The European Union’s embargo on 90% of the oil it imports from Russia is the toughest punishment it’s inflicted on the Kremlin since President Vladimir Putin ordered the invasion of Ukraine.
But a smaller part of the latest sanctions package could prove just as significant. A ban on insuring ships carrying Russian oil would make it harder for Moscow to divert hundreds of thousands of barrels a day to other buyers in India and China, and that could drive global oil prices even higher.
“Targeting the insurance side of things is the best shot at halting Russian crude flows instead of just redirecting them,” said Matt Smith, lead oil analyst at Kpler, a market intelligence firm.
The European Union has announced that EU companies will be blocked from “insuring and financing the transport” of Russian oil to third-party countries after a transitional period of six months.
“This will make it particularly difficult for Russia to continue exporting its crude oil and petroleum products to the rest of the world since EU operators are important providers of such services,” the Commission, the EU’s executive arm, said in a statement.
The United Kingdom is expected to join the EU effort. That would further tighten the vise, since Lloyd’s of London has for centuries been at the center of the maritime insurance market.
So far, Russia has been able to cushion the blow from a drop-off in exports to Europe by attracting other customers with steep discounts. But if ships can’t get the insurance they need for delivery runs, that will become much tougher in the near term.
