According to Reuters article published on April 27, 2023, a rise in spot prices for Russian crude oil to above the $60 per barrel cap imposed by western powers has made ship insurers even more nervous of running foul of the rules as they are unable to independently track the value of cargoes, executives said.
To curb Moscow's oil revenues following 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.
So long as the prices do not exceed capped levels, companies involved in trading and transporting the oil can access to 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 what the actual price was," according to Mike Salthouse, head of external affairs from NorthStandard P&I Club.
"If Russia wants to export its oil and sell it above the price of the price cap, then it's in the interests of both the Russian exporter and the receiver not to release information as to what the true price of the cargo was," Salthouse told Reuters on the sidelines of a Singapore Maritime Week event.
The price caps have been effective in depressing prices for Russian oil, but a jump in global Brent crude prices above $80 a barrel, has pulled Russian Urals above the $60 a barrel price cap, while ESPO Blend, exported from the Far East port of Kozmino, has been trading above $60 a barrel also.
Even before the price caps were imposed, there was no way for insurers to verify the value of cargoes, which can be traded multiple times before reaching their destinations.
Lars Lange, secretary general of the International Union of Marine Insurance said: "We are definitely not able to assess the oil prices of shipments."
"I get an attestation, which is a compliance with the price cap, but I know actually that something different is happening in the background...and this is something where no law can prepare you for these particular cases."
HEIGHTENED SAFETY RISKS
In addition to risks of violating sanctions, the growing "shadow or dark fleet" - tankers purchased by states to deliver Russian oil - has increased safety risks for the shipping sector, the executives said.
"The shadow fleet is a major risk for all shipowners trading within the sanction rules," said Rolf Thore Roppestad, chief executive officer of Gard AS, adding that the risk of colliding with a ship from the shadow fleet is higher than before.
"I don't have a 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 because of sanctions, Salthouse said, increasing risks for shippers and governments worldwide.
"It's a problem that we've tried to explain to governments," he said. "It's in nobody's interests having uninsured ships with dangerous cargo on board floating around, unable to receive payments and everything else."
