According to sources in the insurance industry, a ban is widely forecasted to begin on European insurance coverage for exports of oil from Iran beginning on July 1,2012, and is threatening to restrict shipments from that country, causing costs to rise for large purchasers such as South Korea and Japan.
The European Union created a partial exemption from its embargo last week for some insurance companies that cover Iranian oil, until July. Next month, the ministers in the EU intend to go over whether or not those exemptions will be extended.
South Korea and Japan have been lobbying for these exemptions and to continue the waivers beyond the July 1 date, but executives in the insurance and shipping industry are both predicting that a complete ban will likely be the case.
According to general counsel Michele White, with INTERTANKO, an association whose members have ownership over most of the tanker fleets in the world, the current restricted exemption in the embargo is simply offering a form of grace period between now and July 1, in which time “third party liability insurance, environmental liability insurance and re-insurance seems to me to simply postpone the inevitable.”
Most of the oil from Iran – which is approximately 2.2 million barrels every day – is sold to Asia, where South Korea, Japan, China, and India are the largest purchasers. These countries have either already cut back their oil imports from Iran or have made a pledge to do so in the near future, or they will face increasing pressure from sanctions in the West. Those sanctions have been designed to push Iran to cease progress on its controversial nuclear program.
International insurance news reports.