UK to limit price of Russian oil using ban on insurance, brokerage and delivery services

The British government will cap the price of Russian oil for companies worldwide using Russian insurance, brokerage and shipping services.

The UK Treasury said in a statement on Thursday that the country would ban the provision of services from 5 December.

The ban does not apply to oil purchased below price caps set by a coalition of G-7 countries and Australia, according to the UK Treasury. The decision, which will bring the UK closer together with the European Union, also says it will ban insurance and services on shipments of oil not sold below the cap.

Insurers still unclear how G-7 sanctions on Russian crude cargo will work

The insurance industry was in a state of uncertainty as to whether and how the UK would comply with EU measures, but was expected to do so.

Britain’s move, which was met by skepticism from investors and some in the oil market, was designed to cut revenues into Vladimir Putin’s war machine.

The UK Treasury said in a statement that the final level of the cap would be set by the Union soon. The exemption to transport Russian oil at levels below the price ceiling is to allow countries to continue to secure affordable oil, the Treasury said.

Financial Sanctions Enforcement Service issues license exempt from ban on contracts to ship Russian oil signed before December 5 and delivered before January 19, in line with US approach .

It is unclear how Moscow will view the measure or whether it will elicit a response. The Kremlin says it won’t sell to anyone who buys below the cap. A large shadow fleet of tankers, possibly using alternative insurance, has accumulated over the past few months.

The UK itself will not take advantage of the cap as it introduced a ban on imports of Russian oil.

London is an important insurance market for oil shipping. Protection and indemnity insurance covers businesses against risks including oil spills. The UK is also home to the International Group P&I Club, an umbrella organization of mutual aid organizations around the world that covers his 95% of P&I’s tanker fleet.

– With help from Ellen Milligan.

Copyright 2022 Bloomberg.

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