Will Russian oil transportation via the Bosporus be halted?
- In 2021, some 80 million tonnes of crude oil were shipped from the port of Novorossiysk. This year, shipments have increased by about 10% due to redirection of supplies to India and the SEA countries. Meanwhile, the G7 nations have agreed on Russian crude oil price cap from 5 December 2022. If cargo is purchased at a price above the cap, western companies will not be allowed to provide services on transportation of the cargo including insurance services.
According to recent information, the U.S. does not mind if India buys Russian oil at the price above the cap set by the G7 but the western companies cannot be involved in the process. Taking into account the redirection of crude oil bound for India to the Southern Basin, Turkey has to demand insurance since an incident with a tanker in the Bosporus can lead to an environmental disaster in Istanbul.
Does that threaten with halting exports of crude oil and petroleum products via Russia’s Souhtern Basin? The issue is to find alternative to western insurance clubs. Both Russian companies provided with state supported and the companies of importing countries such as India can step in. However, it is an open question if the Turkish authorities would be satisfied with their guarantees.
One more option is to redirect exports back to the North-West ports. Logistics would be more costly in that case and insurance would be needed anyway.
In general, rejection of liquid bulk cargo insurance by western clubs can prove to be detrimental to the entire global community. To realize the scope of implications one should imagine an oil spill from a 100,000 dwt tanker near a densely-populated country with no proper insurance guarantees ...