Iranian oil tanker continues to blaze off China’s coast

The Iranian oil tanker that crashed off the east coast of China continues to blaze for the third consecutive day, as weather conditions continue to hamper efforts to control the fire, increasing both the environmental fallout and the likely insurance cost of the accident.

The tanker Sanchi, owned by Iran’s top oil ship operator National Iranian Tanker Company, collided with the CF Crystal, a US ship carrying grain, roughly 300km off the Chinese coast, close to Shanghai on Saturday night. The collision caused the tanker to burst into flames and it has been spilling oil ever since.

On Tuesday, a statement from China’s Ministry of Transport explained that attempts to both put out the fire and rescue 31 remaining crew members had been unsuccessful due to poor weather conditions, with heavy rain, strong winds and 3m high waves.

Furthermore, flames and toxic gases from the tanker mean that the South Korean Coast Guard’s search and rescue team could get no closer than three miles from the tanker, according to Reuters.

So far one body has been discovered in the water, on Monday, and handed over to the Chinese civil affairs bureau.

The Panama-registered ship was carrying 136,000 tonnes of condensate, an ultra-light crude oil that becomes highly volatile when exposed to air and water, from Iran to South Korea. The fear is that the longer the blaze continues, the more likely it is to explode, creating potentially the worst oil tanker disaster since 1991 when 260,000 tonnes of oil leaked off the Angola coast.

As yet though, it is unknown how much oil has spilled, as a South Korean official told Reuters. “We can’t grasp the level of oil contamination at this moment.

The cargo is still on fire, so it is hard to figure out if oil is being spilled,” said Park Sung-dong, an official from South Korea’s Ministry of Oceans and Fisheries.

As of Tuesday, four rescue ships and three cleaning boats had been sent from China, a ship and helicopter had been dispatched from South Korea, and a US navy aircraft had been searching a 12,350sq km area for any remaining survivors.

Meanwhile, the US freight ship CF Crystal suffered limited damage and the 21 crew members, all Chinese nationals, had been safely rescued. The ship has been taken to the port of Luhuashan, just south of Shanghai, for further examination into the cause of the accident.

Ship tracking data shows that the collision took place in waters not frequently charted by large vessels, which more commonly stick closer to the Chinese coast in the west or to the Japanese coast in the east.

According to Lu Kang, a spokesman at China’s foreign ministry, the issue of compensation for the victims will be addressed after the investigation is complete.

The Shanghai Maritime Bureau stated that traffic in and out of what is one of the world’s busiest ports has been unaffected by the accident.

In financial terms, the oil on board the tanker is equivalent to one million barrels and a value of $60m. South Korea’s Hanwha Total Petrochemical, the intended recipient of the oil, said it would use its own stockpiles to replace the lost cargo.

The accident has occurred almost a year after global shipping insurers found a way to provide full coverage for Iranian oil exports without involving US-based reinsurers, thereby bypassing the restrictions placed on US companies handling any Iranian goods.

The new arrangements, which started in February 2017, were expected to boost the number of Iranian exports. A landmark deal struck in 2015 lifted many of the international sanctions placed on Iran due to its nuclear development programme, but US restrictions still prevented US reinsurers from participating, leading to 13 of the biggest shipping insurers creating a temporary, fall-back arrangement in 2017 to cover the shortfall.

But as of February 2017, normal coverage of up to $3.08bn and compensation up to $7.8bn for accidents and spills could be collected from shipping companies insured by P&I group members.

As Andrew Bardot, secretary and executive officer of the International Group of P&I Clubs in London, told Reuters at the time: “This will substantially address the potential shortfall in reinsurance recoveries in the event of Iranian-related claims.”

It remains to be seen how the latest accident plus the unpredictable foreign trade policies of a Trump-led US administration will affect the Iranian insurance arrangements.

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