May 8, 2012 / 3:33 PM / 7 years ago

Britain seeks delay to EU's Iran ship insurance ban

* Britain to lobby EU to postpone measure until 2013
    * UK fears imminent ban could lead to oil price spike
    * Britain controls much of ship insurance market

    By Dmitry Zhdannikov and Justyna Pawlak	
    LONDON/BRUSSELS, May 8 (Reuters) - Britain is seeking to
persuade fellow European Union members to postpone by up to six
months a ban on providing insurance for tankers carrying Iranian
oil, arguing that it could lead to a damaging spike in oil
prices, European diplomats said.	
    A European Union ban on importing Iranian oil, which takes
effect on July 1, will also prevent EU insurers and reinsurers
from covering tankers carrying Iranian crude anywhere in the
world from July. 	
    The impact of the measure is likely to be felt strongly in
London's financial district, the centre for marine insurance.	
    Iran exports most of its 2 million barrels of oil per day to
Asia. The four main buyers - China, India, Japan and South Korea
- have yet to find a way to replace the predominantly Western
insurance shipping cover provided by London insurers.      	
    The sanctions seek to stem the flow of petrodollars to
Tehran to force it to halt a nuclear programme that the West
suspects is intended to produce weapons.	
    Some Indian and Chinese firms have already asked state
insurers to step in and provide coverage by offering government
guarantees. . 	
    The situation is more complicated for Japan and South Korea,
which have already cut imports of Iranian oil under pressure
from Washington, but need Western protection and indemnity (P&I)
ship insurance to continue importing the remaining volumes.	
    "Britain will be pushing the EU to postpone the ban on P&I
insurance by six months," said one diplomatic source.	
    "The main reason is pressure from Japan and South Korea as
they would struggle to buy oil after July 1," the source said.	
    He said Britain feared oil prices could rise sharply as a
result of disruptions caused by the lack of insurance after July
1, as Japan and South Korea would be forced to bid aggressively
for alternative supplies to meet their needs.	
    A second European diplomatic source said he was aware of the
British initiative.
    Both sources said that Britain's proposal had yet to win
support from other EU members, including France, which has been
pushing for the toughest stance on Iran.	
    It was not yet clear when the measure could be debated by EU
officials as a meeting to review the embargo on Iranian oil has
been rescheduled from the middle of May to an unspecified later
    Negotiations between Iran and major world powers on nuclear
issues resumed in Turkey in April after a 15-month hiatus.
Another round of talks is scheduled for May 23 in Baghdad, but
Iran has said it wants a softening of sanctions first.
 (Additional reporting Richard Mably, Jonathan Saul; Editing by
Anthony Barker)
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