Japanese and South Korean insurers are trying to persuade the European Union to reconsider its sanctions against Iran so Europe’s insurance market can proceed with covering Iranian oil shipment to Asia.

"We argue that this regulation [EU sanctions] applies too broadly as it also hits non-European companies. Not only South Korea but also Japan, China and others face the same situation," a South Korean government source with direct knowledge of the matter said Friday.

European Union foreign ministers agreed on January 23 to ban oil imports from Iran and to freeze the assets of the Iranian Central Bank across the EU. The sanctions will become fully effective on July 1, 2012, to give EU member states enough time to adjust to the new conditions and find alternative crude oil supplies.

"We could fail to receive Iranian crude from July 1 if no solution is reached," the source told Reuters on condition of remaining anonymous.

European insurers provide coverage for the majority of the world's global oil tanker fleet, and the embargo could prevent Asian oil buyers from importing Iranian crude.

"Chinese tankers are exposed to similar risks as European ones as the sources of reinsurance are similar," said an official with a state-run Chinese ship-owner.

"If the oil is important enough, what you will find in this situation is the states stepping in to provide the reinsurance and liability insurance cover," said a senior official with a leading maritime insurer in Asia.

On February 19, Iran stopped oil exports to British and French firms in line with the decision to end crude exports to six European states in response to sanctions imposed on the country’s energy sector.

Iran announced on February 21 that it will only continue exporting oil to the European Union if the member states guarantee to pay the price and sign medium- and long-term oil purchase contracts.

India and China have already defied a US and EU embargo aimed at forcing Tehran to give up its nuclear energy program.

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News ID 181607