South Korea and Japan are asking the European Union to give them access to European insurance for Iranian oil shipments even after a July 1 embargo comes into effect, the Korean economy ministry said on Monday.
South Korea and Japan are major buyers of Iran’s oil and the EU ban would prevent EU insurers and reinsurers from covering tankers carrying this crude anywhere in the world.
“To the EU members, we explained the problems that could be caused to non-EU members by the EU insurance embargo,” the ministry said in a statement. “In close cooperation with Japan, we are in the process of discussing this with the EU.”
The statement said the South Korean government would take unspecified measures against the possibly disruption in Iranian oil from July 1. Economy ministry official Jae-do Moon also declined to give details.
“It will be hard to find entities to provide alternative insurance coverage to European P&I (protection and indemnity),”Moon, deputy minister for international affairs, told reporters in a briefing.
Iran exports most of its 2.2 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 shipping insurance cover that is mostly provided by London insurers.
Britain is also 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.
The Western sanctions seek to stem the flow of petrodollars to Iran to force it to halt a nuclear program 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. .
Asked if the Korean and Japanese governments were considering doing the same, Moon said nothing had yet been decided.
Like other Asian buyers, South Korea has been gradually decreasing its oil imports from Iran ahead of the sanctions, relying on other Middle Eastern producers to plug the gap.
Data from state-run Korea National Oil Corp showed last month South Korea’s Iranian crude oil imports fell by more than 20 percent to 195,000 bpd in the first quarter of this year, led by a 40 percent cut in its import in March.
Of South Korea’s four refiners, SK Energy and Hyundai Oilbank import Iranian crude. Industry and company sources said last month that Hyundai Oilbank had decided to stop lifting cargoes from June, while SK Energy is sticking to a plan to lift annual committed volumes at least until June.