June 16, 2012 (TSR) – Japan’s lower house passed a bill on Friday to provide government guarantees to tankers carrying Iranian crude, which is to replace commercial insurance by Europeans after the EU’s oil sanctions kick in.
The bill is yet to be voted on by the upper house, but the opposition parties controlling it already indicated their support for the legislation. The bill may be signed into law by month’s end and before the European Union’s sanctions against Iranian oil industry are put in force on July 1.
The Japanese government plans to provide coverage of up to US$7.6 billion for each tanker carrying Iranian crude bound for Japan in the event of accidents. It is the first time Tokyo has offered guarantees on marine shipments, an official in the country’s Transport Ministry, who helped draft the bill, told Reuters.
The guarantee is needed to continue traffic after European insurers are banned from serving Iranian oil trade. The ban is part of the sanctions package the EU has issued to put economic pressure on Tehran and make it stop enrichment of uranium. Western countries suspect that Iran is hoarding the material to create a nuclear weapon, while Iran insists that it needs it as fuel for its civilian nuclear program.
Japan is the first of major buyers of Iranian crude not to follow the US’ and EU’s example of stopping all fuel imports from Iran. Similar moves by China, India, South Korea and South Africa may well follow.
Japan is among the countries which reduced crude imports from Iran and thus won a waiver from the US, which is issuing sanctions against Iran’s trade partners. However, Tokyo is reluctant to make further cuts, especially since its own nuclear energy industry was crippled by the Fukushima power plant disaster and the safety checks it prompted.