Western insurance companies continued to cover Russian oil
“Pecunia non olet”. Several Western insurers provided coverage to tankers carrying Russian oil, Reuters reported, citing shipping and insurance data .
The report highlighted that Western insurers are only allowed to insure tankers with Russian crude if the cargo is sold at or below $60 a barrel. However, according to LSEG data cited by Reuters, the average price of the cheaper Russian crude blend was $69.40 per barrel, higher than the price ceiling set by the G7.
Insurers that have provided cover for ships carrying Russian crude include American Club, West of England and Gard, a Norway-based company, which has insured ten oil tankers loaded with crude produced by Rosneft and bound for Asia. This year all oil tankers have been insured.
The insurance sector has been an important tool for the EU and the US in enforcing sanctions on Russia following the incursion of Russian troops into Donbass in 2022. Under a price cap agreed by the G7, insurers based in the West they could legally provide cover for tankers carrying Russian crude only if it sold for $60 a barrel or less.
It seems that, however, given the current average price, the insurance companies' choice was to favor profit over political obedience. Moreover, with an average price slightly higher than the limit it becomes difficult, if not impossible, for
Insurers realized early on that enforcing the price cap would be a significant challenge, so most of them simply refused to cover tankers carrying Russian crude. This, however, did not stop the export of the product from Russia. Russian insurers and Chinese and Indian companies stepped in to provide the necessary coverage and keep the oil flowing.
The application of sanctions overall has not achieved its goal of suffocating the Russian economy, so much so that a month ago the World Bank added Russia to the list of high-income countries, for the first time since 2015.
Trade was among the main drivers of this development, recording an increase of 6.8% last year, according to the World Bank. The financial industry, another major target of Western sanctions, grew 8.7% last year, according to the World Bank.
Paradoxically, the decoupling from many constraints of Western economies and the powerful economic impulse provided by military production have given a strong boost to the economy.
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The article Western insurance companies continued to hedge Russian oil comes from Economic Scenarios .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/le-compagnie-di-assicurazione-occidentale-hanno-continuato-a-coprire-il-petrolio-russo/ on Thu, 08 Aug 2024 16:05:18 +0000.