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Tankers carrying largely Kazakh crude oil from Russian ports to international markets are stuck in Turkish waters in the Bosphorus and the Dardanelles because Turkey is insisting on them presenting proof of insurance.
The tanker jam began earlier this week, on the day the G7 and EU price cap on Russian oil exports came into effect. Per the cap mechanism, vessels carrying Russian oil can only receive Western insurance coverage and financing services if the cargo is being marketed at or below the cap price of $60 per barrel. The vessels themselves, if they come from a Western country, are also part of the cap mechanism.
But Turkey is stopping tankers carrying non-Russian oil and insisting that they prove they confirm their insurance cover from Western companies, according to an FT report that said as many as 19 tankers had piled up in the Turkish straits on Monday. Insurers, meanwhile, have said it is impossible to guarantee cover for these vessels and have effectively refused to provide the documents that Turkey is asking for.
According to a new report from Bloomberg, the number of tankers stranded in Turkish waters has risen to at least 20, holding a total of 18 million barrels of mostly Kazakh crude. Although one million of the barrels are reportedly Russian Urals destined for India. The UK and the U.S. governments are trying to convince Turkey to drop its demand for insurance cover proof, the report noted.
The oil that has gotten stuck in Turkey is most likely going to Europe, which in addition to the G7 price cap also implemented an embargo on Russian crude arriving by sea. According to Bloomberg, Turkey may be feeling anxious about the fact this oil is hailing from a Russian port and wants to make sure it is not violating sanctions.
Turkey, according to the FT, is also worried that the price cap could see an increase in the number of uninsured vessels sailing through its straits, carrying the risk of spills that would not be covered in case they are uninsured. This appears to be the first of what could be many unintended consequences of the price cap.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.