Britain is seeking to persuade fellow European Union members to postpone by up to six months a ban on providing insurance for tankers carrying Iranian oil, arguing that it could lead to a damaging spike in oil prices, European diplomats said.
A European Union ban on importing Iranian oil, which takes effect on July 1, will also prevent EU insurers and reinsurers from covering tankers carrying its crude anywhere in the world.
The impact of the measure is likely to be felt strongly in London's financial district, the centre for marine insurance.
Iran exports most of its 2.2 million barrels of oil per day to Asia. The four main buyers - China, India, Japan and South Korea - have yet to find a way to replace the predominantly Western insurance shipping cover provided by London insurers.
The sanctions seek to stem the flow of petrodollars to Tehran to force it to halt a nuclear program that the West suspects is intended to produce weapons.
Some Indian and Chinese firms have already asked state insurers to step in and provide coverage by offering government guarantees.
The situation is more complicated for Japan and South Korea, which have already cut imports of Iranian oil under pressure from Washington, but need Western protection and indemnity (P&I) ship insurance to continue importing the remaining volumes.
"Britain will be pushing the EU to postpone the ban on P&I insurance by six months," said one diplomatic source.
"The main reason is pressure from Japan and South Korea as they would struggle to buy oil after July 1," the source said.
He said Britain feared oil prices could rise sharply as a result of disruptions caused by the lack of insurance after July 1, as Japan and South Korea would be forced to bid aggressively for alternative supplies to meet their needs.
A second European diplomatic source said he was aware of the British initiative.
PROPOSAL YET TO BE DISCUSSED
Both sources said Britain's proposal had yet to win support from other EU members, including France, which has been pushing for the toughest stance on Iran.
But in Asia, some shippers welcomed the proposal.
"A six-month delay would give more time for alternative arrangements to be made or for the situation to become clearer," said Arthur Bowring, managing director of the Hong Kong Shipowners Association and a supporter of Britain's actions.
"It could also be an opening for a more permanent arrangement to be worked out."
It was not yet clear when the measure could be debated by EU officials as a meeting to review the embargo on Iranian oil has been rescheduled from the middle of May to an unspecified date.
Japan, South Korea and India have lobbied EU officials for exemptions to the sanctions. "One keeps hearing about positive developments on this issue, so we are hopeful that some positive outcome may come out," said S. Hajara, chairman of the Shipping Corp of India.
Negotiations between Iran and major world powers on nuclear issues resumed in Turkey in April after a 15-month hiatus. Another round of talks is schedule