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The European ban, due to take effect at the beginning of July, on importing Iranian oil will also prevent European insurers from covering any tankers carrying crude from Tehran to the rest of the world. This effect will be felt particularly hard in London, which is the main district for marine insurance.
Without insurance tankers will not transport goods, so it is of utmost importance to Asian buyers of Iranian crude that they find other means to replace the shipping insurance cover predominantly provided by London insurers.
Indian and Chinese firms have already approached state insurers to provide the cover for their own shipments, however Japan and South Korea face problems due to the fact that they have earned protection from EU and US sanctions by significantly reducing their imports of Iranian crude; providing the insurance for the tankers importing the crude could risk them losing that precious protection.
Britain fears that this situation could cause Japan and South Korea to aggressively bid for alternative supplies of oil, and that this will lead to a spike in prices. As a result Britain is attempting to persuade the European Union to postpone the ban on insurance by 6 months in order to provide more time for Japan and South Korea to find alternative insurance options.
One diplomatic source said that, “Britain will be pushing the EU to postpone the ban on P&I insurance by six months. The main reason is pressure from Japan and South Korea as they would struggle to buy oil after July 1”
By. Joao Peixe of Oilprice.com
Joao is a writer for Oilprice.com