Two European insurers have withdrawn cover for tankers involved in the Iranian oil trade, the first such move since tough new sanctions were imposed in July, documents obtained by Reuters show.
The tankers, operated by Hong Kong's Titan Petrochemicals Group Ltd, were used to store Iranian oil for top oil trader Vitol and little known shipping firm Glammarine, Reuters reported previously.
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While the European Union sanctions bar Western-based insurers from covering tankers that carry, rather than store, Iranian oil, the documents show the insurers were not prepared to risk falling foul of the curbs.
"Titan's conduct breaches the spirit if not the wording of U.S. and EU sanctions against Iran," a September 14 document quoted Mike Salthouse, director of North Insurance Management, as saying on behalf of the North of England P&I Association, Titan's main insurer.
"Were the Association to continue to provide insurance to the Titan fleet we have concluded that there would be a high probability of further breaches of sanctions," it said.
Gard, the world's second-largest marine insurer, also dropped the shipping and oil storage company, according to a September 7 document from the insurer to Titan. It had covered one of the firm's floating oil storage vessels.
Both European insurers declined to comment.
Titan must now find new insurers to continue operating its floating storage business off Malaysia, one of the biggest in Southeast Asia. That could prove difficult if other Western-based insurers, which cover around 90 percent of the world's tanker fleet, also decide to shut Titan out.
Titan officials could not be reached for comment.
The company's floating oil storage business generated more than $64 million in revenue last year, about a fifth of Titan's total revenue, according to the firm's annual results. Titan hires the floating storage vessels under long-term contracts with independent shipowners such as Norway's Frontline.
Frontline, the world's largest independent oil tanker operator, has withdrawn the charter for at least one of Titan's fleet due to the ship's involvement in the Iranian oil trade, a Frontline official told Reuters.
Heavy with debt and with five straight years of losses, Titan is being sold to Chinese oil trader Guangdong Zhenrong Energy Co Ltd, whose parent, Zhuhai Zhenrong, is blacklisted by the United States as the biggest supplier of refined petroleum products to Iran.
Titan is locked in a legal battle with U.S. buyout fund Warburg Pincus, which holds a stake of around 10 percent in the shipper. New York-based Warburg has ploughed $215 million into Titan since 2007 in an unprofitable investment, and has filed a petition to wind up the company through the Bermuda courts.
(Additional reporting by Jonathan Saul in London and Stephen Aldred in HONG KONG; Editing by Michael Urquhart and Ian Geoghegan)