A major Chinese ship insurer will halt indemnity cover for tankers carrying Iranian oil from July, dealing a blow that narrows the insurance options for Tehran’s main export already constricted by payment barriers caused by Western sanctions.
With Western sanctions on Tehran increasing, sources at the China P&I Club told Reuters on Thursday it did not want to stand alone in the market, especially after insurers in Japan and Europe plan to either limit or ban their own coverage for tankers operating in Iran.
This is the first sign that refiners in China, Iran’s top crude buyer, may struggle to obtain the shipping and insurance to keep importing from the Middle Eastern country. Iran’s other top customers — India, Japan and South Korea — are running into similar problems, raising questions on how Tehran will be able to continue to export the bulk of its oil.
Crude oil prices are up nearly 14 percent since the start of this year on concerns that Iranian supplies may be disrupted due to Western sanctions. Brent crude traded above $123 a barrel on Thursday.
The China P&I Club, whose members include major Chinese shipping firms Sinotrans and COSCO Group, is the first Chinese maritime insurer to confirm it will halt business with tankers operating in Iran.
“Many ship owners want to join our club and want our club to cover this risk, but considering all these regulations from the United States and the EU, I know the China P&I club will not do that,” said a Hong Kong-based official with the insurer, which provides coverage to more than 1,000 vessels.
“The China P&I club will not take the risk. We have asked our members not to go there, if they go there, they take their own risk,” the official added, who wished not to be named because he was not authorized to speak to the media.
Wonder what that will do to equities when 2.2 million barrels per day disappear in July from total global production?