Russia Still Reliant on Western Insurance for Half Oil Shipments

Russia still relies on Western insurers to cover more than half of the tanker fleet that exports its oil and the country’s energy officials are voicing concerns about the situation according to data compiled by Bloomberg.

• Since early December, between 50% and 60% of vessels that have carried Russian oil are protected against shipowners’ liability risks by members of the London-based International Group of P&I Clubs, according to data compiled by Bloomberg.
• This dependence on western coverage limits Russia’s ability to negotiate higher prices for its oil.
• “Russia’s high dependence on insurance from G7 and European countries for shipping oil means the price-cap coalition has strong leverage,” Meri Pukarinen, Europe-Russia policy officer at the Helsinki-based Centre for Research on Energy and Clean Air, said.
• “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,” Russia’s Deputy Prime Minister Alexander Novak said.
• The pressure of sanctions on the Russian oil industry will only increase this year, Alexander Dyukov, Chief Executive Officer of Gazprom Neft PJSC, said. The nation needs to prepare by developing an independent financial, shipment and oil-trading infrastructure, he said.
• CREA estimates that insurers from G7 and European nations in February provided shipowner’s liability coverage for nearly 60% of all tankers carrying Russian crude. In early 2022, just before the war in Ukraine, the share of major foreign insurers was close to 80%, CREA data show.