March 23 (Bloomberg) -- The European Union allowed some insurance contracts for Iranian oil until July 1, scaling back an earlier plan to spare coverage against the risk of tanker collisions and spills from sanctions on Iran altogether.
EU foreign ministers approved today in Brussels detailed rules for enacting sanctions against Iran outlined on Jan. 23, the bloc said. Because insurers of almost all the world’s tankers follow European law, its provisions on insurance tied to Iranian oil have an impact beyond EU borders.
Europe has joined the U.S. in strengthening sanctions against Iran in a bid to persuade Tehran to discuss all aspects of the Islamic nation’s nuclear program and open it further to United Nations inspectors. The Iranian regime says its atomic activities are for civilian purposes including electricity production.
“Iran cannot ignore the international community and should be in no doubt that we will ratchet up the pressure until it chooses a different path,” U.K. Foreign Secretary William Hague said in a statement today.
The date and location of major world powers’ talks with Iran over its nuclear program will be made public “in the coming days,” EU foreign policy chief Catherine Ashton said today. She will represent the five permanent United Nations Security Council members plus Germany in the negotiations.
“We continue to follow the twin-track approach regarding their nuclear program,” Ashton told a press conference after the ministerial meeting. “My focus is on trying to get the talks moving again.”
The EU is seeking to balance the desire to punish the Iranian regime for the atomic-energy program, which western governments say aims to build nuclear weapons, against concerns about the economic impact that the oil embargo would have amid slowing growth.
Crude oil for May delivery rose 1.8 percent to $107.28 a barrel at 12:01 p.m. on the New York Mercantile Exchange. Brent oil for May settlement gained 1.8 percent, to $125.35 a barrel on the London-based ICE Futures Europe exchange, taking its increase to 21 percent in the past six months.
To address a U.K. request for more study of the impact that the tighter loophole for third-party liability insurance and environmental-liability insurance will have on global oil prices, the ministers agreed to review the exemption before a meeting in May.
The new detailed rules will take effect tomorrow, when they are published in the bloc’s Official Journal, the EU said. As part of the January restrictions, the EU also decided to freeze the assets of the Iranian central bank as well as of eight other entities and a ban on trade in gold, precious metals and diamonds from Iran.
“The regulation approved today defines the precise scope of the measures agreed in January, including the trade restrictions on oil and petroleum products and on petrochemical products and the asset freeze against the Iranian central bank,” the EU said in a statement.
While the January agreement included a ban on oil imports from Iran, the EU allowed existing contracts, as well as insurance related to them, to continue until July 1. Under that decision, the sanctions 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.
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 International Energy Agency said March 14.
The U.S. Department of Energy said there was “emerging evidence” that some shipments of Iranian oil under existing contracts are being reduced because of the unwillingness of U.S. and EU insurance providers to cover them, according to a report published on Feb. 29.
Initial drafts of the EU’s more detailed rules for enacting the trade penalties emerged in February, when the bloc’s regulators proposed fully exempting insurance against the risk of tanker collisions and spills from the restrictions.
Today’s decision to permit third-party liability insurance and environmental-liability insurance until July 1 will allow tankers owned outside the EU to continue for three more months to carry Iranian oil even if they are insured in Europe. Frontline Ltd., Overseas Shipholding Group Inc. and owners of at least 100 supertankers said last month they would no longer call at Iranian ports because of the insurance ban.
The International Group has pressed the EU to grant an exemption for insurance against crashes and pollution, Andrew Bardot, the organization’s secretary and executive officer, said last week.
China, Iran’s largest customer, will take steps to prevent European sanctions from stopping imports, such as nominating an insurer to cover Iranian shipments, Yan Zhichong, general manager of tanker operator China Shipping Development Co., said March 16. India, the biggest buyer of Iran’s oil after China and Japan, said it may provide sovereign guarantees to domestic shipping companies that carry Iranian oil to replace European insurers.
EU ministers also decided today to add 17 people responsible for serious human-rights violations in Iran to its travel ban and asset freeze, bringing the total targeted to 78. The bloc also banned exports of equipment and software intended for use in the monitoring or interception of Internet and telephone traffic. The sanctions regime was extended by 12 months until April 2013.