Japan Cabinet Said to Approve Insuring Iran Tanker Calls
By Yuji Okada and Rob Sheridan - Bloomberg -
Jun 7, 2012 5:39 PM GMT+0300
http://www.bloomberg.com/news/2012-06-07/japan-cabinet-said-to-approve-insuring-iranian-tanker-calls-1-.html

Japan’s Cabinet is poised to approve a bill giving sovereign guarantees for
the nation’s oil tankers loading Iranian crude, potentially undermining
Western sanctions targeting the Persian Gulf nation’s nuclear program.

The government plans to provide as much as $7.6 billion so that ship owners
and petroleum refiners can maintain insurance when hauling crude from Iran,
according to two government officials with direct knowledge of the law, who
declined to be identified before the Cabinet gives consent to the
legislation as soon as tomorrow. The bill will be submitted to the Diet, or
national parliament, after the Cabinet endorses it, they said.

The European Union announced a ban on Iranian oil in January that also
prohibited insuring the shipments. The move affected 95 percent of the world’s
tankers because they were covered by organizations following EU law. A law
signed by President Barack Obama on Dec. 31 blocks countries’ access to the
U.S. financial system if they can’t show they’re reducing oil imports from
Iran. Japan and 10 European nations received exemptions in March for a
renewable period of 180 days.

“If there are insurers in the Far East who can insure this without relying
on Europe, then it will to some extent undermine the sanctions regime and
the pressure the West is trying to put on the Iran government to stop its
nuclear ambitions,” Chris Zavos, a London-based lawyer and partner at Norton
Rose LLP, said by phone today.

July 1 Deadline

The EU introduced the embargo against Iran to convince the country to halt
its nuclear program, which it alleges is for weapons production. The
government in Tehran faces four sets of United Nations sanctions urging the
country to stop enriching uranium.

Japan imported 362,000 barrels a day of crude from Iran in 2010, making it
the country’s second-largest buyer, after China, according to data from the
U.S. Department of Energy. To comply with the European sanctions, ships
carrying Iranian oil would need to unload before July 1. A very large crude
carrier hauling 2 million barrels of oil would take about four weeks to
reach Japan from Iran, according to the e-ships.net website.

Banks that allow ships to change to an insurer who’ll cover Iranian
shipments would potentially violate U.S. sanctions because such a move might
be interpreted as facilitating trade with the Persian Gulf nation, according
to Clare Hatcher, a London-based consultant at Clyde & Co., an international
trade law firm. The U.S. has restricted dealings with Iran since 1979, when
militants took 52 hostages at the American embassy in Tehran.

Nobody answered a telephone call at Japan’s Transport Ministry press office.

Japanese Club

The Japan Ship Owners’ Mutual P&I Association, which insures owners against
risks including spills and collisions, will lose access to Europe’s
reinsurance market for Iranian cargoes after the European embargo comes into
effect July 1.

“For that oil to get to Japan, it needs P&I cover,” Mike Roderick, a
London-based partner at Clyde, said by phone today. “China, Japan and India
are all looking at sovereign guarantees because they are major importers of
Iranian oil.”

To contact the reporters on this story: Yuji Okada in Tokyo at
yokada6@bloomberg.net; Rob Sheridan in London at rsheridan6@bloomberg.net

To contact the editors responsible for this story: Alaric Nightingale at
anightingal1@bloomberg.net; Alexander Kwiatkowski at
akwiatkowsk2@bloomberg.net