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Iran is expecting to see a decline in its crude oil exports to South Korea as a result of U.S. sanctions on tanker transport, the managing director of the National Iranian Oil Company, Ali Kardor, said as quoted by S&P Platts.
Kardor said that while India and China have “booked the sales” and there is no problem for future deliveries, South Korea seems to be having “some issues now because they didn't have their own shipping and were outsourcing, like charter, so maybe that is why the issue. But we told them that our ships are ready for you."
Tanker insurance may turn out to be the biggest hurdle to Iran’s crude oil exports following the expiry of the 180-day wind-down period before sanctions kick in. They will likely prevent the members of the International Group of P&I from insuring tankers carrying Iranian crude against risks if they call on Iranian ports to export or import oil and oil products, Mike Salthouse, the chair of a sanctions committee for the IG Group, told Bloomberg.
Insurance backed by the International Group of P&I is considered the standard in oil shipment contracts. However, with the coming U.S. sanctions, that coverage for tankers in and out of Iran could be reduced or even “stopped altogether” in November, according to Salthouse.
S&P Platts notes that some shipping companies, including Maersk Tankers and Torm already refuse to call on Iranian ports for fear of trouble with insurance and freight payments. Some analysts expect that these problems—as well as more buyers falling in line with the U.S.—will significantly reduce the availability of Iranian crude on international markets.
Related: China Looks To Capitalize On Cheap Iranian Oil
South Korea buys about 300,000 bpd of Iranian condensate at the moment and in case of tanker trouble, this would put a dent in Iran’s exports of the superlight crude grade. But, others, such as international oil economist Dr. Mamdouh Salameh, point out that this time the U.S. is alone in its sanction push against Iran and their effect will be much weaker.
“Not all members of the International Group P&I will comply with the US sanctions against Iran. Moreover, nothing could stop Asian customers of Iranian oil from creating sovereign insurance entities with Iran also providing more coverage,” Dr. Salameh notes.
What’s more, China could buy Iranian crude for yuan. China could also provide tankers for shipments to Chinese refiners if European shippers won’t, Salameh added. Further, the European Union is already paying for Iranian crude in euros, and there is no reason for it to change that.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.