Iran oil trade skirts ship insurance ban

Wed Jul 11, 2012 12:28pm EDT
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By Chen Aizhu and Osamu Tsukimori

BEIJING/TOKYO (Reuters) - Iran is shipping oil to China, its top buyer, despite a row over freight terms, and Japan has taken steps to resume imports in August as Tehran finds ways to get around Western sanctions on ship insurance for its drastically reduced shipments.

European Union sanctions against Tehran have stopped European insurers, who dominate the marine insurance sector, from offering cover on Iranian crude. Industry watchers say the measure has proved to be the hardest hitting in the West's arsenal of sanctions aiming to persuade Iran to abandon its nuclear program.

The lack of shipping cover has already disrupted flows of Iranian oil to Iran's major customers in Asia - China, India, South Korea and Japan - at a time when the EU has stopped buying its oil altogether.

Japan has completely halted imports in July because of the lack of shipping cover to avoid any risk of running afoul of sanctions, and China requested that Iran deliver oil on its tankers while bargaining hard about terms.

On Wednesday, industry sources said Japanese insurers were expanding their maritime coverage to allow more domestic tankers to transport Iranian crude and that Iranian shipments to China were flowing despite the dispute about terms.

At least 4 million barrels of Iranian oil from the July program are on their way to Chinese refiners, said a Chinese crude trader familiar with the negotiations.

"Looks like the freight negotiations are not a package, but voyage by voyage," said the trader, who declined to be identified due to the sensitive nature of the matter. He referred to talks between Chinese state refiner Sinopec (0386.HK: Quote) and the National Iranian Tanker Co (NITC).

China plans to buy about 15 million barrels of Iranian oil in July, sources have told Reuters.   Continued...