The Indian government has been unenthusiastic about providing insurance cover for Indian tankers. In fact, Japan is the only country that has been willing to re-insure its own tankers. And Indian tanker firms are unwilling to touch Iranian oil without insurance protection.
The solution, says Oil Minister G. C. Chaturvedi, is very simple—just have Iran bring its oil to India. “We have requested the Ministry of Shipping to allow Iranian ships to ferry crude oil to Indian shores,” he said.
To provide business for Indian firms, India’s rules currently require that oil be brought to India inside Indian tankers. But the Sjipping Ministry announced Monday that it has now changed the rules so that Iranian tankers may bring Iranian oil to India.
India will reduce its purchases of Iranian oil by 11 percent, Indian officials have said. But without Iranian tankers, it won’t be able to bring in any of the remaining 89 percent. India last year imported an average of 328,000 barrels a day of Iranian oil or 13 percent of all Iranian exports.
Iranian officials have said nothing about the Indian proposal thus far. But they surely have long known that they might have to use Iranian tankers to get around the EU ban on re-insurance for tankers carrying Iranian oil.
One problem may be that many of Iran’s tankers are Very Large Crude Carriers (VLCC) that have a draught too deep for India’s ports. Iran will only be able to use its smaller Aframax and Suezmax tankers to supply India
Meanwhile, Indian refiners finally begun paying for part of their Iranian oil in rupees. Under an agreement reached several months ago, refiners can pay for as much as 45 percent of what they buy in rupees deposited into an account in India. Iranian firms can then buy Indian goods, paying in rials to Iran’s Central Bank, which will then pay the Indian firms from the rupee account.
It took until this month to get the rupee account going because Indian law treated such transactions as domestic business and imposed a prohibitive 40 percent tax. It took until now to get the law changed and remove that tax.