Wall Street Journal: The world’s largest pool of tanker insurers is advising members they shouldn’t insure Iranian oil shipments, citing the short-time frame of sanction loosening agreed to between Iran and Western powers.
The Wall Street Journal
Members reluctant to guarantee coverage, citing the short window of eased sanctions
By Benoît Faucon
LONDON—The world’s largest pool of tanker insurers is advising members they shouldn’t insure Iranian oil shipments, citing the short-time frame of sanction loosening agreed to between Iran and Western powers.
The move is a blow to Iran, which had hoped a six-month, temporary easing of sanctions would allow it to restart petrochemical exports and modestly boost its export of crude. It could also complicate efforts by Washington and its allies to provide Tehran’s new political leadership enough incentive to keep up its side of the nuclear pact it reached with the West.
Late last year, Tehran agreed to closer scrutiny of its nuclear program in exchange for temporary sanctions relief. As part of the package, which formally went into effect last month, sanctions against Iranian petrochemical shipments were suspended until July.
The package also theoretically allowed insurers to cover ships carrying Iranian crude. While that doesn’t affect a cap the West has put on oil exports, it would have made it easier for Iran to execute oil sales it is currently still allowed to make.
U.S. officials, meanwhile, have kept up the pressure on Iran, reminding Western executives of the temporary nature of the sanctions relief, and warning them that Washington would continue enforcing banking and financial restrictions still in place.
In recent weeks, shippers and their insurers have studied the legal and practical aspects of the relief. In an interview with The Wall Street Journal Friday, Andrew Bardot, executive officer of the International Group of Protection & Indemnity Clubs, a pool of member insurers who cover around 95% of oil tanker capacity world-wide, said its members are warning clients the short-term nature of the relief make it impossible for them to indemnify Iranian cargoes.
P&I members “are saying: ‘Don’t do it’ as we cannot guarantee coverage,” Mr. Bardot said. With many liability claims stemming from seaborne accidents taking years to be resolved, “it is highly unlikely that claims would be presented and liabilities finally determined prior to the July 20 cutoff” of the temporary sanctions relief, Mr. Bardot said. In addition, U.S. reinsurers participating in the group’s pool remain subject to insurance prohibitions, he said. That could effectively make it impossible for any member of the group to make payouts on claims.
The insurance official said the International P&I was seeking clarifications from the U.S. Treasury and the European Union on whether such hurdles could be surmounted. A U.S. Treasury spokesperson said it is “still actively looking into this issue.” A spokesman for EU foreign policy chief Catherine Ashton said “consultations are ongoing,” without providing more details.
For now, however, operators aren’t taking chances. “We have sought legal advice and been told it is impossible to return” to carrying Iranian oil, an official at a large Greek tanker operator said.
Exports of Iranian crude have fallen by more than half in the past two years amid tightening restrictions on Iranian oil exports by the EU and the U.S., including an effective ban on tanker insurance. That forced most shippers to stop transporting Iranian oil.
Other Western players that had also hoped to take advantage of the sanctions relief are facing similar hurdles. Despite a suspension on a ban against automotive spare-parts exports to Iran, French car maker Renault SA has said it is wrangling with how to send preassembled kits into the country and get paid for them under existing international banking sanctions.
