The European Union is unlikely to accept South Korea’s request for an exemption from its planned ban on insurance for ships carrying Iranian oil, Seoul officials said Tuesday.

A failure to secure a waiver would mean Korea must halt imports from one of its major crude suppliers unless it finds an alternative source of insurance.

“Our discussions (with the EU) have yet to be finished, but considering the current negotiation process, it will not be easy for us to secure an exemption,” Foreign Ministry spokesperson Cho Byung-jae said at a news briefing.

The EU plans to prohibit European insurers from covering Iran oil shipments beginning July 1 as part of efforts to force Teheran to give up its nuclear programs.

Around 90 percent of the world’s tanker insurance is underwritten in the West. A supertanker carrying around 2 million barrels of oil is expected to need $1 billion insurance coverage against personal injury and environmental liability, industry figures show.

Seoul has been in talks with the EU to be exempted from the sanction, amid concerns that it would cause a supply shortage and a hike in petrol prices.

Iran made up 9.4 percent of Korea’s crude imports estimated at 930 million barrels last year, according to government data.

Asian crude buyers have called for state-guaranteed insurance coverage but the Korean government has been hesitating to take an official stance in light of its ties with the U.S. and EU, as well as the North Korean nuclear issues. SK Energy and Hyundai Oilbank, the country’s largest and fourth-largest refiners, have decided to stop importing Iranian oil starting as early as June, Reuters reported Monday.

Under long-term deals, the companies bring in 130,000 and 70,000 bpd, respectively.

The sanctions have also stoked public concerns over a fresh oil shock in Korea, the world’s fifth-largest crude buyer which imports almost all its oil needs.

To head off a supply crunch, Korea boosted imports from other Gulf and Southeast Asian nations and trimmed its shipments from Iran by more than 20 percent on-year in the first quarter of 2012.

The reduction was also aimed at helping Seoul secure a waiver from U.S. sanctions that prohibit transactions with the Iranian central bank. 


By Shin Hyon-hee (heeshin@heraldcorp.com)