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Cosco Sees `Big Chance' China Insurer Will Cover Iran Oil

10 Apr 2012

China Ocean Shipping Group Co. (COSCZ), the nation’s biggest sea-cargo carrier, said a government-backed insurer will probably cover oil shipments from Iran so deliveries aren’t disrupted by European trade sanctions.

“There is a big chance the government may get a state-owned insurer to underwrite the ships,” Meng Qinglin, managing director at Cosco Group’s tanker unit, Dalian Ocean Shipping Co., said in a phone interview yesterday. It’s not clear when plans will be finalized, he said.

A number of government departments are discussing the issue, Meng said, as China, the biggest buyer of Iranian crude, seeks to ensure that EU sanctions coming into force July 1 don’t interrupt supplies. The EU embargo, prompted by Iranian nuclear plans, affects shipments to China and other countries as 95 percent of oil tankers are insured by the 13 members of the London-based International Group of P&I Clubs.

“The government will definitely carry out measures to deal with the situation,” Meng said. “Replacing Iranian oil imports wouldn’t be easy.”

China Shipping Group Co., the nation’s No. 2 vessel operator, similarly said last month that it expects the government will act to safeguard shipments. China buys about 22 percent of Iranian oil exports, according to U.S. Department of Energy estimates.

China P&I Club

China Shipowners Mutual Assurance Association, known as the China P&I Club, will also probably continue covering tankers carrying Iranian oil, said Meng, who is a director at the ship-insurance co-operative. Reuters said last week that the group may halt coverage, citing an unidentified official.

“I don’t believe China P&I would make such a hasty decision,” Meng said. Dalian Ocean hasn’t received any notice about coverage being halted, he said. The company operates more than 50 oil and liquefied petroleum gas tankers, including at least 20 very large crude carriers, according to its website.

China P&I, which isn’t part of the International Group of P&I Clubs, didn’t reply to faxed questions from Bloomberg News yesterday.

China urges “flexibility” and “sincerity” in nuclear talks between Iran and the five permanent United Nations Security Council members and Germany on April 14, according to astatement posted on the Chinese foreign ministry’s website yesterday. Iran has said its nuclear project is just for civilian use.