British Insurers are forbidden by the UK Treasury to provide insurance coverage to ships carrying Russian oil cargoes from December 5th, 2022.
This also means that ships registered in European state or carrying P&I insurance from an EU or UK-based entity can no longer carry crude oil that originated in Russia. The one caveat for carrying oil of Russian origin is that the oil must have been sold to the buyer at or below a price set by G7 members and Australia. The US is also expected to echo the move and join the insurance ban shortly. If this happens, almost 90% of insurers globally will shun Russian-linked crude oil tankers.
The idea of imposing a price cap is to make Russian crude available at a lower price in the global market for fighting inflation while simultaneously reducing the profit margin from the oil that goes to Russia. Western governments also fear that a complete ban on Russian oil would push oil prices up and hurt the global economy.
Russia has stated that it will not sell oil to any country implementing the price cap, and Russian oil buyers such as India and China have not shown any indication that they would comply with G7’s plan. Samir Mandani, Co-founder of TankerTrackers.com, predicted that the existing buyers, namely China, India, and Turkey, will most likely buy Russian crude at a heavily discounted rate and sell the refined crude derivatives in the global market.
This insurance ban which is to be implemented will initially apply to crude oil only. The scope of the ban will later be expanded on February 5th, 2023 to include crude oil derivatives as well.
The opinions expressed herein are the author’s and not necessarily those of News2Sea.