The Russian state is preparing to step in and beat European Union sanctions by providing its own insurance guarantees to allow tankers to trade its oil around the world.
The move follows an announcement by the EU that it will ban insurers from providing cover to tankers exporting Russian crude.
The sanctions are intended to prevent Moscow from finding alternative markets after the EU carries out its plan to cut 90% of oil imports from the country by the end of the year because of its invasion of Ukraine.
The move is widely expected to be followed by the UK, a major provider of insurance to the tanker industry.
In comments made to social media outlet Telegraph, the deputy chairman of Russia’s security council, Dmitry Medvedev, admitted the EU ban would “complicate shipments to third countries”.
But the former president and prime minister hinted that a solution is already in place.
“The issue of supply insurance can be closed at the expense of state guarantees within the framework of interstate agreements with third countries. The problem can be solved,” Medvedev said.
The EU is drawing up a schedule to introduce the insurance ban this year. The UK is largely expected to copy it.
Medvedev’s comments are likely to be targeted mainly at third-party liability and pollution cover usually provided by protection and indemnity insurers. P&I cover is regarded as an essential ticket to trade for the tanker industry.
The 13 members of the International Group of P&I Clubs provide insurance to more than 90% of the world’s fleet. The International Group’s collective reinsurance cover provides up to $3bn in pollution cover.
Before the EU introduced its ban on tankers, it undertook consultation on the potential implications of leaving a sector of the tanker industry without insurance cover.
Major oil spill
The possibility of a major oil spill involving a tanker that does not have P&I cover could be environmentally and financially catastrophic for the states involved.
Hull and machinery cover, which covers the cost of damage or loss of the hull, is usually taken by the owner to protect itself, or is a requirement of the ship finance. But it is not mandatory to trade the vessel.
The cargo cover is the other main insurance area that could come under the scope of the EU and UK insurance ban.
Like P&I cover, this could be met through the Russian state.