Supply of Iranian crude: Talks heading in positive direction

"Talks are in positive directions and could be concluded soon and help resolve the deadlock," sources in government and insurance companies said.

They said the only issues which are yet to be ironed out in the talks between ship owners through INSA (Indian National Ship Owners Association) and insurance companies led by General Insurance Corporation, include insurers` demand for additional USD 20,000 as "war risk premium" per voyage.

The insurers have agreed for USD 50 million coverage per voyage for risk like collision and oil spills, they said.

Meanwhile, government is granting permission for ships carrying Iranian crude oil here on a case-by-case CIF (cost, insurance and freight) basis.

With 17.44 million tonnes of crude oil imported from Iran last year, India is one of the major buyer of oil from that country but the shipments have been hit due to US-led global sanctions against Tehran which have been adopted by EU also.

Though New Delhi is not bound by the US and EU sanctions against Iran, shipments got affected after European insurers withdrew their coverage for the ships carrying Iranian oil.

The European insurers were earlier giving unlimited insurance, as per the damages, against risks like oil spills and collisions. However, war risk premium was not charged by insurers earlier too.

The Indian government has asked state-run insurers in India, including United India Insurance Company and General Insurance Corporation, to provide insurance cover to the shipments, but they are offering lower coverage as their access to reinsurance coverage would be affected by the international sanctions against Iran.
Sources said the state-run insurance companies are also hopeful of getting government support in cases of higher than expected claims from any accidents, but they do not want to take any chance on war risk premium.

Shipping companies, which include state-run Shipping Corporation of India and private players like Great Eastern Shipping have been seeking coverage of USD 100 million per voyage.

In a recent statement, the Ministry of External Affairs said, "with the EU sanctions which came into effect on July 1, 2012, some complications arose due to the non-availability of protection and indemnity (P&I) club insurance to ships carrying Iranian crude oil. Consequently, a general exemption was granted by government to foreign ships carrying Iranian crude oil on CIF basis to dock at Indian ports under certain conditions."

Subsequently, the national insurance companies have agreed to extend insurance cover to Indian ships for transportation of Iranian crude to India, the Ministry said.