By Osamu Tsukimori and Risa Maeda
TOKYO (Reuters) - Japan will not import any Iranian crude in July as buyers held back to avoid any risk of running foul of EU sanctions targeting insurance, which have severely disrupted the OPEC member's supplies, industry and government sources said on Wednesday.
Japan will join South Korea among top Asian buyers in halting all Iranian imports this month due to sanctions imposed by Brussels on Sunday that aim to cut Iran's oil revenues and force Tehran to curb its nuclear program. The measure will cost Iran dearly in July, as Japan and South Korea imported a combined 256,000 barrels per day (bpd) of Iran's crude in May, worth over $750 million at current oil prices.
"We're aware there will be no imports in July," said a Japanese government official, who requested anonymity because he was not authorized to speak to the media.
China, Iran's top oil buyer, is also likely to see reduced imports in July as it bickers with Iran's top shipping company over freight costs.
The EU oil embargo has stopped European insurers, who dominate the maritime sector, from offering cover on Iranian crude. Industry watchers say the EU step has proven to be the hardest hitting measure in the West's arsenal of sanctions aimed at Iran.
Japan's government agreed last month to step in and provide insurance cover of up to $7.6 billion for shipments to keep oil trade with Tehran going.
Iran's No.3 oil buyer stopped loading cargoes in early June to avoid vessels sailing the final part of their journeys to Japan uninsured in early July.
The country's next shipments will be loaded in Iran in late July. Allowing for journey time, they will arrive in Japan after mid-August, sources said.
So shipping companies will sign up with the government for insurance on Iranian crude later this month, the government source said.
"We haven't signed any contracts yet," the official said.
The cargoes scheduled to load in late July average out at the equivalent of just under 100,000 bpd for the month, up from around 70,000 bpd in June, an industry source said.
Japan has already scaled back its purchases of Iranian crude to ensure an exemption from U.S. sanctions, which target financial institutions dealing with Iran's central bank. The U.S. measures came into effect last week.
The United States gave Japan a waiver to those sanctions earlier this year after the Asian country reduced its import volumes of Iranian crude.
Its Iran crude imports fell by a third in the first five months of this year to an average of around 246,000 bpd despite an increase in Japan's overall demand, data from the country's Ministry of Economy, Trade and Industry (METI) shows.
Japan is the only country to date to offer sovereign guarantees on shipments.
China and India are relying on Iran to use its own tankers to deliver oil to them, making Tehran liable for the insurance.
South Korea has simply stopped importing Iran's oil for now.
A Tehran-based shipping source said there have been no foreign vessels due to load in the country's main oil export terminal in Kharg Island for the past 10 days.
Iranian oil shipments have already tumbled 40 percent this year, according to the International Energy Agency, as the Islamic Republic's top customers -- China, India, Japan and South Korea -- scale back.
Japan's biggest buyers of Iranian oil are Showa Shell Sekiyu KK and JX Nippon Oil & Energy Corp..
(Additional reporting by Luke Pachymuthu and Randy Fabi in Singapore, editing by Simon Webb and Neil Fullick)