Iran has come up with several methods to foil the European insurance embargo on ships loaded with its crude, a sanction which may harm its vital exports as much as the EU oil embargo itself.

Strengthening its sanctions aimed at pressuring Tehran to renounce a controversial nuclear programme, the European Union on July 1 implemented a total embargo on the purchase of Iranian oil.

The 27-member bloc also decided to prohibit insurers and reinsurers in Europe, who control 90% of marine insurance in the world, from covering any ship carrying Iranian crude.

The decision has prompted Tehran's non-European customers, particularly in Asia which absorbs 70% of Iranian crude, to look for improvised alternatives to maintain deliveries.

The International Energy Agency estimates the new sanctions could lower Iranian exports by as much as 40%.

Japan passed a law allowing the state to act as a substitute for European insurance firms in reinsuring tankers which are loaded with Iranian crude, up to $7.6 billion.

But other major customers have not followed suit, forcing Tehran to devise its own alternatives.

China and India, two major buyers, have accepted an Iranian offer to transport the crude with its own fleet under all-Iranian insurance. South Korea, which suspended imports on July 1, has not ruled out joining the offer.

But this solution faces several obstacles, apart from transportation price disputes which have broken out with China, according to diplomatic sources.

National Iranian Tanker Company (NITC), with 40 tankers of 100,000 to 300,000 tons, does not have the long-distance capacity for more than 2 million barrels (300,000 tons) a day in exports by pre-sanctions Iran, a European expert said.

Morever, a number of these vessels were being used in June to store Iranian offshore crude that Tehran has not been able to sell because of the sanctions, according to industry specialists.

Iran has announced plans to quickly expand its onshore storage capacity, which has been saturated, including by subcontracting to private firms. Tehran has also ordered 12 new supertankers from China and should receive the first in December.

"But these solutions do not solve the problem in the short term," said an expert who believes the European ban on tanker insurance "currently has as much impact" on Iranian exports as the EU ban on crude itself.

Iranian insurance companies now provide insurance for the NITC ships and have also offered to cover foreign tankers.

"But these firms are not capitalised to that level and the Iranian state does not seem so far to have formally committed itself to support them were a disaster to strike that could run into billions of dollars," said a Western analyst.

"And they may also have trouble with payments as the Iranian banking system is already under international sanctions," said the analyst posted in Tehran.

In another attempt to evade sanctions, the NITC has tried to disguise some of its ships by changing their names, the company ownership and country of registration, according to the experts.

A US congressman accused Tanzania last week of having reflagged six Iranian tankers, provoking a probe by the Tanzanian government.

Iranian authorities also announced in May that 20% of oil exports, previously monopolised by the national company NIOC, could be entrusted to private exporters.

This could ease the flow of oil through small operations which avoid Western sanctions. "It is easier to insure small shipments than supertankers carrying 300,000 tons of crude," the European expert said.