Iranian exports to China squeezed
As a major shipping insurer halts indemnity on Iranian crude tankers, Shanghai Sinopec stops processing their oil
Heightening political tensions with Iran have caused foreign nations to slow down or stop oil imports from the region. China, currently Iran's largest single export destination, is also now showing signs of reducing import volumes from the troubled state.
Sinopec Shanghai Petrochemicals has processed no Iranian crude this year, after parent company Sinopec Group halted imports from the republic after heated contractual disputes. Last year, Sinopec Shanghai refined around 22,000 barrels-per-day of Iranian oil, or 10% of its throughput, but has yet to process any in the first three months of the year.
The company's chief financial officer Ye Guohua revealed Shanghai Sinopec's plans to keep Iranian oil usage consistent was greatly affected by the “sensitive” political situation, and stated that they would exercise caution in processing Iranian crude this year.
P&I Club, a major Chinese ship insurer, is also treating the issue with discretion, and as of July will halt indemnity coverage for tankers carrying Iranian oil. The decision is a sign that refiners in China may have trouble fulfilling Iranian oil quotas as shipping will become increasingly difficult. Recent reports of a tanker sitting off the cost of Iran in an apparently stalled Syrian, Iranian, Chinese oil arrangement only serve to support concerns.
The club's new policies are likely to influence other insurers to limit coverage for tankers carrying the oil, creating serious repercussions for the Islamic nation, for whom oil is the single largest export. A representative of the insurer in Beijing remarked that “these are $1 billion tankers we are talking about … no single insurance company can handle that.”