Russian oil cap causes oil tanker congestion off Turkey

Vessels congregate in Turkish seas after Ankara requests proof of insurance coverage.

A traffic jam of oil tankers has formed in Turkish seas after Western powers imposed a "price ceiling" on Russian oil and Ankara required insurers guarantee that any boats traversing the straits were fully insured.

Tankers hauling Russian crude oil are forbidden from getting western marine insurance under EU sanctions that went into effect on Monday unless the oil is sold below the G7 price threshold of $60 per barrel. The limitation was put in place to keep oil flowing while limiting Moscow's revenue.

In light of the price cap, four oil sector officials claimed Turkey had sought fresh proof of insurance. A spokeswoman for Turkey's transport ministry did not immediately respond to a request for comment.

Russia has vowed to keep exporting oil even if it loses access to western insurance markets. Russia has stated that it will not trade with any country that adheres to the cap.

According to ship brokers, oil merchants, and satellite tracking agencies, around 19 crude oil tankers were awaiting passage into Turkish waters on Monday. The ships were anchored near the Bosphorus and Dardanelles straits, which connect Russia's Black Sea ports to worldwide markets. According to a ship broker who requested anonymity, the first tanker landed on November 29 and has been waiting for six days.

The tankers sitting in Turkish waters are the first indication that the price cap may impair global oil flows beyond Russia's exports.

According to shipbrokers and TankerTrackers.com, which track worldwide oil movements, much of the oil on tankers near the coast of Turkey is from Kazakhstan. The oil from Kazakhstan arrives at Russian ports through pipeline and is not subject to Western sanctions.

Ankara has requested that all crude tankers transiting the Turkish straits show letters from their protection and indemnity providers, known as P&I Clubs, stating that insurance coverage for incidents such as oil spills and crashes would be maintained.

However, the International Group of P&I Clubs, which represents 13 mutual insurers that provide liability cover to over 90% of worldwide shipping, stated on Monday that the Turkish request went "far beyond" the broad information generally required.

P&I providers were unable to guarantee coverage even in the event of a sanctions violation, according to a statement issued by one of the group's members.

The group's chief executive, Nick Shaw, said that the company was in “ongoing constructive discussions with the relevant authorities to try and resolve the situation”.

A US Treasury official said the US was “aware of how the government of Turkey’s new policy could complicate ships’ movement through the Turkish straits” and, along with the UK, had “raised these concerns in recent engagements with Turkish officials”.

Russia has amassed a so-called "shadow fleet" of more than 100 tankers in an attempt to skirt Western sanctions on its oil shipments, which may operate without insurance or from suppliers outside the West.

According to one oil sector participant familiar with the incident, Russian insurance companies supplied letters of affirmation to Turkish authorities in order to guarantee transit through Turkish seas. The shippers with insurance from western providers were the ones being held up, according to the source.

Tankers carrying refined products like as gasoline and diesel were also allowed through by Turkish authorities because EU prohibitions on such fuels do not take effect until February.

By fLEXI tEAM