Home / Politics / Policy /  India rejects Iranian demand for $1 mn guarantee to free tanker

India has rejected an Iranian demand for a $1 million guarantee to free a tanker detained in the West Asian country since 13 August allegedly for polluting Iranian waters even as it is working on a strategy to break the deadlock, according to a top government official.

“We are not going to give them any guarantee that is meaningful," said a top bureaucrat. “But, we will give Iran something so that they can exit from this."

The issue was discussed by officials from the ministries of shipping, petroleum and natural gas, directorate general of shipping and Shipping Corp. of India Ltd on Wednesday.

“We are looking at some strategy to come out of this. But, we will have to do this very quietly," the bureaucrat, who attended the Wednesday meeting said, indicating that the solution should not be seen to breach Western sanctions on Iran and would be a face-saver for both sides.

“What Iran has done (detaining the ship) is not legal," added this person who did not wish to be identified.

A spokesman for the shipping ministry declined comment. Gautam Chatterjee, director general of shipping, was not immediately available for comment.

The Ports and Maritime Organization of Iran has asked for a $1 million guarantee from the ship’s insurer, The Steamship Mutual Underwriting Association (Bermuda) Ltd, as a condition for releasing the tanker. The guarantee could be used to pay for cleaning pollution caused by the ship.

“Giving the guarantee is an issue because of the sanctions," a Shipping Corp. executive said. “The ship’s insurer cannot give the guarantee because sanctions are applicable." He too asked not to be named.

B.K. Mandal, the finance director of Shipping Corp., said that his firm was looking to settle the issue amicably. “We are not responsible for the pollution," said Mandal, who is also the acting chairman and managing director of Shipping Corp.

Western countries are applying pressure on Iran because they suspect Tehran is developing nuclear weapons. Iran claims it’s using nuclear technology for peaceful purposes.

The UN, US and European Union (EU) have imposed separate sanctions on the West Asian country, the world’s fifth-largest producer of oil.

MT Desh Shanti, a 2004-built double-hull tanker, was detained by Iranian naval authorities on 13 August while on her journey from Basra in Iraq to Visakhapatnam on India’s eastern coast carrying crude for state-run oil refiner Hindustan Petroleum Corp. Ltd.

The Ports and Maritime Organization of Iran could not be reached immediately for comment.

EU has banned the purchase, transport, finance and insurance of Iranian oil from 1 July 2012, reacting to its nuclear programme.

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

The 13-member IG Clubs, a London-based group, between themselves insures close to 95% of the world’s tankers against claims involving pollution damage and wreck removal.

“For Iran, this is a test case," said a Mumbai-based shipping arbitrator who closely follows developments involving the country. “It will be interesting to see how this will be handled by The Steamship Mutual Underwriting in particular and other International Group Clubs in general. Even if this ship is released, Iran may create problems for other ships with false claims so that there will be pressure on the IG Clubs to act," he said asking not to be named.

Jonathan Andrews, head of underwriting at the London office of The Steamship Mutual Underwriting, said his firm was not in a position to comment.

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