The European Union may allow insurance against risks such as collisions and spills for tankers carrying Iranian oil, a proposal that would ease curbs on the nation’s crude exports.
The EU would prohibit the insurance and re-insurance of Iranian oil “except for third-party liability insurance and environmental liability insurance,” according to a draft document obtained by Bloomberg News. The bloc aims to complete the regulation, which is being considered by national governments, within a month, according to an EU official with knowledge of the matter.
Brent oil has risen 14 percent since an EU embargo was announced Jan. 23 to pressure Iran over its nuclear program. As originally agreed, the ban would affect insurance for 95 percent of the world’s tankers that are covered by the London-based International Group of P&I Clubs, according to insurers and ship owners. The International Energy Agency said today Iranian exports would slump 50 percent by mid-year, when the EU embargo is due to take full effect.
“This is a first sign that the EU and U.S. realize that they have overshot a bit on the sanctions against Iran, and that internal pressure is increasing on the question of oil prices spinning out of control,” said Olivier Jakob, managing director at Petromatrix GmbH, a researcher in Zug, Switzerland. “It is likely to have an impact on prices at some stage.”
Brent oil for April settlement fell 14 cents to $126.08 at 5:13 p.m. on the London-based ICE Futures Europe exchange.
An exception proposed in the draft document would allow tankers owned outside the EU to continue carrying Iranian oil even if they are insured in Europe, according to Andrew Bardot, the International Group’s secretary and executive officer.
“Liability insurance is the big issue because the level of exposure is much higher,” he said in a phone interview from London. “The draft would mean non-European tanker operators can lawfully carry cargoes outside Europe to non-European destinations.”
The International Group has pressed the European Commission and member states about making an exception for insurance against pollution and crashes, Bardot said. The group’s 13 members are subject to EU rules to access the reinsurance pool, according to Bardot.
Frontline Ltd. (FRO), Overseas Shipholding Group Inc. (OSG) and owners of at least 100 supertankers said last month they would no longer call at Iranian ports because of the insurance ban.
Iran’s output dropped last month to 3.45 million barrels a day, the lowest level since September 2002, according to data compiled by Bloomberg. Exports slid to 1.8 million barrels a day from 2.3 million at the end of last year, according to Citigroup Inc. They may decline as much as 1 million barrels a day after July, the IEA said today.
Oil sales earned the Persian Gulf country, the Organization for Petroleum Exporting Countries’ second-biggest producer, $73 billion in 2010, accounting for