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Turkey has warned the world’s oil shippers that they will have to prove they are insured to cross the country’s vital straits, a move that could curtail the flow of Russian oil as new European sanctions come into effect.
The new rule comes into force on December 1, days before the European Union and the United Kingdom impose additional restrictions on Russian trade, which will make it much more difficult to obtain insurance for tankers carrying the country’s oil.
Because the insurance covers everything from oil spills to collisions, Turkey is actually looking to protect its waters, but it could also affect the flow of millions of barrels of Russian crude exports.
Vessels transporting oil through the waterway and the nearby Dardanelles Strait will be required to provide a letter from their insurer stating that cover will be provided for that specific voyage and cargo, Turkey’s Transport Ministry said in a circular.
The European Union and the United Kingdom launch aggressive sanctions on Russian oil shipments on December 5, which will significantly affect the availability of industry standard insurance.
Russia has shipped nearly 650,000 barrels a day of its own oil directly from its Black Sea port of Novorossiysk over the past six months, loading schedules compiled by Bloomberg show. A nearby Russian port exported nearly 1.3 million barrels a day of cargo from Kazakhstan.
A director of Turkey’s institution governing maritime traffic confirmed the letter and said the motive was to comply with EU sanctions even though Turkey was not among them.
The director said the move could well impact Russian tankers if they struggle to obtain the necessary indemnity protection and insurance, which covers owners against liabilities such as oil spills. The measure should enhance maritime security along the Turkish strait, he said.
Under EU and UK sanctions, vessels will still be able to receive industry-standard cover, provided the cargo carried is purchased below a price cap that remains at determine.
If ships cross the strait uninsured, the waterway could be severely damaged and maritime traffic could come to a halt if an uninsured ship had an accident, the circular said. Accordingly, a letter guaranteeing insurance coverage is seen as a solution to this problem, he added.
The International Group of P&I Clubs is based in London and organizes coverage of 95% of the world tanker fleet. It also depends on Europe for reinsurance.
–With assistance from Patrick Sykes.
(Updates with sixth paragraph oil flow data.)
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