Russia’s crude oil exports are in jeopardy, and it’s not just because Europe is moving toward banning Russian crude oil by the end of the year. The European Union’s proposed sanctions against Moscow for its war in Ukraine also include a ban on all shipping insurance for transporting Russian oil. Straight Arrow News contributor Peter Zeihan explains the impact.
Europeans control 95% of all insurance, and by revoking that possibility, ships can no longer go to the Baltic Sea or the Pacific coast of Russia and load up crude unless they get a sovereign indemnification. That is not gonna happen from the Chinese because Chinese state companies have already been avoiding Russian ports because they are too big and their exposure to American sanctions would be too large. They don’t want to risk it. It’s really just smaller non-politically connected Chinese refiners that are taking Russian crude right now.
So that pretty much seals off all exports from the Pacific, which is the one part of the Russian system that a lot of people thought was going to continue forever. The Baltic Sea’s even more damning because the Baltic Sea port of Primorsk is so shallow that you can’t get a super tanker in there. So you would have to do a sea-to-sea transfer anyway, and now you can’t get insurance for that either.
So the insurance aspect of things is likely to reduce Russian oil exports by more in the next couple of months than this phased-in European sanctions on Russian oil. But it all ends to the same place. Very, very, very little of Russian crude can find a home now, unless a country comes in and does that sovereign indemnification. And it’s really difficult to see any country that wants to have reasonable relations with the Europeans being able to do that. The Chinese are out. The Turks are a maybe, and that’s about it. India’s too far away.
So the Europeans have found a way to have their cake and eat it too. The only question of course is how will the Russians now respond? I’m sure they’re not gonna be happy about this.