Lloyd’s restricts cover for petroleum shipments to Iran

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Lloyd’s of London, the insurance market, is restricting cover for any ships carrying petroleum to Iran.

President Barack Obama signed new sanctions legislation into law on Thursday night. Lloyd’s said it would move to ensure its members complied with the US rules, the toughest unilateral measures taken against Iran in over a decade.

“The Act provides a powerful tool against Iran’s development of nuclear weapons and support of terrorism, while at the same time preserving flexibility to time and calibrate sanctions,” Mr Obama said.

“In particular, it provides new authority for addressing the situation of those countries that are closely cooperating in multilateral efforts to constrain Iran.”

Sean McGovern, Lloyd's general counsel, said earlier, “Lloyd’s will always comply with applicable sanctions”.

International companies that defy the unilateral measures could be barred from conducting any transactions with US banks and have their US assets frozen, as well as being denied US government contracts.

The sanctions take aim at companies providing Iran with petroleum and the underwriters of those shipments. They also target international banks that trade with Iran’s Revolutionary Guard Corps, or with 16 blacklisted Iranian banks. Because of limited refining capacity, Iran depends on imported petroleum to meet between a quarter and a third of its domestic consumption.

The current round of US sanctions contrasts with a 1990s-era Congressional bid to impose penalties on energy companies doing business with Iran. That was largely ineffective for years, because it was successfully resisted by the European Union.

This time, the EU’s three leading powers – Germany, France and Britain – all support tougher sanctions against Iran.

Iran will now find it harder and more expensive to secure supplies of petroleum. But the biggest future impact of the legislation may be to limit international banks from dealing with Iran. Many European banks have pulled out, but others, notably those from China and the Gulf, continue to do extensive business in the country.

Mr Obama’s administration had been keen to win greater latitude from Congress than it ultimately received in enforcing the new measure. The new law also makes it more difficult for the administration to avoid imposing the existing sanctions on companies that invest $20m or more in the Iranian energy sector.

The legislation allows Mr Obama to grant a waiver for sanctions on a case-by-case basis for a maximum of twelve months, if he deems this vital for US interests and if the home country of the company concerned cooperates with the US on Iran policy – as is true of the UK.

The legislation also says companies should not be punished if they have exercised “due diligence” to avoid covering shipments to Iran.

Lloyd’s, which has 8-10 per cent of the worldwide maritime insurance market, said it welcomed such provisions. Other insurers are likely to follow its lead on complying with the new rules.

The prospective EU sanctions on Iran will also focus on financial services, while United Nations measures urge vigilance in financial transactions with the country.