UPDATE 1-Britain seeks delay to EU's Iran ship insurance ban

Wed May 9, 2012 1:25am EDT

* Britain to lobby EU to postpone measure until 2013
    * UK fears imminent ban could lead to oil price spike
    * Britain controls much of ship insurance market

 (Adds comments from Hong Kong, India industry officials)	
    By Dmitry Zhdannikov and Justyna Pawlak	
    LONDON/BRUSSELS, May 8 (Reuters) - Britain is seeking to
persuade fellow European Union members to postpone by up to six
months a ban on providing insurance for tankers carrying Iranian
oil, arguing that it could lead to a damaging spike in oil
prices, European diplomats said.	
    A European Union ban on importing Iranian oil, which takes
effect on July 1, will also prevent EU insurers and reinsurers
from covering tankers carrying its crude anywhere in the world. 	
    The impact of the measure is likely to be felt strongly in
London's financial district, the centre for marine insurance.	
    Iran exports most of its 2.2 million barrels of oil per day
to Asia. The four main buyers - China, India, Japan and South
Korea - have yet to find a way to replace the predominantly
Western insurance shipping cover provided by London insurers.   
  	
    The sanctions seek to stem the flow of petrodollars to
Tehran to force it to halt a nuclear programme that the West
suspects is intended to produce weapons.	
    Some Indian and Chinese firms have already asked state
insurers to step in and provide coverage by offering government
guarantees. .	
    The situation is more complicated for Japan and South Korea,
which have already cut imports of Iranian oil under pressure
from Washington, but need Western protection and indemnity (P&I)
ship insurance to continue importing the remaining volumes.	
    "Britain will be pushing the EU to postpone the ban on P&I
insurance by six months," said one diplomatic source.	
    "The main reason is pressure from Japan and South Korea as
they would struggle to buy oil after July 1," the source said.	
    He said Britain feared oil prices could rise sharply as a
result of disruptions caused by the lack of insurance after July
1, as Japan and South Korea would be forced to bid aggressively
for alternative supplies to meet their needs.	
    A second European diplomatic source said he was aware of the
British initiative.
 	
    	
    PROPOSAL YET TO BE DISCUSSED	
    Both sources said Britain's proposal had yet to win support
from other EU members, including France, which has been pushing
for the toughest stance on Iran.	
    But in Asia, some shippers welcomed the proposal.	
    "A six-month delay would give more time for alternative
arrangements to be made or for the situation to become clearer,"
said Arthur Bowring, managing director of the Hong Kong
Shipowners Association and a supporter of Britain's actions.	
    "It could also be an opening for a more permanent
arrangement to be worked out."	
    It was not yet clear when the measure could be debated by EU
officials as a meeting to review the embargo on Iranian oil has
been rescheduled from the middle of May to an unspecified date.
 	
    Japan, South Korea and India have lobbied EU officials for
exemptions to the sanctions. "One keeps hearing about positive
developments on this issue, so we are hopeful that some positive
outcome may come out," said S. Hajara, chairman of the Shipping
Corp of India.	
    Negotiations between Iran and major world powers on nuclear
issues resumed in Turkey in April after a 15-month hiatus.
Another round of talks is scheduled for May 23 in Baghdad, but
Iran has said it wants a softening of sanctions first.
.	
	
 (Additional reporting by Richard Mably and Jonathan Saul in
London, Randy Fabi in Singapore, Clare Baldwin in Hong Kong and
Swati Pandey in Mumbai; Editing by Miral Fahmy)
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