With India refusing to provide a sovereign guarantee to refineries processing Iranian crude, Iran has stepped in to back Iranian insurance firms that cover the country’s ships and tankers calling at Indian ports, as well as extend insurance to Indian refineries.
The guarantee could be linked to supply of extra Iranian crude oil as the insurance premium payments cannot be transferred due to banking sanctions against the country, sources said.
Last week, Iran’s minister for industries, mines and trade wrote to India’s directorate general of shipping conveying his nation’s sovereign guarantee — in excess of $50 million and up to $1 billion per incident — for Iranian vessels carrying shipments and containerised cargo between both nations.
His assurance did not involve linking the claim settlement to Iran’s rupee fund held in UCO Bank.
New Delhi wants a defined fund carved out of the rupee deposits as repayment backup but Tehran says that that would block the amount which could be required for any “urgent imports”.
This guarantee amount could change, said sources, as it would now include the loss limit of Mangalore Refinery & Petrochemicals (Rs 6,000 crore) and of Essar Oil (Rs 12,000 crore) besides the Iranian tankers. An Iranian delegation is visiting India next month to tie up the arrangement, they added.
The genesis of Iran’s guarantee lies in India’s shipping ministry directive earlier this month banning foreign vessels at Indian ports, unless it was covered by members of Europe-based International Group of Protection and Indemnity Clubs (IG P&IC) or classed with International Association of Classification Societies.
This stranded Iran-bound containers of engineering goods, rice, soy meal etc at Indian ports, and urea and crude oil bound at Bandar Abbas port until the ministry on July 17 gave a three-month reprieve to Iranian underwriters Kish P&I Club and Moallem Insurance Co.
The ministry also agreed to give a longer approval if Iran backed the insurers, prompting Tehran to offer guarantee only for vessels.
Iran’s first offer was then tweaked to propose that a consortium led by Central Insurance of Iran would insure Iranian vessels as well as Indian refineries that process Iranian crude. This would be backed by Iran’s