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US sanctions had made payments to Iran for crude oil an issue for India. Another problem could be brewing: Bringing the fuel into the country itself.
Shipping companies may refuse to carry Iranian crude oil, for they may not get international insurance cover following European Union sanctions against Iran announced on January 23. The sanctions prohibit EU-based entities from providing insurance and guarantees for transportation of oil from Iran.
Indian shipping lines take protection and indemnity cover (P&I) mainly from European P&I clubs, which provide third-party liability cover.
According to shipping company officials, the European P&I clubs have told shipping lines that they will have to follow the sanctions once they are implemented. This is expected to happen by March.
Existing shipping contracts with Iran for crude oil should be completed before July 1. The insurance cover will not be extended to any fresh contract entered into after January 23.
Ministries to Meet
“Shipping companies will not be able to pick up oil cargoes without adequate insurance cover for the whole voyage,” said Capt. Sunil Thapar, Director, Bulk Carriers and Tankers, Shipping Corporation of India.
Indian shipping lines have taken up the matter with oil companies and the Government. The Shipping Ministry has convened a meeting of various Ministries, including Petroleum, External Affairs and Finance, on Friday to sort out the issue.
“Shipping companies have told us that they cannot pick up cargo from Iran without insurance cover. We will be discussing the issue tomorrow to find out a way out,” said Mr K. Mohandas, Union Shipping Secretary.
All Indian public sector oil companies — IOC, BPCL, HPCL and MRPL — import crude oil from Iran. Companies like Shipping Corporation of India, Great Eastern Shipping and Mercator have annual contracts with these oil companies for importing the crude.
A shipping company official said, “It is for the Government to take a decision.
“If the oil companies decide to buy crude on c.i.f. basis, it will be the responsibility of the sellers to arrange for the shipment. But then they will have to pay higher freight rates.”
A Way Out
Alternatively, the Government could work out a system to provide insurance cover to shipping companies through General Insurance Corporation of India, according to another shipping company official. Some years ago, there was a proposal to set up an Indian P&I club.
However, this did not take shape.
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