US-led sanctions against Tehran have claimed their latest casualty, with state-run companies in India and Iran deciding to scrap a 37-year-old shipping joint venture because the unrelenting pressure was making operations untenable.

The sanctions denied the joint venture’s ships of insurance to cover third-party claims in case of oil spills or other accidents. Also, the curbs have made it very difficult for Iranian companies to do business in US dollars and euros — the currencies of choice for charter hires.

The joint venture — Irano Hind Shipping Company — will be disbanded and its assets split between the Shipping Corp of India and the Islamic Republic of Iran Shipping Lines, Shipping Corp Chairman Sabyasachi Hajara told Dow Jones Newswires.

Shipping Corporation owns 49% of Irano Hind, while the Iranian company hold the rest. The joint venture has seven ships — including four crude carriers — and is getting an eighth one built.

Another Shipping Corp senior executive said that the joint venture has been “rendered useless after all the sanctions. It also hasn’t got insurance covers. So it’s best that the operations are discontinued.” He added that the decision will have to be approved by the Indian and Iranian governments.

The move to scrap the venture is a victory for the sanctions, which have been imposed by the US and Europe as well as the UN to get Iran to abandon an alleged nuclear weapons programme. Tehran says its nuclear programme is for peaceful purposes, such as generating electricity.

India maintains that it follows only UN sanctions, and not those imposed unilaterally by countries or blocks. But it has been decreasing its crude oil imports from Iran, saying it wants to diversify its sources and reduce dependence on any one country.

Iraq replaced Iran as India’s second-largest crude-oil supplier in the year ended March 31 as New Delhi cut shipments ahead of impending sanctions by the US and the European Union on countries trading with Tehran.

In the financial year ended this March 31, shipments from Iran to India fell 5.7% to 17.44mn tonnes. New Delhi aims to cut Iranian imports to about 15.5mn tonnes this fiscal year

Irano Hind was formed in March 1975 to service the government-run Kudremukh iron ore project in the south Indian state of Karnataka. It later diversified to other transportation services, including shipping refrigerated foodstuff between India and Iran and other countries.

The senior Shipping Corp executive said the decision to scrap the joint venture is unlikely to have a significant impact since the company had already trimmed operations. Also, it doesn’t contribute significantly to Shipping Corp’s finances.

“The ships the company [Shipping Corp] will get from Irano Hind can be used on other routes,” he said. Shipping Corp has a fleet of 75 ships, with 25 more on order. The Islamic Republic of Iran Shipping Lines couldn’t immediately be reached for comment.

Meanwhile, the Mangalore Refinery & Petrochemicals Ltd said it expects to use Indian-flagged vessels to import crude oil from Iran starting next week after New Delhi barred the use of Iranian tankers because that was hurting the business of local shippers.

MRPL — a unit of the Indian state-run energy explorer Oil & Natural Gas Corp — imported just one cargo of crude oil from Iran in July using an Iranian tanker against its entitlement of four cargoes, managing director P P Upadhya said.

India has cut its imports of Iranian oil following US and European Union sanctions against Tehran over its nuclear program. For the current fiscal year that started April 1, Indian refiners have a commitment to source 310,000 barrels a day of oil from Iran, down 11% from the previous year.

The Western sanctions have led insurers to stop providing cover for tankers to bring oil from Iran. Indian then allowed its refiners to temporarily chart Iranian tankers.

But, the shipping ministry objected to this arrangement. Meanwhile, the government made its own arrangement to insure Indian tankers by asking state-run insurers to cover cargoes from Iran.

“The General Insurance Corp of India has agreed to provide $ 50mn insurance for hull and machinery and $ 50mn for protection and indemnity,” Upadhya said.
“The modalities between shipping agencies and GIC are being worked out,” he said. “By Monday-Tuesday it will be resolved.”

Upadhya said MRPL may import seven cargoes from Iran in August, including its backlog of three from July, using Indian tankers.

MRPL, India’s largest importer of Iran crude, scaled back its Iran imports for the year by 19% to 100,000 barrels a day. It imported 966,600 barrels a day during the April-June period.