Russia continues to rely on Western insurance for more than half of the oil cargoes it sells, which could give leverage to the West if it decides to toughen the sanctions against Moscow.
On December 5th, the EU and G7 banned maritime transportation services from shipping Russia’s crude oil to third countries if the oil is bought above the price cap of $60 per barrel. At the same time, the EU imposed an embargo on seaborne imports of Russian oil into the bloc. Price caps for Russian oil products then came into effect on February 5, which coincided with the EU banning the seaborne imports of fuels.
While Russian exports are holding resilient, the still high dependence on Western insurance for tankers limits Moscow’s wiggle room to negotiate the price of the oil it sells.
Western insurers cover 50%-60% of the tankers that have carried Russian oil since early December, according to data in the Equasis shipping system compiled by Bloomberg.
Finland-based Centre for Research on Energy and Clean Air (CREA), which tracks Russian energy exports, estimated earlier this month that the share of tankers covered by the price cap in crude oil shipments out of Russia was close to 60%. For oil products and chemicals, the coverage of the price cap coalition was above 70%.
“The shares of ownership and insurance of vessels carrying Russian crude and oil products & chemicals within the price cap coalition are much higher for shipments departing from Russia’s Arctic, Baltic and Black sea ports, but much lower for shipments departing from Pacific ports,” CREA said.
The still high dependence on Western insurance services has prompted Russia to seek alternatives to be able to negotiate higher prices for its oil with non-Western insurance coverage.
Russia is working to create “new insurance and reinsurance systems accepted by Russia’s clients and partners in the current environment,” Deputy Prime Minister Alexander Novak said earlier this week.
“We should necessarily continue the work that is already underway, to ensure the expansion of trade and economic cooperation with friendly countries, with CIS countries, with the Eurasian Economic Union,” Novak was quoted as saying.
By Tsvetana Paraskova for Oilprice.com
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