Your running into the exception because by default applets load into sandbox security, Sandbox only allows you to make url connections to the domain serving the applet. Meaning you cannot create a url connection to google unless you applet is hosted by google.

You need to do the following in order to properly connect to a remote url.

Create a self signed certificate at least, Ideally you have a verified certificate linking back through verisign or some other certificate authority (CA) of your choosing. Certificate Instructions

Sign your jar using jarsigner. Signing Instructions

Now you can wrap your code in a privileged block as follows

try 
{
    final String imageURL = "http://www.google.com/intl/en_ALL/images/logo.gif";
    URL url = (URL) AccessController.doPrivileged(new PrivilegedAction() 
    {

        public Object run() 
        {
            try
            {
                return new URL(imageURL);
            }
            catch (MalformedURLException e)
            {
                e.printStackTrace();
                return null;
            }

        }  
    });  

    if(url == null)
    {
         // Something is wrong notify the user
    }
    else
    {
         // We know the url is good so continue on
          img = ImageIO.read(url);
    }

} 
catch (IOException e) 
{
    System.out.println(e);
}  

I imported your applet code, I switched some of it around, Pulling the img instantiation out of the privileged block & having the block return a url. This works when I load it into a webbrowser.

import java.applet.Applet;
import java.awt.*;
import java.awt.image.*;
import javax.imageio.*;
import javax.swing.*;

import java.io.IOException;
import java.net.*;
import java.security.AccessController;
import java.security.PrivilegedAction;

public class LoadImageApp extends Applet
{
  private BufferedImage img;
  private final String imageURL = "http://www.google.com/intl/en_ALL/images/logo.gif";

  public void init()
  {
    loadImage();
  }

  public void paint(Graphics g)
  {
    if (null != img) { g.drawImage(img, 0, 0, null); }
  }

  public void loadImage()
  {
    URL url = (URL) AccessController.doPrivileged(new PrivilegedAction()
    {
      public Object run()
      {
        try
        {
            return new URL(imageURL);
        }
        catch (Exception e) { e.printStackTrace(); }
        return null;
      }
    });

    try {
        img = ImageIO.read(url);
    } catch (IOException e) {
    e.printStackTrace();
    }

  }
}

It seems you re running an applet instead of a normal application. An applet is not allowed to retrieve any resources outside the domain it has been loaded from. The idea is to prevent "bad" applications from calling something like

String targetURL = "http://www.foo.bar/spoof?source" + System.getProperty("...);

or transfering other kinds of data to an unknown destination.

If you really need to retrieve external data you have to sign your applet.

1. Create a file call "policy.all" in the same folder of your jar

2. copy/paste the following text in it :

   grant { permission java.security.AllPermission;};

3. Start application like this :

   java -jar yourjar.jar -Djava.security.policy=policy.all

Sounds like you’re not trying to create a jar file which will be run from the command line but an applet which will be executed in the browser. If that is true, you’re pretty much out of luck because applets are only allowed to access the server they have been loaded from. If you really want to access other servers from an applet, you have to sign your applet; Google can help you find more information.