The Seoul government is bracing for a possible halt in imports of Iranian crude oil following tightened sanctions by the European Union.

The EU enacted rules in March to stop insurance coverage on all tankers carrying Iranian crude oil starting July 1 as part of sanctions on the Middle Eastern country to make it give up its nuclear program.

The Korean government belatedly found out about the measure and only recently began pushing for negotiations with the EU to extend the insurance coverage.

Crude oil tankers are required to have insurances on their cargo, hulls and for protection and indemnity. Because of their potential danger, uninsured tankers are not allowed to pass through any territorial waters. Insurers of almost all the world’s tankers follow EU law.

“If the EU goes ahead with the measure, it could result in a halt in imports of Iranian crude oil from July,” said Moon Jae-do, a senior official at the Ministry of Knowledge Economy.

“We will do our best to persuade the EU to exempt us from the measure while securing alternative sources of imports.”

The EU’s sanctions on Iran would result in an imbalance of global crude supply and demand and an increase of oil prices, weighing on the Korean economy and exacerbating Korea’s trade terms with Iran, the ministry said in a statement.

Seoul has so far focused only on negotiations with the U.S. to get exempted from a law that bans economic entities dealing with the Iranian central bank from doing business with U.S.-based financial institutions. Because the Iranian central bank collects the country’s oil export revenues, the law essentially forces other countries to stop importing oil from Iran.

But even if Korea gets exempted from the U.S. National Defense Authorization Act, it won’t be able to import Iranian crude if the European insurers do not cover the tankers that transport it.

Unlike the U.S. Act, the EU rule does not have any grounds to permit exceptions. And it will be difficult to reach an agreement with the EU, which consists of 27 member countries, to give a grace period for Korean tankers.

A Korean team of negotiators led by Moon plans to visit Brussels for talks with the EU later this month, following their previous trip in April.

A high-ranking ministry official said that while the government concentrates on the negotiation, Korean refiners should make efforts to minimize Iranian crude imports in the remaining month and a half. Iranian oil accounted for 9.4 percent of Korea’s total crude imports last year.

“Even if we can meet the demand by increasing imports from Saudi Arabia and the United Arab Emirates, crude prices will inevitably rise once imports from Iran are banned,” he said.

By Kim So-hyun (sophie@heraldcorp.com)