Iran has started providing insurance cover as well as ships to continue exporting crude oil to its second-biggest buyer after China, India.
The United States pulled out of a landmark nuclear deal and said sanctions will be re-imposed on Iran within 180 days, has threatened to cut off access to the American banking system for foreign financial institutions that trade with Iran. This has led to European re-insurers refusing to give insurance cover to firms importing Iranian oil.
To solve this, Iran has started providing shipping insurance.
Iran has also started using its own ships to transport oil to India as not many shipping lines participated in recent tenders for transportation of Iranian oil.
Hindustan Petroleum Corp Ltd (HPCL) had to cancel the purchase of an Iranian oil cargo earlier this month after it faced insurance issues.
According to sources, this seems to be a temporary problem and a similar situation had arisen when the first round of sanctions against Iran was imposed in 2012.
In 2012 the insurance cover was extended to all installations minus the proportion of Iranian oil the company processed. So if Iranian oil in a company's portfolio comprised of 10 percent, the insurance cover would be to the extent of 90 percent of the processing.
Sources claimed HPCL problem should be sorted out soon and the cancellation of one cargo happened because of new insurance company coming in on the renewal of the cover.
They stated, other firms like Indian Oil Corp would renew their insurance cover in 2-3 months, by when a clear situation on Iran would emerge.
In 2017-18, 22.6 million tonnes of crude oil was bought by India from Iran.
While supplying 8.93 million tonnes of oil, Iran became India’s second-biggest supplier behind Iraq in the first three months of current fiscal.