Indian shipping firms will find it difficult to obtain replacement insurance coverage to continue importing Iranian crude oil after new European Union sanctions come into effect, industry sources said.
State-run Shipping Corp of India, the largest tanker owner in India, will lose its EU insurance coverage for its oil tankers operating in Iran from July 1, when European insurers will be prohibited from indemnifying ships carrying Iranian oil.
Indian shipping firms will find it difficult to obtain replacement insurance coverage to continue importing Iranian crude oil after new European Union sanctions come into effect, industry sources said.
State-run Shipping Corp of India, the largest tanker owner in India, will lose its EU insurance coverage for its oil tankers operating in Iran from July 1, when European insurers will be prohibited from indemnifying ships carrying Iranian oil.
Indian maritime firms are likely to be the most affected in Asia by the sanctions as the other two biggest buyers China and Japan do not rely on European insurers but are covered by domestic providers. India, China and Japan are Iran's three biggest crude oil buyers.
"We are covered by P&I clubs in the EU," Sunil Thapar, director at Shipping Corp of India said, referring to the groups of customer-owned maritime protection and indemnity insurance groups.
"These clubs will not be able to give us coverage for vessels to Iran from July. It will be difficult for Indian shipping lines to transport Iranian crude unless alternative arrangements are made."
Europe and the US are implementing tougher sanctions in the hope that isolating Iran will force Tehran to halt its atomic programme, which the West fears will be used to develop nuclear weapons.
Iran denies Western suspicions that its programme has military goals, saying it is for purely peaceful purposes.
Iran will export a six-month low volume of fuel oil to East Asia in March due to sanctions and volumes will likely drop further as the EU embargo approaches.
A.P. Moller-Maersk, Singapore-based Samco Shipholding, and many other international maritime firms have halted new deals with Iran, leaving Asian oil importers to rely more on domestic and state-run firms to handle the Opec member's shipments.
All but one of the international P&I clubs, which together cover 95 per cent of the world's tankers against pollution and personal injury claims, are covered by the sanctions since they are based in the EU or the US.
That leaves India firms with only a few options — Japan's P&I club, insurers in China, Russia and the Middle East, or Singapore and Hong Kong.
"We continue to provide insurance to oil tankers. It does not matter whether the ships call at Iran," said an official with Japan P&I club.
The club has received recent inquirers from South Korea and Taiwanese shipowners.
Switching to the Japan P&I club could take months as members have to weigh the risk of a potential new entrant, especially one that wants to do business with Iran, maritime lawyers said.
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