to just over one million bpd in recent years.
Iran is working to regain market share after sanctions relief and exports had already risen by 500,000 bpd in February.
But the country's crude shipments, particularly to Europe, have been complicated by a lack of clarity on ship insurance, US dollar clearance and European banks' letters of credit.
Reuters reported March 1 that securing insurance for cargoes carrying oil from Iran is likely to take another two to three months, potentially limiting Iran's ability to quickly ramp up oil exports.