• 2022 December 8 15:28

    Oil tankers with P&I club insurance piled up at The Bosphorus Strait

    A traffic jam of oil tankers has built up in front of Turkey’s Bosphorus Strait thanks to Ankara's new insurance paper demands — a knock-on effect of the sanctions against Russian seaborne crude that went into effect this week, according to POLITICO.

    However, a dozen of the tankers lined up at the key transport route connecting the Black Sea with the Mediterranean are carrying crude from Kazakhstan, not Russia, said Viktor Katona, lead crude analyst at intelligence company Kpler.

    "Russian cargoes seemingly don't have a problem, yesterday three tankers with Russian oil products had no problem passing through the strait," he said.

    EU members, as well as G7 countries and Australia, agreed to impose a price limit of $60 per barrel on Russian crude as of Monday. Under the deal, the countries ban insurance and shipping companies from offering their services to shipments of Russian oil to non-EU countries if it’s sold above the price cap. The EU also imposed its own ban on imports of Russian seaborne crude.

    Turkey has not joined the G7 insurance ban, and still imports Russian oil.

    As of December 2, Ankara started demanding that insurers confirm that ships would remain fully covered as they crossed the Bosphorus, Turkish waters, ports or terminals — even if the vessels were found to be in breach of the new sanctions.

    But the International Group of P&I Clubs said its clubs “cannot and should not” provide such a letter of unconditional guarantee, as doing so would expose “the Club to a breach of sanctions under EU, UK and US law and as such the Clubs cannot comply with the Turkish Authority's request.”

    As a result, oil tankers with P&I club insurance are now being held up, while ships covered by Russian-issued insurance are allowed through.

    "P&I clubs don't really issue letters of coverage for individual journeys, with cargo, vessel and journey destination — it's normally one paper insurance policy document carried throughout the year — but that's now what the Turks are asking for," Katona said. "Whereas the Russian insurers, for example Ingosstrakh, don't mind providing individual coverage certificates."

    Tracking data from Lloyd’s List shows one large crude tanker in the vicinity which loaded at the Russian port of Novorossiysk and 12 others that filled up at offshore loading terminals connected to the CPC pipeline, which carries mostly Kazakh and some Russian oil.

    Kpler data also showed that 12 of the loaded tankers in the queue had filled up from the CPC pipeline.

    Most of the vessels currently held up are either Suez tankers, which can hold 1 million barrels of oil, or Aframax tankers, which carry about 600,000 barrels.

    Volumes are attributed to Russia and Kazakhstan from the CPC pipeline on a quota system, with each load of oil having its own certificate of origin so there are no mix-ups. The Kazakh government earlier this year successfully negotiated to have its oil granted an explicit exemption to the EU Russian embargo, despite the CPC pipeline crossing through Russia.

    "It’s widely understood that vessels loading at that particular area are carrying Kazakh oil — the fact that they’re all being delayed … is strange, because they shouldn’t be caught up in this,” said Michelle Wiese Bockmann, markets editor and analyst at Lloyd’s List.

    “Either they’ve got a really bad administrative problem, or the Turkish authorities are playing hardball,” she said. “It's becoming quite an issue ... no crude tankers have gotten through."

    Earlier this year EU diplomats raised the possibility that banned Russian oil would seek to slip through the EU embargo using false certificates of origin from Kazakhstan.

    Brenda Shaffer, senior fellow at the Atlantic Council’s Global Energy Center and energy professor at the U.S. Naval Postgraduate School, said Turkey has been especially careful on the issue of possible sanctions violations in recent years.

    "Since the Kazakh origin oil will be supplied mostly to the EU market, its cargoes are undergoing special scrutiny," Shaffer said.

    A statement from the Kazakhstan government said the insurance issue is "being clarified."

    The European Commission declined to comment on whether any negotiations were ongoing with Turkey to resolve the issue.

    A U.K. Treasury spokesperson said: “The U.K., U.S. and EU are working closely with the Turkish government and the shipping and insurance industries to clarify the implementation of the oil price cap and reach a resolution."

    The spokesperson added that the price cap deal provides an insurance exemption for emergency situations such as oil spills, so "there is no reason for ships to be denied access to the Bosphorus Strait for environmental or health and safety concerns."

    Andreas Economou, director of the oil research program at the Oxford Institute for Energy Studies, said it was still too early to say whether the hold-up would affect global markets; the benchmark Brent crude price is down almost 10 percent over the last five days to about $78 per barrel.

    Katona said Russian crude in the Black Sea is mostly being delivered to Bulgaria, which has a one-year exemption from the EU ban, rather than through the straits, so Moscow is not bearing the brunt of the current logjam.

    "The pain is being felt elsewhere," Katona said, adding: "Ultimately now it's not a Russian problem, but a Western problem because it's affecting Chevron, Eni, Total and all the other companies who are involved in the upstream oil operations in Kazakhstan, [and] are shareholders in the CPC pipeline or are marketing and selling Kazakh oil."

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