The British authorities are planning to postpone the introduction of a ban on insurance for vessels carrying Russian oil bound for third countries. The authorities fear that such a decision will provoke a new round of price increases and provoke the aggravation of the energy crisis. This was reported by the British Financial Times with reference to the sources.
Back in June, after the adoption of the sixth package of sanctions against Russia, British and European officials agreed to coordinate their actions, the British side promised to synchronize its bans with the European, but so far this has not happened. EU sanctions ban insurance of vessels carrying Russian oil bound for third countries from December 5.
The UK, on the other hand, has so far only approved a ban on the insurance of vessels with Russian oil bound for the Kingdom, the ban will come into force in early 2023. Thus, London still retained the possibility for its insurers to earn on the supply of Russian oil, albeit to third countries. Sources close to the negotiations between U.S., British and European leaders say the authorities fear that a single insurance ban in December will lead to a sharp spike in oil prices, and this will only exacerbate the energy crisis around the world.
"We are ready to impose further sanctions against Russia and are working closely with our allies to ensure maximum damage to the Russian economy," the publication quotes a statement from the British Ministry of Finance.
Lloyd's of London, the main ship insurance and reinsurance exchange, also announced its readiness to implement new sanctions against Russian oil. Patrick Davison, director of underwriting at Lloyd's Market Association (a subsidiary of the exchange) said that so far no new restrictions have been issued by the British authorities, but the market is in close contact with government representatives.
"Given the global nature of the insurance industry, the European ban alone may well affect appetites for Russian shipments including in London," Davison said, hinting at a reduction in demand for Russian shipping insurance even if sanctions are imposed by European countries alone.
The publication also notes that the introduction of a single ban on insurance by the U.S., EU and Britain is bogged down in part because of the U.S. authorities, who fear a new round of rising oil and gasoline prices in the run-up to the midterm elections to be held in November. This is one of the reasons why the U.S. authorities are primarily betting not on the insurance ban, but on the establishment of a price cap on Russian oil.
In this case, the U.S. authorities themselves have previously admitted that they are ready to synchronize the introduction of their restrictions with the European and British authorities. December was appointed as the "month of change" for the time being, when the EU will impose a ban on insurance of all tanker shipments (the embargo will start working at the same time). By that time the USA and Great Britain promise to present their own mechanisms of restrictions. The USA is betting on the establishment of the ceiling price of the Russian oil, which will be much lower than the market price, but still profitable for the Russian oil industry in order to continue to ship it abroad.
Western countries, on the other hand, hope that the ban on insurance of tanker shipments to third countries, coupled with the mechanism of marginal oil prices will drastically hit Russian revenues and put additional pressure on the authorities.
