China Offers Insurance To Iran Oil Shippers, Withdraws From Pipeline Finance

The CEO of state-owned China Shipping Development Company (CSDC) Yan Zhichong told Bloomberg on 17 March that the Chinese Ministry of Transport and National Development Reform Commission have decided to extend insurance to all shippers of Iranian crude to China, after the latest round of US sanctions come into effect on 1 July. Mr Zhichong noted that the position of the Chinese government “is clear – we must make sure that the volume of our [oil] shipments [from Iran] will not drop.” It is not clear if China will use a national re-insurer or seek assistance from non-US allied nations in the Asia-Pacific area. However, Beijing has signaled that it will do its outmost to sustain at least its 2011 level of imports. These accounted, according to the US Energy Information Administration, for 22% of total Iranian exports.

Meanwhile, Beijing has decided against underwriting the proposed pipeline to deliver Iranian gas to Pakistan. On 16 March, Pakistan’s Finance Minister Naveed Iqbal told local media that the Industrial and Commercial Bank of China (ICBC) and its local partner, Habib Bank Limited, decided to withdraw from the financing of the 1,000km long Pakistani component of the project that aims to transport up to 8.7 bcm/year of gas to central Pakistan. The cost of the Pakistani section of the pipeline is estimated at $2.5bn. Mr Iqbal said that ICBC attributed its decision to the current geopolitical situation. Pakistan has said that it has alternative means of financing its part of the project.

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