NEW DELHI/SINGAPORE India's largest shipping company was forced to cancel an Iranian crude oil shipment last month because its European insurers refused to provide coverage for the vessel on the grounds of tightening sanctions on the OPEC member, industry sources said.
The European Union announced new sanctions in January prohibiting European insurers from indemnifying ships that carry Iranian crude and oil products anywhere in the world.
Iran is India's second-biggest supplier of oil after Saudi Arabia, with some $11 billion a year in shipments meeting about 12 percent of India's crude import needs.
The suezmax tanker, Maharaja Agrasen, owned by state-run Shipping Corp of India, was initially booked by refiner Indian Oil Corp. to load Iranian crude oil in mid-February, but could not get the necessary insurance coverage.
"The European Mutual Protection and Indemnity Club is covering contracts concluded before January 23 on a case-by-case basis up to July 1. They have said they cannot cover contracts finalized after January 23," said a shipping source with direct knowledge of the deal.
"Shipping Corp concluded the fixtures and applied for a cover which was not extended by the European P&I Club," he added, referring to a group of maritime insurers. Two shipbrokers also confirmed the tanker cancellation.
The two Indian companies made the deal in the spot market after the January 23 deadline, sources said. The crude oil was intended to be in addition to the annual term deals between IOC and National Iran Oil Co (NIOC).
State-run Indian Oil has a deal to buy 30,000 barrels per day of oil from NIOC in the fiscal year ending March 31.
The India government is now weighing up options including extending sovereign guarantees for its shipping lines and buying Iran oil on a delivered basis to ensure cargoes from July, former Shipping Secretary K Mohandas said last week.
Europe and the United States are enforcing tougher economic sanctions in the hope of isolating Iran and forcing it to halt its nuclear program, which the West fears will be used to develop nuclear weapons.
Iran, the biggest producer in OPEC after Saudi Arabia and the world's fifth largest oil exporter, says its nuclear program is purely for peaceful purposes.
(Editing by Clarence Fernandez)