India may ask Iran to take responsibility for delivering crude to the South Asian nation, allowing domestic refiners to avoid arranging insurance on the shipments, according to two people with knowledge of the matter.
The plan is one of two options being considered by the government as it seeks to maintain oil imports from Iran amid tightened international sanctions against the Persian Gulf supplier, the people said, declining to be identified because the information is confidential. The other option is for India to provide sovereign guarantees to domestic companies hauling crude from Iran, they said.
The European Union and U.S. have imposed sanctions to protest Iran’s nuclear program, restricting trade and financial transactions. The U.S. and its allies say they suspect the program is a cover for developing atomic weapons, a charge Iran has repeatedly denied, maintaining it’s for civilian purposes.
An EU ban on the purchase, transportation, financing and insurance of Iranian oil affects Asian importers because 95 percent of the world’s tankers are insured by the 13 members of the London-based International Group of P&I Clubs. That means fewer ships may be available to load the cargoes from the Organization of Petroleum Exporting Countries’ second-largest producer.
Indian refiners previously have been responsible for arranging insurance when buying Iranian crude. They may now ask Iran to supply the oil on a cost-insurance-and-freight basis, according to the people. That means the Islamic Republic will deliver the crude, arranging shipment and insurance, according to the people.
Shipping Corp. of India hasn’t told Indian refiners it can’t lift Iranian crude, Sunil Thapar, the Mumbai-based director of bulk carriers and tankers at the state-run shipping company said. Thapar said the company continues to load Iranian crude, and is receiving insurance cover on a case-by-case basis. He declined to comment on the options being considered by India to solve the difficulties in receiving insurance cover for the shipments.
“The industry has asked for a guarantee in lieu of protection and indemnity,” Shipping Secretary K. Mohandas said in an interview yesterday. He declined to say when a decision may be taken, adding that it will be decided at the “highest levels” of government. Mohandas was unavailable to comment when contacted by telephone today in New Delhi today.
The international measures have made it difficult for India and Iran to preserve $9.5 billion in annual crude trade, after the Reserve Bank of India dismantled a mechanism used to settle payments in euros and dollars in December 2010. Transactions are currently routed through Turkiye Halk Bankasi AS, based in Ankara, which has told Indian refiners it may no longer be able to act as an intermediary, four people with knowledge of the matter said Jan. 10.