Reluctant maritime insurers unlikely to cripple Iran’s oil exports
Baku, Azerbaijan, March 13
By Farhad Daneshvar, Dalga Khatinoglu - Trend:
While Tehran is determined to regain oil market share it lost under sanctions regime, existing challenges over covering the insurance risks of tankers carrying Iran's oil cargos has cast doubts over the Islamic Republic's plans to boom its oil exports.
Despite the fact that the international sanctions on Tehran have already been removed since January 16 and the official Tehran is confident that the nuclear related sanctions will never be snapped back, the National Iranian Oil Co (NIOC) suffers from serious problems to get tankers carrying the country's cargos insured.
Although state-backed Kish P&I club currently insures the Islamic Republic's oil shipments to India as well as China and Turkey, the Iranian oil company says most of its customers prefer the International Group of the protection and indemnity (P&I) insurance clubs to provide insurance for the tankers.
Therefore, Iran with a considerable amount of oil stored offshore in tankers (according to the US Energy Information Administration between 30 and 50 million barrels), most of which is condensate, and crude oil stored at onshore facilities, has to get the P&I clubs to cover the tankers.
The P&I clubs have failed to provide full coverage for tankers as American insurance industry players are still banned from doing business with Iran and the clubs partially work under the US insurance policies.
According to a late-February report by Reuters, in the absence of the US insurers, the European partners are able to provide only 85 percent of the roughly $8 billion per ship normal liability coverage, a crucial element in providing tanker cover.
In a bid to overcome the existing obstacles against insuring tankers carrying Iran's oil, the NIOC has held several rounds of talks with the International Group of the protection and indemnity (P&I) insurance clubs.
Regarding talks with the P&I, National Iranian Tanker Company (NITC) says obstacles are "almost settled" on the back of months-long negotiations, though the country is still facing problems to provide insurance for its tankers.
Marina Samsjo, an official with The Swedish Club, a member of the P&I clubs without providing further details has told Trend that talks over the issue in question are still going on.
In spite of the fact that the existing hurdles and ambiguities over insurance issue seem to many as a sticking point, over the past month a couple of tankers loaded with huge amounts of Iran's cargoes left the Persian Gulf for several destinations in the Europe.
Apparently the ambiguities over providing insurance for tankers carrying Iran's oil have failed to discourage Iranians from making efforts to ram up oil exports as the country's oil export is projected to reach two million barrels per day in a few months.
While Iran's oil exports have already reached 1.5 million barrels per day, First Vice President Eshaq Jahangiri has forecasted that the country's oil exports will reach two million barrels per day by late May.
The NIOC's difficulties with insurance would be considered as an indication of international community's partial failure to provide a clear and transparent procedure or legal framework reassuring financial organizations to engage in business activities with Iran in the post sanctions-era, a formidable barrier against fulfilling economic reforms in the sanctions-worn country.
Regardless of Iran and its oil customers' initiatives to find a way out of the current situation, the international community including the UN, US and EU as well as others involved in Iran's nuclear deal is expected to come up with more transparent legal frameworks and regulations to remove the existing ambiguities over business with Iran in the post-sanctions era.
Dalga Khatinoglu is head of Trend Agency's Iran news service, Farhad Daneshvar is Trend Agency's staff journalist, follow him on Twitter: @farhad_danesh