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Bangalore: When oil tanker MT Omvati Prem loads crude from Iran’s Kharg Island export terminal on 15 August, it will be the first Indian ship to haul oil from the Persian Gulf nation after European insurers declined to provide third-party insurance cover.

State-run insurer United India Insurance Co. Ltd has provided the vessel owned by Mercator Ltd cover worth $50 million against pollution damage, wreck removal and personal injury claims.

Transporting more crude from Iran, however, will depend on the scope of further sanctions being planned by the US, Mercator said. European Union insurers on 1 July cut off third party liability cover to around 95% of the global tanker fleet that ships crude from Iran.

United India’s insurance cover is part of an emergency plan put in place in mid-July at the prodding of the government to help India continue buying crude oil from Iran. The insurer has also agreed to provide a separate cover of up to $50 million for hull and machinery to protect ships against physical damage.

India, the world’s fourth-biggest oil importer, buys about 8-10 shipments a month on an average from Iran, mainly to its refineries on the western coast, but the European Union sanction has crippled the shipments.

Omvati Prem will carry the crude to New Mangalore port, where Mangalore Refinery and Petrochemicals Ltd, the nation’s biggest buyer of Iranian crude, runs a refinery. The voyage to New Mangalore takes seven days. In July, the state-run refiner could import only one shipment against a monthly average of four.

“The MRPL shipment was finalized and approved by the government last week," a shipping ministry spokesman said. MRPL managing director P.P. Upadhyadid not return calls made to his office.

Mercator was the only tanker owner, not only among the five operating in India but from anywhere else in the world, that had participated in a tender floated by the government’s ship-chartering department, Transchart, on 30 July for hauling 85,000 tonnes of crude from Iran for MRPL.

State-owned departments and undertakings are bound by a government policy to make their shipping arrangements through Transchart, which gives first preference to Indian ships to move their cargo, provided they match the lowest rates quoted by foreign ship owners when price quotations are invited.

The 30 July enquiry was the first to be floated by Transchart to fix a ship on spot basis for a state-run oil refiner after the European Union banned the purchase, transport, financing and insurance of Iranian oil from 1 July.

Following the ban, London-based International Group of Protection and Indemnity Clubs (IG Clubs) stopped providing third-party liability cover to ships hauling Iranian crude.

The lone participation by Mercator in the government tender just goes to show the effectiveness of the EU sanctions, a Mumbai-based shipping industry executive said, requesting anonymity.

Top local tanker owners such as Shipping Corp. of India Ltd, Great Eastern Shipping Co. Ltd, Essar Shipping Ltdand India Steamship stayed away from participating in the Transchart enquiry saying the scope of the United India cover was not adequate enough for them to move crude from Iran.

In the absence of a suitable third party liability cover, Great Eastern has even halted its annual contract with MRPL that began in April to carry crude from Iran. “While other tanker owners feel that the $50 million third party liability cover is not good enough, we think we would be able to manage with the cover," a spokesman for Mercator said, confirming that Omvati Prem has been booked by MRPL for loading Iran crude.

The Mercator spokesman also said the firm would “review" its decision to carry crude from Iran based on developments taking place in the US. He was referring to a new plan being readied by the US that seeks to impose sanctions on those who sell, lease or provide oil tankers to Iran or provide insurance to the National Iranian Tanker Co., the state-run shipping line. The new sanction is awaiting President Barrack Obama’s signature.

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