The European Union is expected to leave out of the next sanctions package against Russia a proposed ban on EU-owned vessels from transporting Russian oil anywhere in the world due to objections from Greece, the EU member most reliant on international shipping, Bloomberg reported on Monday, quoting documents it has reviewed and sources with knowledge of the talks.
The European Commission last week officially proposed a full ban on Russian crude and oil product imports by the end of the year. The initial draft of the sixth sanctions package against Russia over its invasion of Ukraine also included going after Russia's ability to even ship oil on the high seas with a proposed ban on European vessels and companies' ability to provide services to Russian shipping entities. If such a ban on Russia's access to European insurers were enacted, this would leave Russian companies exposed to the tune of multiple billions of dollars every time a single tanker leaves port, given risks like accidents and oil spills can bring with it such a price tag in terms of claims and legal action.
Due to objections from Greece and other EU members, the bloc is now expected to drop the proposal to ban EU vessels from shipping Russian oil to third countries, but the ban on insurers would stay, according to Bloomberg's sources.
If a ban on insurance for Russian vessels stays in the final sanctions package that all 27 EU member states need to sign off on, this would severely complicate Russia's oil exports and raise its shipping costs considering that Russia itself must provide insurance coverage for the cargoes to the buyers that would still want to buy its oil. That's because the International Group of P&I Clubs based in London, with many European insurers and reinsurers as members, deals with 95 percent of the coverage of the global tanker fleet for spills and other liabilities.
Meanwhile, the EU continues to discuss the details of the embargo on Russian oil imports, with Hungary still a holdout to a ban, despite reportedly being offered a two-year exemption to comply.
By Tsvetana Paraskova for Oilprice.com
More Top Reads from Oilprice.com:
- U.S. Shale Swings From Losses To Record Cash Flows
- China’s COVID Lockdowns Force Aramco To Slash Oil Export Prices
- Saudi Energy Minister: Insufficient Investment To Blame For High Fuel Prices