With the US sanctions threatening to
block its oil trade, Iran has
started providing ships as well as insurance cover to continue exporting crude oil to
India, its second-biggest buyer after China, people familiar with the
After re-imposition of sanctions on
Iran the US has threatened to cut off access to the American banking system for
foreign institutions that trade with Iran. As a consequence, European re-insurers
refuse to give insurance cover to firms importing oil from Iran.
Hindustan Petroleum had to cancel
purchase of Iranian oil cargo facing insurance issue and HPCL too had a similar
experience with re-insurers refusing cover any incidents involving Iranian oil
processed or stored.
To help Iranian oil importers overcome
this difficulty, Iran has started providing shipping insurance, the people
said. Also, Iran is using its own ships to transport oil to India as not many
shipping lines participated in recent tenders for transportation of Iranian
oil, they said.
Sources said this seems to be a temporary
problem and a similar situation had arisen when first round of sanctions
against Iran were imposed in 2012.
At that time, the insurance cover was extended
to all installations minus the proportion of Iranian oil the company processed.
So if Iranian oil in a company's portfolio comprised of 10 per cent, the
insurance cover would be to the extent of 90 per cent of the processing.
Sources said HPCL problem should be sorted out
soon and the cancellation of one cargo happened because of new insurance
company coming in on the renewal of the cover.
Other firms like Indian Oil Corp (IOC) would
renew their insurance cover in 2-3 months, by when a clear situation on Iran
would emerge, they said.
In 2017-18, India bought 22.6 million tonnes of
crude oil from Iran. Iran became India's second-biggest supplier behind Iraq in
the first three months of current fiscal, supplying 8.93 million tonnes of
The Trump administration is piling pressure on
India, China, and other buyers to end all imports of Iranian oil by a November
4 deadline as it looks to choke the Persian Gulf state's
economic lifeline with sanctions over its nuclear programme.
New Delhi has so far not taken a stand on the
sanctions. But beginning November the payment channels would get blocked and it
will have to look at alternate means to pay Iran for the oil it buys.
India currently pays Iran in euros using
European banking channels. During the first round of sanctions in 2012
when European Union joined
the US in imposing financial restrictions, India initially used a Turkish bank
to pay Iran for the oil it bought but beginning February 2013 paid nearly half
of the oil import bill in rupees while keeping the remainder pending till the
opening of payment routes. It began clearing the dues in 2015 when the
restrictions were eased.