With a focus on strengthening its energy security, the Japanese government proposes to expand the scope of the arrangement that offers coverage equivalent to reinsurance for tankers transporting crude oil and other commodities to Japan.
According to a news report in The Japan News, the measure, which currently applies only to “Iranian crude oil,” will be revised to also cover crude oil from countries other than Iran, as well as liquefied natural gas (LNG), according to sources close to the government. This will help mitigate risks for shipping companies and provide flexible security for energy suppliers.
The news report said, “Under the special measures law, enacted in 2012, the government introduced a measure to provide coverage equivalent to the aforementioned reinsurance for tankers without reinsurance. However, this measure applied only to Iranian crude oil, as, at the time, EU sanctions prohibited reinsurance for Iranian crude oil, giving rise to concerns that imports to Japan could be suspended. The government therefore stepped in to provide the coverage that would otherwise have been provided by reinsurance.”
According to the sources quoted in the report, the revised law will allow for the special measure to be applied to “countries designated by Cabinet order,” allowing it to be used flexibly for nations other than Iran. In addition to crude oil, petroleum products such as naphtha, which is used as a raw material for many everyday plastic products, as well as LNG, will be made eligible for coverage.
The government reportedly envisions applying the measure to more countries in cases where additional energy suppliers become subject to Western sanctions, resulting in a sudden disruption in supplies to Japan. Although there are no specific candidate countries at this time, the government will review the measure to prepare for future risks.
The news report said learning from how tensions in the Middle East have increased, the government is diversifying its energy procurement channels. The government also plans to provide coverage equivalent to reinsurance for voluntary insurance on tanker cargoes and hulls.