Page 7 - FSUOGM Week 26 2022

FSUOGM COMMENTARY FSUOGM

reparations to Kuwait. But that programme was IRClass' actions were, “not a matter for dis-
beset with widespread corruption and abuse. cussion by the association,” and that members
Meanwhile, despite the intentions, the price of the association were free to make their own
cap might encourage some buyers such as India commercial decisions.
and China to actually ramp up oil supply from With the Indian IRClass certification Rus-
Russia, because after all they would be paying sian ships have then turned to their domestic
less. Therefore, the cap might fail to deprive insurance companies for cover. Sovcomflot's
Moscow of revenue, as Russia would be able chief executive told reporters earlier this month
to offset some of the lost price with increased that the group had insured all its cargo ships
volumes. That is, unless the cap was comple- with Russian insurers and the cover met inter-
mented with coordinated global reductions in national rules. Reuters reported that the Russian
Russian oil purchases, which buyers such as state-controlled Russian National Reinsurance
India have already shown they are unwilling Company (RNRC) has become the main rein-
to agree to. surer of Russian ships, including Sovcomflot's
Using insurance markets to implement the fleet.
cap might also cause the price of non-Russian RNRC is under the control of the Central
crude to soar amid fears of future shortages. This Bank of Russia (CBR). The CBR raised RNRC's
would hurt the global economy and could make capitalisation to RUB300bn ($6bn) from
buyers more willing to risk penalties for violat- RUB71bn and hiked its guaranteed capital to
ing sanctions. Buyers that are not aligned with RUB750bn so the firm had adequate resources
Western policy towards Russia might also accept to provide reinsurance.
Russian or other insurance. Indian authorities have also accredited the
Indian has already blown a hole in this privately owned Russian insurance giant Ingoss-
scheme after an Indian insurance company trakh as an insurance company for shipping oil,
agreed to offer Russian tankers safety certifica- which means vessels the company insures can
tion to a Dubai-registered subsidiary of Russia’s enter Indian ports. Ingosstrakh was formerly
biggest ship operator Sovcomflot on June 23. owned by Czech investment holding PPF and
That will allow Russia to export oil to Indian Italian insurance giant Generali, which “froze”
even if the Western insurance sanctions are put its 38.5% stake in the company in March, but has
into effect. no plans to sell it, according to reports. Russian
Moreover, certification by the Indian Regis- oligarch Oleg Deripaska is also a major share-
ter of Shipping (IRClass) could well be accepted holder. Ingosstrakh earned just over a third of
by Russia’s other nonaligned customers in the its premiums of $910mn from marine insurance
developing world, most of which have refused in 2021.
to join the western sanctions. bne IntelliNews
reported, the enthusiasm for the West’s sanctions Allianz, Europe’s biggest insurer, which offers
outside of the G7 countries is only lukewarm. a wide range of insurance products in Russia, has
Data compiled from the IRClass website also said it has intension of exiting the market,
shows that it has certified more than 80 ships the Financial Times reported in March.
managed by SCF Management Services (Dubai)
Ltd, a Dubai-based entity listed as a subsidiary Export of oil to India have boomed this year
on Sovcomflot's website, Reuters reports. as it takes advantage of the deeply discounted
India's ship certifier is one of 11 members of prices. Russian grades accounted for about
the International Association of Classification 16.5% of India's overall oil imports in May, com-
Societies (IACS), top-tier certifiers that account pared with about 1% in all of 2021.
for more than 90% of the world's cargo-carry-
ing tonnage. The Russia Maritime Register of If the price caps are put in place and the insur-
Shipping was also part of the group until March, ance ban made to work, then there is also the
when its membership was withdrawn following risk of a drastic reaction from Russian President
a vote by 75% of IACS' members. However, only Vladimir Putin, who could respond by cutting
four of the 11 members (UK, Norway, France, oil and possibly gas exports to Europe, plunging
and the US) have withdrawn their services from its markets into economic chaos, even if doing so
Russian ships due to sanctions. hurts Russia and its hydrocarbon industry con-
An IACS spokesman told Reuters that siderably in the process. ™

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