Iran Economy NewsShip groups tighten contracts after Iran sanctions

Ship groups tighten contracts after Iran sanctions


Reuters: Ship owners can refuse to deliver refined petroleum cargoes to Iran under a new clause developed by shipping associations in the wake of tougher sanctions against the Islamic Republic, groups involved say.

By Jonathan Saul

LONDON, July 20 (Reuters) – Ship owners can refuse to deliver refined petroleum cargoes to Iran under a new clause developed by shipping associations in the wake of tougher sanctions against the Islamic Republic, groups involved say.

The West suspects Iran’s nuclear work is aimed at bomb-making but Tehran says it is for peaceful purposes. U.S. President Barack Obama signed into law this month new wide ranging sanctions that aim to squeeze Iran’s fuel imports and increase its international isolation.

European Union foreign ministers will adopt tighter sanctions against Iran next week, including measures to block oil and gas investment and curtail its refining and natural gas capability.

Fearing they could be in breach of sanctions, shipping associations have created a clause in time charter party contracts allowing a ship owner to refuse a petroleum trade to Iran.

INTERTANKO, an association whose members own the majority of the world’s tanker fleet, produced a clause in March.

“It effectively gives owners the right to refuse to go to Iran if there is an order for Iran or if they are on their way to Iran and sanctions come into force during that voyage, they can ask for fresh orders to take the cargo elsewhere,” said Michele White, general counsel with INTERTANKO.

White said the clause, which is wide enough to apply to any country which has sanctions imposed, was reviewed in July when the U.S. measures came into force.

“We feel it is adequate to assist our members,” she said.

Iran is the world’s fifth-biggest crude oil exporter but previous U.S. sanctions mean it has suffered from lack of investment in refineries, forcing the OPEC member to import some 40 percent of its gasoline needs.

While the latest sanctions have excluded Iranian crude oil sales, petroleum imports into the country have been affected.

“There are many tanker owners who have stopped trading refined products to Iran in line with sanctions,” INTERTANKO’s managing director Peter Swift told Reuters.

BIMCO, the world’s largest ship owners’ association, introduced a similar clause this month concerned that sanctions could be imposed not only on foreign ship owners including parent companies, but also on the crew and providers of services such as a vessel’s managers, insurers and re-insurers.

“Normally under a time charter party there is a strict obligation to comply with a time charterer’s order so this is a means of saying under particular circumstances I am prepared to refuse that order,” said Grant Hunter, BIMCO’s documentary affairs officer.

“Sanctions will make things more difficult for Iran.”


In another blow to Iran, which depends on its seaborne trade, insurance market Lloyd’s of London said in July it would not insure or reinsure Iranian petroleum shipments.

“The international insurance community won’t cover Iran, so very few people are willing to get involved in cargoes without insurance but also due to sanctions,” a trade source said. U.S. sanctions were also having an effect on the P&I Club market, which are marine insurers owned by shipping clients.

UK P&I Club, a leading P&I Club, said this month its directors could terminate the insurance of members, comprising ship owners and operators, “in respect of any ships where the member has exposed or will expose the club to a material risk of sanction”.

Another trade source said Iran could try to insure its own fleet.

“The shipping clause together with insurance restrictions are a double blow,” the second source said. “Iran may try to get their own companies to insure their cargoes but it will be at a massive premium. So it’s going to get much more costly and cumbersome.” (Editing by Sue Thomas)

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