Japan's Iran crude buyers raise cargo, hull insurance cover to Yen 39.6 bil: sources

Japanese buyers of Iranian crude have increased their shipping insurance cover for cargo and hull damage to Yen 39.6 billion ($385 million) per VLCC, up 1.5% from an earlier cap of Yen 39 billion, effective April 1 after one local non-life insurance company agreed to increase its cover, sources familiar with the matter said Tuesday.

At least five local non-life insurance companies have since agreed to provide up to Yen 39.6 billion/VLCC cover for cargo and hull damage, and the hike in insurance cover will enable the Japanese buyers to lift more volume said sources, without elaborating.

The increase comes after Japan introduced a law March 26 that allows up to Yen 764.4 billion be provided for insurance cover for tankers carrying Iranian crude in the 2014-15 fiscal year (April-March), up 19.5% from the year before, due mainly to the weakening of the yen against the US dollar.

This is a supplementary insurance framework set up by the Japanese government in 2012 to get around the EU ban on protection and indemnity cover for tankers carrying Iranian oil from July 1 of that year.

The move followed a March 20 Cabinet decision that provided a range for the insurance cover, between a minimum Yen 873 million and maximum Yen 764.4 billion, for tankers carrying Iranian crude in fiscal 2014-15, an official at the Ministry of Land Infrastructure, Transport and Tourism said March 26.

Japanese buyers of Iranian crude have not returned to using international P&I clubs to insure their shipments since the EU's six-month suspension of its ban on insurance for shipments of Iranian oil came into force January 20, according to industry sources.

A US State Department official said March 4 Japan will be able to maintain its crude imports from Iran without further reduction while talks between world powers and Iran continue over its nuclear program.

Japanese refiners have been importing Iranian oil under a series of 180-day waivers from US-imposed Iranian sanctions, first issued in March 2012 and requiring ongoing reductions in purchase volumes. Japan's most recent waiver had been scheduled to expire March 5.

However, in line with an agreement between Iran and six world powers that came into effect January 20 for six months, the US has agreed to pause efforts to pressure the six countries still buying Iranian oil to cut volumes further.

Japan received a new waiver January 20 in line with that agreement which "obviated" the previous 180-day waiver requiring purchase reductions, the US State Department official said March 4.