Oil-laden tankers risk languishing at sea if insurers don’t get urgent clarity about an unfinished G7 and European Union plan to curb the price of Russian crude, two senior industry executives told Reuters.
The Group of Seven (G7), which includes the United States, Britain, Germany and France, agreed in September to force a low price on sales of Russian oil.
US officials said the move, which is set to start on December 5, was intended to keep it flowing, and avoid a potential price shock after the total EU bans were ratified in June.
Insurers still unclear how G-7 sanctions on Russian crude oil shipments will work
And with only three weeks to go, time is running out to fully convince the shipping industry that it will work.
The concerns center around a scenario where insurers discover that oil in transit at sea, which was believed to be sold below the price cap, was in fact sold above the price cap.
This would lead to the withdrawal of insurance coverage and a refusal by buyers to accept the delivery, leading to financial and logistical problems and risks to the environment.
“If time is short, I think everyone will have a plan B to reduce risk, terminate, stay out, and maybe not sign new contracts until there is some clarity,” said George Voloshin, Global Anti-Virus. Financial Crime Expert at ACAMS, the Association of Certified Anti-Money Laundering Specialists who consults with bankers, merchants and insurers in the oil industry.
If insurance were revoked midway through the trip, buyers and traders would have to consider what to do with a stranded cargo that may have been subject to sanctions, complicating a strategy to deprive Russia of money for its invasion of Ukraine.
“It’s probably going to be pretty messy,” Voloshin said.
A European Commission official said the EU is aware that many more additional details will be needed as time is running out for companies to learn their commitments, but the issue needs to be addressed at the G7 level. .
The official spoke to Reuters on condition of anonymity as they are not authorized to speak on the matter.
US State Department Ambassador James O’Brien, who leads the coordination of sanctions against Russia, said the G7 countries will be ready with all operational details and technical talks on pricing and governance are underway.
‘Sanction Islands’
But if information gaps remain on the cap, it is possible for oil-filled tankers to be left uninsured and left near ports, posing a major safety concern for nearby countries in the event of a spill, as well as any cleanup costs.
“In that situation, the ship will fall by the wayside and financial and technical services will be withdrawn and no one will take delivery of the cargo,” Mike Salthouse, head of claims at UK-based global shipping insurer North, told Reuters.
“This would be a bad development, because nobody wants uninsured ships lying off the coast,” he added.
Salthouse said a ship owner who may not have earned anything for months “will factor that into any decision they make about carrying cargo in the future,” adding that it would likely act as a dissuasive effect.
“If that happens too often, it will conflict with what the EU/G7 coalition is trying to achieve.”
Although the EU ratified the price cap last month, insurers are pointing to as-yet-unpublished legal details that should be in line with incomplete but more detailed guidance from the US Treasury Department, especially regarding guarantees that insurers will make during a ship’s voyage. no surprises.
“We need regulation in the G7 community, which is similar, that is, the US – where we now have interim guidelines – the UK and the EU,” said Lars Lange, Secretary General of the International Union of Marine Insurance (IUMI ).
“We fear that if we get different rules from these three ‘sanction islands,’ we will struggle to comply with all the rules at the same time,” Lange said, adding that ships rejected by ports will have serious consequences.
The IUMI and the separate International Group Insurance Association have informed the G7 and EU governments that their guidelines must include guarantees that proof that a Russian cargo has been sold in compliance with the limit is all an owner needs to check before agreeing to it. to load and transport the cargo.
(Edited by Alexander Smith)
Photo: Suezmax crude oil tanker SCF Surgut, operated by Sovcomflot. Photo credit: Sovcomflot
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