Indian oil refineries plan to halt imports of Iranian oil because of loss of insurance due to recent sanctions.
Two of India’s largest oil refineries have announced plans to halt imports of Iranian oil because they can no longer get insurance coverage, according to Reuters.
Mangalore Refinery and Petrochemicals Ltd (MRPL), India’s largest buyer of Iranian oil and Hindustan Petroleum Corp (HPCL) told Reuters of their plans Friday.
This is a delayed result of European sanction against Iran. Though the sanctions took effect in April 2012, the insurance companies only notified the refineries of the non-coverage in February.
A January letter from the General Insurance Corp. to the General Insurance Council, an industry trade group, notified them that claims filed regarding the processing and shipping of Iranian crude could not be covered under existing sanction, Reuters reported.
European Union sanctions have blocked European maritime insurers from any involvement in insuring shipments of Iranian oil, drying up sources for reinsurance options.
The average oil barge requires $1 billion dollars in insurance coverage to sail. The Indian government has promised to provide alternative insurance programs, but similar past programs have provided limited coverage and were not widely used.
P.P Upadhya, managing director of MRPL told Reuters. “Insurance companies said if I buy Iranian crude my refinery’s insurance cover will be canceled … If we don’t get insurance for the refinery then we will stop buying Iranian crude.”
In January, India imported over 286,000 barrels per day of Iranian oil. That is a tiny amount, less than 0.1 percent of Iran’s total output, but enough to affect the already struggling Iranian economy.
Indian refineries also expect to be hit hard by the change. India imports a total of 3.45 million barrels per day of crude and the demand has been rising steadily for the the past 10 years. Indian refineries will have to find other sources to meet their needs.
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