According to analysts, the EU’s ban on insuring vessels transporting Russian oil could be more damaging than Moscow’s ban on the country’s crude oil.
The European Union recently announced a ban on insurance in the sixth set of economic sanctions aimed at punishing Russia for its invasion of Ukraine.
With further knocks, G7 leaders are calling for a Russian oil price cap to further undermine the Kremlin’s earnings.
The EU’s insurance and reinsurance ban, which covers all sea transportation of Russian oil, is due to Moscow’s attempt to expand sales to China and India to offset the embargo.
“Achieve more than an embargo”
The ban on insurance “will have an even greater impact on the oil market than the EU’s oil embargo,” said Karsten Frich, an analyst at Commerzbank.
Companies will no longer be able to transport oil by sea from Russia or insure such transport.
EU insurers will need to implement the ban until the end of this year, but UK insurers are expected to follow suit.
Marcus Baker, International Marine Captain of Marsh, a US broker, said:
A similar ban was used in 2012 when the EU banned European insurers and reinsurers from covering Iran’s oil-carrying vessels.
The block also banned the purchase of Iranian crude oil as part of sanctions on Tehran’s controversial nuclear program.
Commercial ship operators must insure the ship and its cargo, as well as protection and compensation (P & I) to cover events such as war and environmental damage.
Mathieu Berrurier, managing director of marine insurance broker Eyssautier-Verlingue, told AFP that potential payments caused by such disasters would require large amounts of cash.
As a result, insurance companies will form P & I clubs that “provide the same amount of risk as the risks involved” in events such as “large oil spills and collisions with ocean liners.”
“It requires a huge amount of money,” he emphasized, adding that such a disaster could potentially cost “billions of dollars.”
Former President Dmitry Medvedev, Vice-Chairman of the Russian Security Council, hinted that Moscow could circumvent the ban by providing a national guarantee to cover oil exports.
He argued that it could allow Russia to self-insurance and circumvent EU sanctions.
“That’s true to some extent,” said Libya Galarati, an analyst at consultancy Energy Aspect.
However, experts say that EU and UK-based insurers cover 95% of the P & I insurance market, so it will be difficult for Russia to completely circumvent the ban.
“In Europe, the markets are very intertwined. [that it] It will be almost impossible to escape the effects of the ban, “an oil transport executive told AFP on condition of anonymity.
“There is no mature and deep alternative insurance market in the world,” said an executive.
India “Supporting Russia”
It was reported late last week that India had intervened to provide certification services to some tankers carrying Russian crude oil.
This has highlighted this week’s G7 Summit, which focuses on more collaborative financial action against Russia.
“India is helping Russia continue to sell oil, despite Western sanctions,” said Frich, an analyst at Commerzbank.
He added that India provides safety certification for more than 80 vessels belonging to a subsidiary of Dubai-based Russian shipping company Sovcomflot.
G7 leaders, who met in Germany on Monday and Tuesday, accused Russia of invading Ukraine as “illegal and unjust.”
“We emphasize our accusations of Russia’s illegal and unjustified war of aggression against Ukraine,” they said in their final draft statement.
The communiqué was published after the G7 met with Indian Prime Minister Narendra Modi and leaders from Argentina, Indonesia, Senegal, South Africa and Ukraine.
https://www.themoscowtimes.com/2022/06/29/eu-insurance-ban-targets-russian-oil-exports-a78136 EU insurance ban covers Russian oil exports