The European Union is seeking to go beyond an import ban on Russian crude, targeting insurers in a move that could dramatically impair Moscow’s ability to ship its oil anywhere in the world.
The bloc is proposing to ban European vessels and companies from providing services—including insurance—linked to the transportation of Russian oil and products globally as part of its new sanctions package, according to officials and a draft document seen by Bloomberg.
While member states are still wrangling over the terms, it’s a potentially powerful tool because 95% of the world’s tanker liability cover is arranged through a London-based organization that has to heed European law.
Without such insurance, Russia and its customers would have to find alternatives for risks including oil spills and mishaps at sea that can quickly run into multi-billion-dollar claims.
Cover from the International Group of Protection & Indemnity Clubs is a basic part of contracts for the transportation of most oil cargoes. The IG, as it’s known, provides reinsurance if claims exceed what the group’s 13 individual member clubs can cover.
And there’s precedent: Insurance is one of the key means by which the U.S. and Europe successfully limited Iran’s oil exports. Individual countries responded to those steps by organizing cover directly, although IG insurance is widely preferred by most big companies.
The move—if implemented in full—dramatically increases the stakes with Moscow. The insurance measures come on top of the EU’s plan to ban imports of Russian crude and refined products by the end of the year.
The restrictions on services would extend to providing “directly or indirectly, technical assistance, brokering services, financing or financial assistance, or any other services, related to the transport, including through ship-to-ship transfers, to third countries of crude oil and petroleum products which originate in Russia or have been exported from Russia.”
The bloc wants this part of the package to come into effect by early June, though member states are still debating the details and sign-off has to come from all countries.
