EghtesadOnline: Iran has started providing ships and insurance cover to continue exporting crude oil to India, its second-biggest buyer after China, with the US sanctions looming, people familiar with the development said.
The US, which in May pulled out of a landmark nuclear deal and said sanctions will be reimposed on Iran within 180 days, has threatened to cut off access to the American banking system for foreign financial institutions that trade with Iran. This has led to European reinsurers refusing to give insurance cover to firms importing Iranian oil, NDTV reported.
To overcome this, Iran has started providing shipping insurance.
Also, Iran is using its own ships to transport oil to India, as not many shipping lines participated in recent tenders for transporting Iranian oil, according to Financial Tribune.
Earlier this month, Hindustan Petroleum Corp Ltd had to cancel the purchase of an Iranian oil cargo after it faced insurance issues.
When HPCL at the beginning of the month got its insurance for all its installations from refineries to pipelines and storages, renewed to protect against any accident, the reinsurer refused to cover any incidents involving Iranian oil processed or stored.
Sources said this seems to be a temporary problem and a similar situation had arisen when the first round of sanctions against Iran was imposed in 2012.
At that time, the insurance cover was extended to all installations minus the proportion of Iranian oil the company processed. So if Iranian oil in a company's portfolio comprised of 10%, the insurance cover would be to the extent of 90% of the processing.
Sources said the problem of HPCL should be sorted out soon and the cancellation of one cargo happened because of new insurance company coming in on the renewal of the cover.
Other firms like Indian Oil Corp would renew their insurance cover in two to three months, when a clear situation on Iran would emerge, they said.
Iran was India's second biggest supplier of crude oil after Saudi Arabia till 2010-11 but western sanctions over its nuclear program relegated it to the seventh spot in the subsequent years. In 2013-14 and 2014-15, India bought 11 million tons and 10.95 million tons respectively from the country.
Sourcing from Iran increased to 12.7 million tons in 2015-16, giving it the sixth spot. In the following year, the Iranian supplies jumped to 27.2 million tons to catapult it to the third spot.
In 2017-18, India bought 22.6 million tons of crude oil from Iran.
Iran became India's second-biggest supplier behind Iraq in the first three months of current fiscal, supplying 8.93 million tons of oil.