One month after three Iranian ships were seized in Singapore, Islamic Republic Shipping confirmed that two other ships were seized in Malta and Hong Kong.
The news was carried by Radio Zamaneh and quoted by Iranian news agency Payvand Iran News.
Mohammad Hossein Dajmer, director of Islamic Republic Shipping told a press conference that they are trying to secure the release of these ships but added “If in some cases the resources necessary are not provided, we might come to an agreement on putting the ships up for sale.”
The three cargo ships, Sahand, Sabalon and Tochal, which belong to Iranian navy, were seized in Singapore last month upon complaints filed against them by a French bank for failing to make appropriate loan payments.
While it was announced that the ships were put up for sale, Dajmer claimed: “The loan payments were made but the ships were not released yet” and the delays have been attributed to the end of year holidays by Iranian media.
Islamic Republic Shipping maintains that the loans are currently in good standing; however, the insurance they carry has not met the approval of the bank.
Following the approval of UN sanctions against Iran, several large insurance companies have refused to insure Iranian ships and the alternative insurance that Iran has secured for the ships has not been accepted by the banks.
The two ships that were seized in Malta and Hong Kong have been called in by a German bank that carries a $280 million loan on it. The bank refuses to accept payment on the loan due to the insurance disputes and wants full payment on its loan.
The UN Security Council passed a resolution last June which imposes restrictions on companies linked to Iran’s Revolutionary Guards and the Islamic Republic Shipping.
(The following is a translation of a BBC Persian interview. A link to the Farsi-language original can be found below.)
BBC
“Persian Dawn” program
January 3, 2011
Interview with Mehrdad Emadi, EU Economic Advisor
One month after the seizure of 3 Iranian ships in Singapore, 2 more have also been seized in Malta and Hong Kong, as confirmed by IRI Shipping Industry officials. Nearly a month ago, three Iranian naval cargo ships, named Sahand, Sabalon and Tochaal were seized, following an official complaint against them by a French bank in Singapore. The said bank had financed the purchase of these ships and evidently upon the default on loan payments, it had filed a complaint, and the court subsequently issued a warrant for the seizure of the ships. Later two more ships were similarly seized in Malta and Hong Kong based on a complaint filed by a German bank.
According to the Director of Iran’s Shipping Lines, “Iran’s plan is to obtain the release of the ships, but in the event the necessary funding cannot be secured, it is likely that a warrant could be issued for auctioning off of the ships.”
We spoke with Economic Expert Mehrdad Emadi in this regard and asked his opinion on the banking problem that has led to such seizures.
Mehrdad Emadi: First of all, the ships used by Iranian companies do not have the necessary legal protection in terms of insurance coverage. Protection and Indemnity insurance policies usually consist of three areas, only one of which covers damages to the physical ship in fateful incidents. And the three ships that were seized earlier in Singapore waters, as well as the recent two, do not have such necessary coverage.
Another issue facing Iranian shipping lines is that Iran has created a domestic trade organization with the Central Bank as guarantor, and maximum assets of no more than one billion dollars. Furthermore, Iran’s Central Bank is not a member of International Sea Cargo Shipping Insurance Networks used for transportation of goods. It therefore lacks the necessary recognition and adequate credit worthiness. And secondly, the insurance budget allocated to this purpose by the Central Bank is extremely inadequate.
It is within this framework that I would need to add that the very insurance company that was providing primary coverage for water transport of cargo, is itself on the list of sanctions against Iran which renders unlawful any contract that the insurance company enters into. This is causing concern for the government-owned banks and semi-official and pseudo-official lenders that have issued loans to the companies that have purchased these ships, as they lack sufficient capital and fear the potential law suits that can be filed by even the ship’s crew in case of accidents. Therefore, the banks are reluctant to take such risks that are incidentally growing every day, as the sanctions and their application expand and grow in severity.
Mr. Emadi, what are the chances of other Iranian ships following the same fate and if the trend continues, what steps can Iran take to contend with the situation?
Mehrdad Emadi: The first part of your question is quite important. The fact that this has already occurred twice, can serve as a wake-up call for the other banks to follow suit and to perhaps extricate themselves from the risk of lending funds to Iran’s shipping lines - a move which the banks within the European Union are also evaluating. This could bear extremely destructive consequences for Iran’s trade capacity in terms of the transportation of goods, and could also lead to sea blockading of the country.
As for the steps that Iran can take to rectify the problem: the only practical solution is for Iran to enter into a partnership agreement with an internationally known insurance provider so as to split the risk and reduce her margin of risk perhaps by 50%. The cost of this would naturally be exorbitant for Iran, as it is considered a high-risk partner under the current sanctions.Therefore, Iran may even have to absorb 3-4 times the ordinary cost of such a partnership.