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International insurance companies have found a way around U.S. sanctions on Iran still in place and will now offer almost complete cover on outgoing crude oil shipments, Reuters writes in an exclusive report.
The service provision should start on February 20, after the companies, members of the International Group of P&I Clubs, hammered out the details of insurance and re-insurance coverage of the cargoes without the involvement of U.S. insurers and re-insurers.
After last year’s lifting of most sanctions against Iran, a group of 13 insurers agreed to provide coverage of up to US$830 million per tanker of Iranian oil, by devising something called “fall-back” insurance. This, however, is unusually low coverage for crude oil carriers, which deterred some shippers, preventing Iran from fully exploiting its oil riches.
Under the new arrangement, maximum coverage will be US$3.08 billion, with compensation of up to US$7.8 billion for events such as oil spills and other accidents, to be paid by shipping companies using the services of the International Group of P&I Clubs.
How long this arrangement will last depends on the priorities of U.S. President-elect Donald Trump, who has been vocal in his opposition to the deal that Western powers struck with Tehran in a bid to curb its nuclear program in exchange for lifting most sanctions.
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Meanwhile, Iran exported an average of 2.57 million barrels of oil daily in the period between March and December 2016, with the December daily average rising to 2.83 million bpd, according to information from the Oil Ministry. To compare, before the sanctions, Iran exported 3 million bpd, which means even without full insurance coverage the country is returning to pre-sanction levels.
Revenue from oil and gas condensate exports should reach US$41 billion for the fiscal year ending in March 2017, Oil Minister Bijan Zanganeh said yesterday, with US$29 billion worth of oil and condensate shipped abroad in the first nine months of the fiscal year.
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.