Russia has continued to use Western insurance services to ship its oil despite sanctions
- Russia is still using western shipping and insurance services for around half of its oil trade, Bloomberg reported.
- That's despite recent sanctions, which prevent Russia from using western services unless crude is sold below $60 a barrel.
Despite the cascade of sanctions targeting Russian oil suppliers, Russia has continued to use western insurance and shipping services in moving about half of its oil cargo, according to data compiled by Bloomberg.
Around 50%-60% of Russian oil vessels are still being insured with partners of the International Group of P&I Clubs, the London-based shipping insurance group, Bloomberg reported on Thursday. That matches estimates from the Center for Research and Energy and Clean Air, which found 60% of Russian tankers still covered by western services in February this year, only slightly down from 80% in early 2022.
Tankers that are not insured with western services could be insured by Russia itself, or unknown insurance firms, Bloomberg added.
That comes just a few months after the European Union banned imports and slapped a $60 per barrel price cap on Russian oil, which outlaws Russian crude being shipped with western insurance and shipping services unless it's sold below that threshold.
Critics, however, have blasted the price cap for being ineffective, with little impact on Russia's war revenue. Although the nation appears to be reliant on western insurance, some estimates say the majority of Russian crude is still being sold above the price cap, with the US Treasury estimating up to 75% of Russian oil is being purchased above the threshold, Bloomberg reported.
That's because there's no real way to enforce the price cap mechanism, one US Treasury official previously said, who estimated that Russia could potentially export up to 90% of its oil for more than $60 a barrel.
Though insurers need to verify if Russian oil cargo is being sold below $60, verifications could be as simple as asking oil suppliers to promise in writing they will adhere to price cap rules. There is also no punishment for verifications that are discovered to be false if insurers can prove they had honest intentions.
Other estimates paint a different picture: The International Energy Agency has praised the price cap mechanism, estimating that most Russian crude is being sold far below the $60 cap.
Russian energy execs have also warned of a more difficult year as sanctions continue to bite, particularly as the European Union mulls lowering the Russian oil price cap threshold.
Russia will need to focus on developing its own shipping insurance providers or finding an alternative to western insurance, Russia's deputy prime minister Alexander Novak said on Tuesday.
"In the current conditions, it's important to create new instruments, new systems of insurance and reinsurance that would be accepted by our clients, our partners," Novak added.
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