Page 35 - Russia OUTLOOK 2023

particular through maritime routes, of Russian oil to third countries. As finding
new sources of insurance is difficult and costly, this measure would have a
meaningful impact on Russian exports to non-EU countries.

Fearful of the potential repercussions of this measure on global oil market, the
United States pushed – most notably at the G7 level – to replace the EU’s
blanket insurance ban with a mechanism linked to an oil price cap, under
which insurance would be offered to ships transporting Russian oil only when
the price cap is respected.

The G7 agreed this price cap in September. Since then, the EU has modified
its previous oil sanction scheme and introduced – with its eighth package – the
option for EU operators to insure oil tankers transporting to third countries
Russian oil traded below the agreed price cap.

The aim of this move, representing a watering-down of the EU previous oil
sanction scheme, is that Russian oil will continue flowing at lower prices,
removing windfall profits, but avoiding the worst global economic
consequences – if it works.

The jury remains out on how effective the oil price cap scheme will be.
Russia owns around 82 vessels out of the 7,200 that transport oil worldwide;
the G7 and allies own about 4,700 vessels. To redirect to the East/Global
South, Russia would need to increase the number of its tankers by roughly 4
times.

But some EU shipowners will have to sell tankers if they are not allowed to
transport Russian crude. And Chinese shipowners will buy those vessels to
carry Russian crude. Russia was already reportedly assembling a “ghost
armada” of tankers, booked using shell companies and intermediaries to hide
their origin, taking a leaf out of the Iranian playbook, which successfully
avoided much of the oil export ban imposed on it by the US.

Russia is building a "shadow" fleet of oil tankers (grey) to circumvent the
G7 price cap. Putin is using dollars earned from energy exports right now to
buy the "shadow" tankers, particularly from Greek shipping companies, says
Institute of International Finance (IIF).

35 Russia OUTLOOK 2022 www.intellinews.com