The G7 countries meeting in Germany this week are preparing to announce a price cap on Russian oil exports, to prevent Moscow benefiting from an increase in energy prices as a result of sanctions.
The move is a fine-tuning of a European Union and UK sanctions package to phase out Russian oil imports, announced in early June.
An additional ban on marine insurers covering ships carrying Russian oil exports was included in the measures to prevent Russia sending Europe’s oil to other countries.
Protection and indemnity insurers could find themselves at the centre of the upgraded sanctions package.
G7 leaders are working on a scheme that will prevent them insuring ships carrying Russian oil that has exceeded a specified price level.
The International Group of P&I Clubs, whose members cover more than 90% of the world fleet, and the London insurance market have been in close consultation with the UK and EU governments over the proposed scheme.
P&I policies include clauses that will allow them to be adapted to comply with international sanctions.
But the inclusion of a price cap could prove a complication for P&I clubs and other marine insurers to administer.
Shipowners already have been told by the International Group to notify insurers of any Russian port calls, or run the risk of losing cover.
The move comes after European governments took on board US concerns that planned sanctions against insuring ships carrying Russian oil exports would result in further energy price rises that would boost President Vladimir Putin’s war budget.
Geopolitical goal
The idea of a price cap has come from Italian Prime Minister Mario Draghi. He told the G7 meeting in Bavaria this week: “We need to reduce our funding to Russia.
“Putting a ceiling on the price of fossil fuels imported from Russia has a geopolitical goal as well as an economic and social one.”
Potential buyers of Russian oil, including India, Argentina, South Africa, Senegal and Indonesia, have been invited to join the price cap discussions.
Moscow has already hinted that it will be able to provide state guarantees to replace insurance for its oil exports. Alternative cover may be also available in Asian insurance markets.
However, there is a question mark over whether the markets outside Europe can match the $3bn of reinsurance cover provided by the International Group’s 13 members.
P&I insurance covers pollution, salvage, crew, wreck removal and other shipowner third-party liabilities.
