Other firms say the maximum insurance amount of $50 million to cover oil spills to too limited when most tankers carry insurance totaling $1 billion to $2 billion for oil spills.
India and Japan are the only two governments offering government-backed insurance for ships carrying Iranian crude in order to bypass European sanctions. But Japan is offering coverage up to $7.6 billion.
The first Indian ship to carry oil from Iran with Indian insurance was scheduled to load up in Iran Wednesday after the Iran Times went to press. The MT Omvati Prem — a tanker contracted to carry 85,000 metric tons of crude oil from Iran for Indian state refiner Mangalore Refinery and Petrochemicals Ltd. — is scheduled to arrive in India by August 25, said Kowshik Kuchroo, president of shipping for Mercator Ltd., an Indian shipping company.
“This being a government of India cargo, it has a different sense of importance. We’re not doing it just for business,” Kuchroo said. “India is in definite need of the crude,” he added. “At a short notice, we can’t just snap the supply.” Actually, the wordl had notice in Januaury when the EU approved the sanctions forbidding European firms to provide either insurance or re-insurancde for any ships carrying Iranian oil.
Mercator is insuring the ship with $50 million in hull and machinery insurance, which covers physical damage to the ship, from state-owned New India Assurance Co. and another $50 million in protection and indemnity (P&I) insurance, which covers a broad range of liabilities including environmental pollution and cargo damage, from government-backed United India Insurance.
That is a far cry from the $1 billion in coverage Indian companies like Mercator got through European re-insurers, which used to underwrite most maritime coverage.
Mercator aside, most Indian shippers don’t like the terms of the insurance coverage and have declined to send tankers to Iran.
Sabyasachi Hajara, chairman and managing director of Shipping Corp. of India, said the current package was “inadequate.”
China, India, Japan and South Korea are among Iran’s most important oil export markets.
Japan was the first country to devise a workaround to the EU sanctions, offering its shippers a robust $7.6 billion per tanker in government-backed insurance for oil cargo from Iran. Japan’s Parliament passed the emergency measure in late June to avoid a disruption to Iranian oil supplies.
Iran has offered to deliver crude on its own ships to China, South Korea and India. But Iran’s fleet size is limited and some companies are skeptical about the viability of Iranian insurance cover, analysts say. They fear Iran might just skip out on any billion-dollar damage claim.
South Korea stopped importing Iranian crude in July, when the insurance sanctions hit. Two refiners told the Associated Press Monday they are in talks with the South Korean and Iranian governments about using Iranian tankers under Iranian insurance cover to import oil.
“Iran first made the offer,” said Eom Ik-hoon, spokesman for South Korea’s largest refiner, SK Energy, which imported 10 percent of its crude from Iran before the sanctions hit. “We are discussing details with the South Korean government, but we do not know when imports will be resumed.”
Hyundai Oil Bank Co.’s spokesman Koh In-soo said the company is also reviewing the use of Iranian ships and insurance but denied earlier news reports that the crude imports may be resumed as early as September.