P&I cover could become a missing piece of the jigsaw for ships carrying Iranian bunkers.
Effective July 1, 2012 a European Union ban on the transportation of Iranian crude oil and products will result in the loss of protection and indemnity (P&I) cover for any ship running on bunker fuel of Iranian origin.
According to Platts, Janet Strode, the London-based general manager of the International Parcel Tankers Association (IPTA) confirmed by telephone that a note had been circulated to explain how the EU sanctions would impact their operations.
The email was reportedly sent following an April 25th meeting with the International Group (IG), an association of 13 member clubs that provide liability cover for close to 90% of the world's shipping tonnage.
The directive will have a "far-reaching impact"
The note was reported as stating that the prohibition on P&I cover will, irrespective of where the bunkers were taken on board or type of ship or cargo carried, extend to any ship carrying Iranian bunker fuel in its bunker tanks.
IG also updated its list of Frequently Asked Questions on April 19 to indicate the lack of insurance cover for any vessel carrying Iranian bunker fuel.
European and US sanctions, aimed at curbing Tehran's nuclear ambitions, included the January 23 ban by the EU on the import and transportation of Iranian crude oil by its member nations.
Protection & Indemnity Clubs offer insurance cover for broad, indeterminate risks such as:
third-party liabilities, including a carrier's liability to the owner of a cargo for damage to the cargo
the liability of a ship after a collision
war risk insurance
Since Iranian-origin bunker fuel is sold at major bunkering ports such as Singapore and Fujairah, it is expected that the directive will have a "far-reaching impact" on non-oil trade and affect tankers loading Iranian crude for markets beyond Europe.
According to a ship-owning source, "This is going to be a huge problem when a shipowner asks the bunker supplier for the certificate of origin of the fuel supplied to his ships in event of something going wrong," especially at ports such as Karimun in Indonesian and Tanjong Pelepas in Malaysia where Iranian fuel is blended into bunker grade oil to be sold out of Singapore.
Another source reported to Platts that since the use of Iranian bunker fuel had, to date, not been on "anybody's radar" this will likely have a large impact on the sale of Iranian fuel oil in the future.