Iran Detains Tanker Carrying Iraqi Crude to India

Source: Reuters 8/15/2013, Location: Middle East

An Indian ship carrying Iraqi crude has been detained by Iran in its territorial waters due to pollution concerns, the head of the refiner buying the oil and India's shipping directorate said.

The Desh Shanti was carrying 140,000 tonnes of Basrah crude from Iraq to India, a separate source at buyer Hindustan Petroleum Corp Ltd (HPCL).

Iraq was India's biggest supplier of crude in June, pipping Saudi Arabia for the top slot with exports of 606,000 barrels per day (bpd). Exports from Iran, which used to be India's second-biggest supplier, have dwindled because of western sanctions.

"It was a Shipping Corp of India (SCI) vessel carrying Iraqi crude for us ... it was detained by Iran authorities to check pollution," HPCL Chairman S. Roy Choudhury told Reuters.

The ship was stopped on Tuesday.

"SCI has informed us that it will be getting cleared today," he added.

The head of India's directorate general of shipping, Gautam Chatterjee, confirmed that the Iranian coast guard authorities had detained the ship, adding: "I have no information it has been released."

The HPCL source said the Iranian coast guard suspected the vessel had spilled some oil and inspected it.

"They did not find anything. Now they have asked them to take the vessel to Bandar Abbas. After this we have been told there could be another inspection," he added.

Two sources at SCI said clarity on the vessel's status would emerge on Friday.

"The vessel is still in the Persian Gulf. We will get to know if things are clear to us only when it reaches Fujairah," one of the SCI sources said.

Any pollution damage claims would be handled by the tanker's insurer, the Steamship Mutual protection and indemnity club.

Michael Hird, head of claims at Steamship Insurance Management Services in London, said: "We are certainly involved in the matter. We are not in a position to comment further. Hopefully it is straightforward."

The HPCL source said SCI would arrange another ship if there were problems with this vessel for their consignment.

India, Asia's third-largest economy, relies on imports for 80 percent of its crude consumption, and over 60 percent of its supplies come from Gulf countries.

Tensions between Iran and Iraq have always been high, spilling into outright war during the 1980s, but they are now focused on the battle for market share as Iran struggles with the impact of western sanctions on its sales.

The United States and European Union have made it increasingly difficult for Iran to sell oil by imposing sanctions on finance and insurance as they target funding for Tehran's controversial nuclear programme.

Iran's top clients - India, China, Japan and South Korea - have cut purchases to win exemptions from the sanctions.

India's imports from Iran dropped to 140,800 bpd in June, the last month for which data is available.

HPCL and Mangalore Refinery and Petrochemicals halted Iranian oil purchases in April amid difficulties securing insurance for refineries processing the crude. That leaves private refiner Essar as Iran's only Indian client.

MRPL may resume imports from Iran soon if New Delhi comes forward with funds to back domestic insurers for cover of refineries.

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