Singapore — As the countdown begins for the restoration of US sanctions on Iran, many shipping companies such as Maersk Tankers and Torm are already refusing to commit to fresh Iranian business, fearing complications relating to processing of freight and insurance related payments, sources said Monday.
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"We will not lift any cargo from Iran with immediate effect," a source at Torm told S&P Global Platts. Another source at Maersk Tankers also confirmed the company is not offering its ships for fresh Iranian cargoes.
"The concerned staff have been internally informed not to offer ships for moving cargoes into or from Iran," the source said.
However, Maersk Tankers clarified in a statement that it will honor agreements that went into force before May 8 and ensure they are wound down by November 4, as required by the re-imposed US sanctions.
"Everything is on hold now, except for the usual Chinese and Greek owners," a clean oil tankers' broker in Singapore said.
Less than a week after the US decided to pull out of the Joint Comprehensive Plan of Action, or JCPOA, maritime insurers are warning that the winding down of businesses could lead to serious ramifications, including processing of protection and indemnity cover and other related payments.
The implementation of sanctions has a timeline ranging from 90-180 days, but most shipping companies feel there will be payment-related hassles for all maritime activities linked with Iran in the run-up to the deadline or during the grace period.
"The sanctions have a capacity to disrupt the entire chain of maritime insurance involving shipments into and out of Iran," a Singapore-based maritime broker said on the sidelines of the WISTA Shipping Conference held in the island city-state late last week.
"There is a whole chain of people who are involved in providing an insurance cover and the US decision will cause major headaches to all of them because the processing is now to be done in such a way which is not in contravention of the new sanctions regime," the broker said.
A source with a shipowner said there are now two complicating issues: insurance premiums and issuing letters of credit for the payment of freight.
When the sanctions were relaxed more than two years ago, hundreds of individuals and entities were removed from the US lists of sanctions.
These parties will now have to be re-listed before November 5. Re-listing implies that secondary sanctions that were lifted will now be reinstated.
Furthermore, the US plans to revoke licenses such as the General License H which authorized US-owned and controlled foreign entities to engage in activities involving Iran.
Even those companies with no links to the Iranian shipping fleet will have a significant part of their business affected because the bulk of trade in and out of the country is undertaken in ships carrying other flags, maritime industry officials said.
Banks process premium payments and due to their vast global exposure, including to the US, they are unlikely to do so for companies that trade with Iran, one of the insurance brokers said.
"The primary problem is the payment of insurance premiums because financial institutions like to deal with clean benign cargoes," he said.
The maritime industry officials also noted that the processing of claims only occurs in the event of an accident and though they may not be frequent in Iranian waters, all insurance covers first need to be processed at banks, which are unwilling to deal with Iranian business.
A 180-day wind-down period before the sanctions are reimposed on Iran's port operators and shipping and shipbuilding sectors ends November 4.
Transactions by foreign financial institutions with Iran's central bank and insurance services are also to end by that date.
However, most business entities do not want to take any chances as some transactions may spill over into the sanctioned period.
"Sanctions are designed to restrict trade and when there is a grey area, insurers err on the side of caution," the same insurance broker said.
Insurance companies already have a Sanction Limitation and Exclusion Clause, or SLEC, which exempts them from providing any payments or cover in contravention of international sanctions. Underwriters must not be seen to be insuring something they are not supposed to do, a P&I Club executive said.
A chartering executive with an oil trading and refining company said there will now be "a lot of uncertainty over Protection and Indemnity."
Private businesses have pinned their hopes on the fact that unlike the past when comprehensive international sanctions were imposed on Iran, this time it is only the US that has declared its intention to do so.
A full assessment of the likely impact of the US decision will be possible after the remaining JCPOA partners -- China, France, Russia, the UK, Germany and the EU -- clarify their positions, the North P&I Club said in a statement last week. These partners recently reaffirmed their support for the JCPOA. Further clarification is also needed from the US Office of Foreign Assets Control, or OFAC, in relation to the management of the winding down period, the statement said.