International shipping associations are moving to relieve their members of any responsibilities to deliver refined products to Iran, by changing clauses in standard contracts to ensure that shipping companies do not breach tightened unilateral European Union (EU) and particularly US sanctions against the Islamic Republic.
INTERTANKO, which organises most of the world’s tanker fleet, included such a clause in its model contracts as early as March. Head counsel Michele White told Reuters that “It effectively gives owners the right to refuse to go to Iran if there is an order for Iran or if they are on their way to Iran and sanctions come into force during that voyage, they can ask for fresh orders to take the cargo elsewhere”.
It seems that BIMCO, the largest ship owners’ association, may have taken a similar measure, with its documentary affairs officer, Grant Hunter, telling Reuters that “normally under a time charter party there is a strict obligation to comply with a time charterer’s order so this is a means of saying under particular circumstances I am prepared to refuse that order”, adding that “sanctions will make things more difficult for Iran”.
The shipping industry moves come as the global marine insurance market actors continue to move away from covering Iranian trades, or indeed companies involved in Iranian trade.
A leading actor, the UK P&I Club, told Reuters that its directors could terminate the insurance of members—both ship owners and operators—”in respect of any ships where the member has exposed or will expose the club to a material risk of sanction”.
IHS Senior Middle East Energy analyst Samuel Ciszuk said, “the shipping and insurance industry moves spell significant problems for Iran’s gasoline (petrol) import needs, as its own refinery expansion programme still is a long way off meeting domestic demand. With shippers of refined products largely likely to start shunning Iran, the Islamic Republic will have to rely on its own inadequate fleet of product tankers, as well as on small shipping players on the industry’s sidelines.”
He also highlighted that this would force the country into unsafe shipping practices.
“Apart from raising Iran’s costs through risk premiums and sourcing/contracting issues—as well as costing time—this might lead to a drop in the operational safety standard of vessels in the Gulf’s busy sea lanes. A large proportion of Iran’s tankers are currently in use as floating storage for its heavy and sour crude, which it sometimes finds hard to market, but some of these vessels, despite being crude tankers, might now be better used elsewhere.”
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