Iran has claimed that it can withstand up to three years worth of U.S. oil sanctions but the countries real downfall could come in the form of insurance salesman. More specifically the lack of insurance sales brought on by an upcoming European ban on providing maritime insurances for Iran’s oil tankers.
90% of the world’s tanker insurance is based in the West and without maritime insurance Iran won’t be able to ship oil to essential markets including Japan, China, India and South Korea.
As one Japanese buyer recently told Reuters:
“The bottleneck is insurance.”
Japan and South Korea would both like the EU to create exemptions to the rule however that is an unlikely scenario. Those two countries could provide government guarantees or use Iranian insurance, however Iran has leveraged its tankers business by mortgaging the fleet in lieu of recent economic sanctions, those mortgages demand AAA-rated insurance and that’s something that Iran and stop-gap insurers simply can’t provide.
Even if Iran could provide its own insurance policies on the oil tankers, leaders find it “laughable” and as one expert notes:
“Even if Iran said it would, we would have no collateral for that” while adding that Iran would never pay, more specifically “the chance [of a payment] is zero.”
Insurance isn’t cheap on our cars, homes and other belongings, now just imagine if you were attempting to insure hundreds of millions in oil that were traveling across the ocean. It looks like insurance salesman could in fact be the final straw that breaks the Iranian governments financial back.