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While the oil industry and market are still assessing the impact of the U.S. withdrawal from the Iran nuclear deal and the re-imposition of sanctions, the biggest hurdle to Iran’s crude oil exports could be issues with the insurance of tankers carrying oil out of Iran—and this could significantly affect its exports.
After the 180-day wind-down period, reinstated U.S. sanctions on Iran will likely prevent the members of the International Group of P&I from insuring the tankers 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.
The International Group is in contact with the U.S. Treasury’s Office of Foreign Assets Control (OFAC) and the European External Action Service, and “will be using those to obtain more clarity for ourselves and our members,” Salthouse told Bloomberg.
During the previous sanctions period before the 2015 deal was struck, Asian customers of Iranian oil created sovereign insurance entities, and Iran also provided more coverage.
Meanwhile, the European Union’s High Representative for Foreign Affairs and Security Policy, Federica Mogherini, met with Iran’s Foreign Minister Javad Zarif on Tuesday, and the EU said that “The European Union is committed to the continued full and effective implementation of all parts of the Iran nuclear deal.”
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Yet, shipping companies—including Maersk Tankers and Torm—are already refusing to offer ships for new cargoes from Iran, for fear of complications in the cargo and insurance related payments, industry sources told Platts on Monday. Maersk Tankers will honor the deals that went into effect before May 8, but it would not commit tankers to fresh cargoes, it said.
“There is a whole chain of people who are involved in providing an insurance cover and the US decision will cause major headaches to all of them because the processing is now to be done in such a way which is not in contravention of the new sanctions regime,” a Singapore-based maritime broker told Platts late last week.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.