A group of Western insurers has said a Russian oil price cap has become unenforceable and only pushed more ships into joining a shadow fleet, delivering one of the harshest rebukes to the measure that had been meant to cut revenue to the Kremlin.
The G7 group of industrialised nations approved a price cap for Russian oil after Washington lobbied to curb the Kremlin’s revenue amid the war in Ukraine while keeping Russian oil flowing to avoid a an energy price spike.
The cap allows Western shippers and insurers to participate in Russian oil trading as long as oil is sold below $60 per barrel.
The International Group of P&I Clubs said in a statement the price cap has had little success since being introduced two years ago as Russia has switched to its own fleet as well as ships outside Western oversight.
The statement was submitted as written evidence to a UK parliamentary hearing on Tuesday. The group says it comprises 12 marine third-party liability insurers covering 87% of the world’s ocean-going tonnage.
“The oil price cap appears increasingly unenforceable as more ships and associated services move into this parallel trade. We estimate around 800 tankers have already left the International Group Clubs as a direct result of the introduction of the oil price cap,” the statement said.
U.S. and European Union officials consider the price cap to have succeeded in cutting revenue to Russia while keeping oil flowing and avoiding a price shock.
Enforcement of the price cap by the U.S. Treasury has reduced the number of ships that are willing to carry Russian crude, complicating Russian efforts to sell it and get profits.
However, Tom Keatinge, director of the Royal United Services Institute’s Centre for Finance and Security, told the hearing: “Within the reach of the UK and the G7 there are insurers who are providing insurance that is in breach of the oil price cap”.
“These are names that should be being added to the sanctions list and should be drawn to the attention of the international community that dealing with that particular insurance company is going to get you into hot water,” he added, without naming any firms.
(Reporting by Dmitry Zhdannikov; editing by David Evans)