HomeMediaLatest NewsCeiling Tools: How Russia Can Resist Oil Price Restrictions

Ceiling Tools: How Russia Can Resist Oil Price Restrictions

07 December 2022

Gromov Alexey I. Principal Director on Energy Studies, Head of the Energy Department

Alexey Gromov, Principal Director on Energy Studies of the Institute for Energy and Finance, commented to the weekly magazine Profile on Russia's possible reaction to the introduction by the G7 and the EU countries of a price ceiling on Russian oil marine deliveries.

Today, about 90% of the ships in the world are insured by companies that are members of the London-based International Group of P&I Clubs.

According to Alexey Gromov, Russian tankers "have not been insured in London since May," they are serviced by domestic companies. But will foreign ship owners want to use the services of Russian insurers? The fact is that the policies of our insurance companies cover the transported cargo and the ship itself, while insurance from the International Group of P & I Clubs also covers the so-called open risks, including environmental damage in the event of an accident or oil spill.

According to Alexey Gromov, at the beginning of 2022, Russia had a fleet that “in theory could transport 65% of Russian oil cargo.” However, until recently, approximately 65% of Russian oil and oil products were transported on tankers from Greece, Malta and Cyprus, which offered the best transportation economics.

According to the Financial Times, Russia has bought more than 100 tankers since the beginning of 2022 to supply oil to India, China, and Turkey. Among them there are approximately 30 supertankers. To tell the trough, all the purchased ships are old - they are 12-15 years old, and the previous owners planned to write them off in the next few years.

As Alexey Gromov commented, Russia is adopting the experience of Iran and Venezuela - they have long been using the "shadow" fleet to provide gray and even illegal exports. For the "shadow" fleet, old ships are being purchased, which will soon have to go through the decommissioning procedure. If a tanker is formally decommissioned, it is not subject to International Maritime Organization regulations and does not need, for example, to be equipped with a transponder that tracks the movement of the ship using satellites. The reverse side of the coin is the high risk of accidents in old ships and the problem of their insurance, taking into account the not very clear legal status.

But the scale of Russian exports is not comparable with the volumes that Iran and Venezuela sell. Therefore, it will still not be possible to fully replace European carriers in the coming months.

Gromov Alexey I. Principal Director on Energy Studies, Head of the Energy Department
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