The government of Japan is considering proposals to provide cover for tankers bringing in Iranian oil once a European Union ban on insurance takes effect in July, Japanese officials said on Wednesday.
Japan has been lobbying the EU to seek an exemption from the sanctions on insurance and reinsurance of Iranian oil exports. The US and other Western nations have imposed sanctions on Tehran to target its oil revenues in their bid to halt its controversial nuclear programme.
The Japanese government is considering to ask the parliament introduce a law that would enable it to provide the necessary insurance cover, the officials told Reuters on condition of anonymity.
The US, Russia and some European powers have began negotiations with Iran in Baghdad on Wednesday.
“All eyes are on the negotiations in Baghdad today,” said one official who declined to be identified as he is not allowed to talk to media. “The lobbying for insurance and reinsurance exemptions is the prime focus.”
A local Japanese newspaper reported that the government was planning to submit the draft to the parliament in early June, with the aim of getting it passed by the end of the month.
Japanese law obliges shipping companies entering the nation’s territorial waters to obtain liability insurance against damages from accidents, including oil spills and fatalities.
Most of this coverage has been offered by the Japan Shipowners’ Mutual Protection & Indemnity (P&I) Association, which in turn obtains reinsurance from other P&I clubs and other insurers to cover potentially large claims.
The EU’s sanctions will prohibit European insurers from covering liabilities for tankers carrying Iranian crude oil.
An official at Japan P&I Club claimed liability provided by Japanese insurers would only cover damages up to $8 million without reinsurance. He added that requests to get cover from Chinese insurers had failed.
Tankers are currently insured up to $7.6 billion for any critical incident except an oil spill. Coverage for oil spills is up to $1bn because they occur more frequently.
The Nikkei reported that Tokyo expects the scheme to be utilised by 16 or so tankers that carrying Iranian crude in the first year, while shipping companies that seek the additional government coverage will likely be asked to pay a ¥20-30m ($250,300-$375,400) annual fee per tanker.
Iran, OPEC’s second-largest producer, exports most of its 2.2 million barrels of oil per day to four of its main customers: China, India, Japan and South Korea.
Japan secured a waiver from US financial sanctions against Iran in March, and its imports from Iran have fallen sharply despite an increase in overall oil demand after last year’s Fukushima nuclear disaster.