Tanker congestion in the Black Sea linked to oil embargo: what is Turkey trying to achieve

The West assesses the consequences of restrictions on trade in “black gold” from the Russian Federation

Oil tankers are queuing off the coast of Turkey due to a cap on Russian oil prices. According to Western media, the Turkish authorities require insurers to prove that ships passing through the straits are fully insured.

A congestion of oil tankers has surged out of Turkey after Western powers imposed price caps on Russian oil in an attempt to hurt the Kremlin.

Vessels carrying “black gold” stopped after the Turkish authorities in Ankara demanded from insurers to prove that tankers crossing the straits were fully insured.

EU sanctions on Russian oil prices came into effect on Monday after tense negotiations last week. The rules state that tankers carrying Russian crude oil must not carry Western marine insurance unless it is sold at a cap price of $60 a barrel.

The restriction was introduced in an attempt to limit Russia’s fossil fuel revenues while ensuring that oil continues to flow and the London-dominated marine insurance industry is unaffected. The Russian oil pumped through the pipeline, the price “ceiling” does not apply, notes The Guardian.

Some 19 crude oil tankers waited Monday to cross Turkish waters, stopping at the Bosporus and Dardanelles straits that link Russia’s Black Sea ports with overseas markets, the Financial Times reported. One of the tankers was said to have been waiting for six days.

The tanker escalation is the first sign of the impact of the lockdown on the international oil market, which has been upended by the conflict in Ukraine.

Initially, the outbreak of the Ukrainian conflict caused a sharp increase in oil prices, which led to record prices at gas stations and rising inflation.

There have been questions about whether the restriction will affect the reduction in Russia’s oil revenues, since its exports have not significantly decreased since the start of the special operation in Ukraine. Russia has increased oil exports to countries such as India and China after Europe stopped exporting it.

P&I Clubs, an international group that represents 13 mutual insurers that provide coverage for 90% of the global shipping industry, told the FT that Turkey’s request went “well beyond” the information normally required. Its chief executive, Nick Shaw, said there were “constructive discussions” to resolve the situation.

The Ukrainian crisis has also undermined the global gas transportation industry: the drive to replace Russian gas with natural gas supplies has led to an increase in the number of tankers carrying liquefied natural gas to Europe. Gas prices have fallen in recent months, leaving LNG carriers waiting on the high seas until prices recover.

Oil prices rebounded on Tuesday after falling more than 3% on Monday as sanctions on seaborne Russian crude eased concerns about oversupply and China’s easing of COVID-19 restrictions bolstered the demand outlook. Futures for Brent crude rose 85 cents to $83.53 a barrel.

The threat of loss of protection and indemnification insurance (P&I) will limit Russia’s access to the tanker market, reducing crude oil exports to 2.4 million barrels per day, which is 500,000 below the level observed prior to the conflict in Ukraine at the end of February this year, it is believed Rystad Energy analysts.