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April 30, 2012 – 11:56 am | Views: 513

(Reuters) – China is

considering sovereign guarantees for its ships to enable the world’s second-biggest oil consumer to continue importing

Iranian crude after new EU sanctions come into effect in July, the head of China’s shipowners’ association

said.

Vessels sail past Malta-flagged Iranian crude oil 

supertanker "Delvar" (L) anchoring off Singapore March 1, 2012. REUTERS/Tim Chong

Vessels sail past Malta-flagged Iranian

crude oil supertanker "Delvar" (L) anchoring off Singapore March 1, 2012. REUTERS/Tim Chong

Tough new European Union sanctions aimed at stopping Iran‘s oil exports to Europe also ban EU insurers and reinsurers from covering

tankers carrying Iranian crude anywhere in the world. Around 90 percent of the world’s tanker insurance is based in the

West, so the measures threaten shipments to Iran’s top Asian buyers China, India, Japan and South

Korea.

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Global crude oil prices have risen nearly 20

percent since October, partly on fears over supply disruptions from Iran.

“(Ship) operators are worried that if the

insurance issue cannot be resolved, they will not be able to take orders for shipping Iranian oil any longer,” Zhang Shouguo,

secretary general of China Shipowners’ Association, told Reuters in a rare interview with foreign media.

“We have put

forward our concern and related government departments are studying the issue.”

Iran, OPEC’s second-largest producer,

exports most of its 2.2 million barrels of oil per day to Asia, and major buyers have yet to find a way around pending EU

sanctions.

“We are paying great attention to this, the country has the need for oil and it’s our responsibility to

move the crude,” said Zhang. “But we need a solution from the government so we can avoid such risk.”

Like China, India

and South Korea were also mulling sovereign guarantees for their tankers. Indian shipping firms indicated last week they

would continue to transport Iranian oil even if limited insurance cover exposed them financially to a spill or

accident.

Chinese insurers and shipowners would not take the risk on themselves and government intervention was

necessary, Zhang said. Major ship insurer, China P&I club, told Reuters earlier this month it would not provide

replacement cover for domestic tankers carrying Iranian oil.

Most of China’s tanker fleet, owned by firms such as

China Shipping CNSHI.UL, COSCO Group COSCO.UL and Nanjing Tankers (600087.SS), were covered by European insurers,

analysts said.

Most maritime insurers pool their coverage and tap into the reinsurance market when coverage exceeds $8

million (4.9 million pounds). A typical supertanker – the biggest can ferry some 2 million barrels of oil – is covered for $1

billion against personal injury and pollution claims.

Several government departments were considering the industry’s

request, including the Ministry of Finance, China Insurance Regulatory Commission, Ministry of Transport and National

Development and Reform Commission (NDRC), Zhang said. He did not say when a decision might be made.

Until recently,

China was Iran’s top customer, taking more than 20 percent of its crude exports but customs data last week showed China

halved its Iranian crude imports in March compared with the same month in 2011.

On the broader shipping market, Zhang

said he expected the troubled industry would return to a normal growth path in 2014. The freight market, which includes oil

tankers, dry bulk ships and container vessels, has been in one of the worst downturns in recent memory due to an oversupply

of vessels and slow global economic activity

(Editing by Randy Fabi and Ed Davies)

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