A pledge by world powers to ease ship insurance sanctions on some Iranian oil exports is likely to take months to come into effect due to complex law and regulation and to insurers' unease over providing cover.
A deal struck last weekend between Iran and six world powers over Tehran's nuclear programme leaves U.S. and European oil sanctions in place for six months. Iran secured limited relief including an easing of a ban on European ship insurance, which could allow the transport of some oil to its Asian customers.
European Union sanctions last year cut out Iran's oil trade from Europe's so-called Protection and Indemnity (P&I) clubs, which cover most of the global tanker market.
"Although this agreement suggests an improvement in relations, a formal change in EU, UK and U.S. laws will be needed to release insurers from existing prohibitions," a spokesman for ship insurer UK P&I Club said.
"Until such changes are made, the effect of sanctions on Club cover remains unchanged," he added.
Specialist P&I insurers, mutually owned by shipping lines, dominate the market for insuring ocean-going vessels against pollution and injury claims, the biggest costs when a tanker sinks. Vessels transporting Iranian crude have been left with limited alternatives, mostly set up by importers.
EU officials said earlier this week the bloc could relax some sanctions on Iran as early as next month, although the timing would depend on how long the legislative process takes. In the meantime, ship insurers remained cautious about any change while they awaited guidelines on the pledged relief.
"The devil is in the details, and we will have to look very carefully at what comes out and what we can and can't do," said Mike Salthouse, director of North Insurance Management, which manages the North P&I Club.
"I suspect unless they target or relax some of the currency transfer restrictions and restrictions on payments of SDNs, (designated entities and individuals), there are still going to be a lot of operational problems in trading with Iran."
Trade sanctions have slashed Iran's oil exports by more than half from prior levels of about 2.2 million barrels per day, costing it billions of dollars a month in lost revenue. Washington has said it will not allow exports to rise above current sanctioned levels.
SITTING ON THE FENCE
Iran's big oil customers such as India and South Korea, on top of cutting purchases to get waivers from U.S. sanctions, have struggled to import even their permitted