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Oil cargo could soon be stranded at sea if G7 leadership fails to get insurers details regarding the upcoming—but undefined—price cap mechanism on Russian crude oil, senior industry executives told Reuters this week.
The price cap plan—although it can hardly be called a plan at this point—is set to take effect as of December 5, after Canada, France, Germany, Italy, Japan, the UK, and the United States agreed to hold buyers within the group to purchase crude oil from Russia only if it could be purchased below a set minimum.
The plan, if the G7 nail down the details—would seek to limit the revenue Russia receives from the sale of crude oil, while allowing those in need to still purchase oil from the sanctioned country.
With just three-and-a-half weeks to go before the measure would go into effect, the industry is clamoring for clarity.
One lingering question, according to Reuters’ sources, is that insurers could discover that an oil cargo en route was actually sold at a level that exceeded the agreed-upon price cap. As it stands, insurers would need to pull coverage for the cargo, and the buyer would not accept the delivery—what happens after that has not yet been ironed out, and has the potential to leave cargo stranded at sea, at great environmental risk.
"If the time is too short, I think everyone will have a Plan B to de-risk, terminate, stay away, not maybe conclude any new contracts until there is some clarity," George Voloshin, Global Anti-Financial Crime Expert at ACAMS, the Association of Certified Anti-Money Laundering Specialists told Reuters. “It will probably be quite messy.”
One European Commission told Reuters that the EU was aware that the industry is looking for more detail, but that the matter needed to be addressed by the G7 specifically.
U.S. State Department Ambassador James O’Brien has said that the G7 will have the details ready.
By Julianne Geiger for Oilprice.com
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Julianne Geiger is a veteran editor, writer and researcher for Oilprice.com, and a member of the Creative Professionals Networking Group.