(Reuters) — A surge in spot Russian crude oil prices above the $60-a-barrel limit imposed by Western powers has made ship insurers even more nervous about breaking the rules because they cannot independently track the value of cargoes, executives said. said.
To curb Moscow’s oil revenues in response to the Ukraine war, the Group of Seven nations, the European Union and Australia imposed price caps on Russian crude and oil products from December and February, respectively.
As long as prices do not exceed the ceiling, companies involved in trading and transporting the oil can access Western financial services, ships and insurance.
But shipping documentation can be filled with false information and it would be “very difficult for ship owners to get to the bottom of what the actual price was,”; according to Mike Salthouse, director of external affairs at the NorthStandard P&I Club.
“If Russia wants to export its oil and sell it above the price of the price cap, then it is in the interest of both the Russian exporter and the recipient not to release information about what the real price of the cargo was,” he says. Salthouse told Reuters on the sidelines of a Singapore Maritime Week event.
The price caps have been effective in reducing Russian oil prices, but a jump in global Brent oil prices above $80 a barrel has pushed Russian Urals above the $60 a barrel price cap, while ESPO Blend, which is exported from the port of Kozmino in the Far East, has been trading above $60 a barrel as well.
Even before price caps were introduced, there was no way for insurers to verify the value of cargoes, which can be traded multiple times before reaching their destinations.
Lars Lange, general secretary of the International Union of Marine Insurance, said: “We definitely cannot assess oil prices for shipping.”
In addition to the risks of violating sanctions, the growing “shadow” or “dark fleet” – tankers bought by states to deliver Russian oil – has increased security risks for the shipping sector, the executives said.
– The shadow fleet is a big risk for all shipowners who trade within the sanctions rules, says Rolf Thore Roppestad, CEO of Gard AS, and adds that the risk of colliding with a vessel from the shadow fleet is higher than before.
“I have no solution regarding the shadow fleet. But if we know how big the risk is, we can take some precautions.”
More ships could be at risk of losing insurance coverage due to sanctions, Salthouse said, increasing risks for shippers and governments worldwide.
“It is a problem that we have tried to explain to governments,” he said. “It’s not in anyone’s interest to have uninsured ships with dangerous cargo on board floating around, unable to accept payments and everything else.”