EU Could Ban European Insurance and Tanker Transport for Russian Oil
To accompany its proposed ban on the importation of Russian oil, the European Union may also decide to prohibit European companies from providing maritime transport for Russian petroleum, anywhere in the world.
According to Reuters and Bloomberg, the European Commission is proposing to cut off Russia's access to European tankers and the insurance cover obtained in the City of London. Despite Brexit, the UK's market-dominating marine insurance industry would have to abide by an EU ban on service provision for Russian oil cargoes, Bloomberg reports.
This decision could have two major impacts on Russian oil exports. First, the majority of the tanker tonnage that carries Russian oil today is Greek-controlled, according to Robin Brooks of the Institute of International Finance. These ships could be directly covered by a vessel-services ban for EU companies, depending upon the specifics of the sanctions langugage. Second, the possibility of losing International Group marine insurance cover could make it risky for even non-EU vessels to load a Russian cargo. The net effect could be a rapid reduction of Russia's ability to export crude to new, faraway customers, amplifying the impact of an EU import ban on Russian oil.
Growing awareness in policy circles that the Greek tanker fleet stepped up its oil shipments out of Russia after the invasion of Ukraine. Since war began, fraction of Greek ships lifting oil out of Russian ports is up to 53% on average, up from 39% pre-war. With @JonathanPingle pic.twitter.com/ZOfJThJ3LT— Robin Brooks (@RobinBrooksIIF) April 21, 2022
Since oil exports account for about 40 percent of Russia's federal budget, the plan would be an immense escalation of the EU sanctions regime, reminiscent of stiff U.S. sanctions on Iranian oil exports. But it is far from a done deal. Hungary has voiced strong opposition to the headline item in the sanctions round, the EU oil import ban, reflecting both its government's strong ties with Moscow and its heavy reliance on Russian energy. In addition, Greece, Cyprus and Malta are said to question the ban on EU shipping services for Russian crude, according to Bloomberg. Only one EU member state's "no" vote would be needed to block the entire sanctions package.