The EU price cap on Russian oil is already disrupting the market – tankers are piling up off Turkey after Ankara demands insurance paperwork

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Turkish President Recep Tayyip Erdogan addresses the 77th session of the United Nations General Assembly at UN headquarters in New York City on September 20, 2022. (Photo by TIMOTHY A. CLARY / AFP) (Photo by TIMOTHY A. CLARY/AFP via Getty Images)
Turkish President Recep Tayyip Erdoğan

  • The EU’s price cap on Russian crude and its ban on seaborne Russian crude kicked in Monday.
  • Oil tankers have begun piling-up off Turkish shores, as Ankara demands proof of insurance protection.
  • Shipping insurers rejected the request, as Turkey’s asking for protection that might expose them to a breach of sanctions.

A European Union price cap on Russian oil kicked in on Monday and it is already inflicting delivery disruption — oil tankers are piling up off the coast of Turkey as Ankara is demanding paperwork that the vessels are totally insured, in accordance with the Financial Times.

The pile-up comes simply as an EU price cap of $60 a barrel price cap for Russian crude kicked in. 

As 90% of the world’s shipping insurance is offered by a bunch largely based mostly in Europe, the intention is to curb Russia’s oil revenue by limiting how a lot protection the insurers can present — that is as a result of solely these vessels carrying cargo priced under the EU cap can entry Western maritime insurance. 

But the Turkish authorities needs full insurance protection for the ships — leading to a standoff and visitors jam of 19 crude oil tankers ready to cross Turkish waters, in accordance with the FT which cites ship brokers, oil merchants, and satellite tv for pc monitoring providers.

In a discover issued on November 16, Turkey’s authorities is insisting on documentation of delivery insurance protection “under any circumstances” — even when the ships breach sanctions “whether knowingly and intentionally or unknowingly and unintentionally”, in accordance with a statement posted on Monday by Gard, a Norwegian delivery insurer that covers half of the world service provider fleet. 

Such necessities transcend normal info that is often contained in a letter of entry for the ships, so the International Group of P&I Clubs — the safety and indemnity suppliers which represents a bunch of delivery insurers — has assessed that it “should not issue such a letter” to ships.

“Issuing a confirmatory letter under these circumstances would expose the Club to a breach of sanctions under EU, UK and US law,” in accordance with the assertion. The International Group of P&I Clubs is negotiating with the Turkish authorities.

This standoff in flip has affected visitors round the Turkish straits of Bosphorus and Dardanelles as they join exports from Russia’s Black Sea ports to world markets. The first ship to reach at the location has been ready since November 29, the FT reported.

Turkey’s ministry of transport and infrastructure didn’t instantly reply to Insider’s request for remark despatched exterior common enterprise hours.

Moscow, on its half, has stated it will not promote its crude oil below the $60 a barrel stage, with Russian Deputy Prime Minister Alexander Novak calling the price cap an “interference” that might trigger “destabilization, shortages of energy resources and reduction of investment” in the market, in accordance with TASS, the state-owned information company.

“It may be applied not only to oil but to other products on the market, and not only to Russia but to other countries as well,” Novak stated on Sunday.

US West Texas Intermediate oil futures had been up 0.8% at $77.55 a barrel at 10.14 p.m. ET Monday, whereas worldwide Brent crude oil futures had been 0.8% greater at $83.36 a barrel.

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