TOKYO (Reuters) - Japan is considering a new law to provide sovereign guarantees for its ships to allow them to continue importing Iranian crude oil after EU sanctions come into effect in July, the Nikkei business daily said.
The European Union has already prohibited European insurance coverage on hull and machinery for Iranian crude shipments, which has significantly limited Japan’s lifting of Iranian crude from April.
The European Union in March, however, extended European insurance for oil spills on Iranian oil shipments until July 1, responding to calls for exemptions by Japan and South Korea.
Industry sources have said it would be very difficult for Asian nations to keep importing Iranian crude without European insurance coverage. Around 90 percent of the world’s tanker insurance is based in the West.
Iran, OPEC’s second-largest producer, exports most of its 2.2 million barrels of oil per day to Asia. Japan is a major buyer, along with South Korea, India, Japan and China, which are also reportedly considering sovereign guarantees.
Under the proposed legislation, the Japanese government and shipping companies would sign an insurance contract and the shipping firms would pay the premiums to the government, the Nikkei report said, without citing sources.
If the European Union opts to ban insurance in July, the government would swiftly introduce the bill to the parliament, aiming to pass the legislation by early June, the Nikkei said.
EU foreign ministers will review the sanctions at a May 14 meeting, and a complete ban on European insurance coverage is likely.
Government officials declined to comment on the Nikkei report, but said Japan was still lobbying the European Union for exemptions.
Several government officials have also asked the Japan P&I Club, the country’s main ship insurer against pollution and personal injury claims, for advice, an industry source said.
“Talking about a backup plan at this stage could disturb EU judgment,” one of the government officials said. “We don’t think we can live without Iranian crude oil imports so we might need to consider some steps.”
The United States and Europe are trying to squeeze the revenues Iran makes from its oil exports to force it to halt a nuclear programme they fear will be used to make weapons but which Tehran says is for power generation.
Reporting by Osamu Tsukimori, Tetsushi Kajimoto and Stanley White; Editing by Miral Fahmy