July 9, 2010 / 11:45 AM / 10 years ago

UPDATE 2-Lloyd's says won't cover Iran petroleum shipments

* Lloyd’s says will always comply with applicable sanctions

* Says its decision recognises importance of U.S. market

(Adds further comment, detail, background)

By Jonathan Saul

LONDON, July 9 (Reuters) - Lloyd’s of London will not insure or reinsure petroleum shipments going into Iran, the insurance market said on Friday, in another blow to the Islamic Republic from wide-ranging U.S. sanctions.

U.S. President Barack Obama signed into law last week new sanctions that aim to squeeze Iran’s fuel imports and increase its international isolation.

“The U.S. is an important market for Lloyd’s and, in recognition of this, the market will not insure or reinsure refined petroleum going into Iran,” Lloyd’s General Counsel Sean McGovern told Reuters in a statement.

“Lloyd’s will always comply with applicable sanctions,” McGovern added.

Iran is the world’s fifth biggest crude oil exporter but previous U.S. sanctions mean it has suffered from lack of investment in refineries, forcing the OPEC member to import some 40 percent of its gasoline needs.

Iran has already found it harder to secure trade finance. A number of oil companies, trading houses and other international companies have stopped doing business with it this year fearing they may be in breach of U.S. sanctions.

An industry source told Reuters this week oil major Royal Dutch Shell will not renew its contracts to supply Iran Air with jet fuel in response to pressure.

Louise Nevill, head of marine at Talbot Underwriting, said Iran would find it tougher to get insurance cover.

“A sanction, whether it’s U.S. or U.N., does not just affect Lloyd’s it should affect all insurance providers,” she told Reuters. “It’s going to be a struggle (for Iran) and will probably end up having some sort of desired effect.”

The United States and its European allies suspect Iran is trying to build an atomic bomb. Tehran has said its nuclear programme is for the peaceful generation of electricity.

“AT MERCY OF SUPPLIERS”

The Lloyd’s marine insurance market represents 15 to 20 percent of the total marine insurance industry, underwriters say.

“Historically, Lloyd’s has been a leader and many will follow,” said J. Peter Pham, senior fellow at the National Committee on American Foreign Policy think tank.

“One has to consider the value of U.S. and European markets versus the very limited Iranian market.”

The sanctions were also having an effect on the P&I Club market, which are marine insurers owned by shipping clients.

Norwegian P&I Club Skuld said this week U.S. legislation was wide enough to expose insurers to the risk of sanctions, such as the blocking of dollar transactions and freezing of U.S. assets.

Skuld said its board was “invited as a matter of urgency” to consider restrictions on cover for vessels involved in refined petroleum shipments to Iran to protect members’ interests.

The tougher climate has meant Iran is depending more on friendly powers in the international arena for fuel supplies.

Oil traders told Reuters on Thursday Iran is buying around half of its July gasoline imports from Turkey and the rest from Chinese sellers as most other suppliers have stopped selling.

“Iran is going to have to pay more for its petroleum-refined imports,” said Pham who also advises U.S. and European governments on strategic matters.

“In a way, they are at the mercy of their current suppliers. So they are going to get squeezed.”

Iran, which depends on its seaborne trade, may try to use its own fleet. But underwriters and shipping officials said it would face complications and could ground vessels as ships need to prove to ports they have acceptable cover.

“Tanker safety will be reduced and it will be more expensive and more unsafe,” said Samuel Ciszuk with consultancy IHS.

For a FACTBOX on sanctions and fuel supplies to Iran

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