The European Union is set to de-escalate sanctions against Russian oil following a weekend of controversy, although it intends to maintain a key shipping provision that would block Russian crude exports worldwide.
The bloc will abandon a plan to ban EU ships from transporting Russian oil to third countries, while maintaining a provision that will not allow these shipments to be secured, according to documents seen by Bloomberg and insiders.
Greece, which is among the countries with the largest number of ships in the world, has pushed – along with other countries – to remove the above provision from the sixth package of EU sanctions against Russia for invading Ukraine, citing non-agreement between the G7 countries.
A ban on European ships carrying Russian oil anywhere in the world would further hit Moscow’s exports. But even with the blockade on the possibility of insuring charterers, the EU is putting a significant obstacle to Russian crude exports. Shipping companies insure their ships with the Shipowners’ Protection and Compensation Clubs, which buy reinsurance from 80 companies, including the top 20 in the world, which can not ignore European law.
EU member states are still discussing the sixth package this week, with diplomats trying to defuse Hungary’s objections to a Russian oil embargo after failing to reach an agreement at the weekend.
In its first proposal, the EU sought to ban the shipment of Russian oil to third countries, even by diverting it from one ship to another.
The shipment insurance block, which excludes goods that do not come from Russia even if they pass through the country, will take effect three months after the official approval of this provision.
In practice, this would restrict Russian oil sales to Russia, while trade would begin to operate more underground, with smaller shipowners coming into play.
“The oil will be sold at a reduced price and the ships will be traded at a premium, because the shipowner who engages in this activity will find that his ships are not accepted by anyone else for some time,” said Mike Muller of the Vitol Group. .
The EU proposal seeks to ban imports of Russian crude within the next six months and refined fuels from early January. European companies will also be barred from providing “technical assistance, brokering, financing or financial assistance or any other service related to such sanctions”.
The EU had given Hungary and Slovakia until the end of 2024 to comply with the measures against Russia and the Czech Republic by June of the same year, as they were heavily dependent on Russian crude. Bulgaria is also seeking a similar transition period.
A source told Bloomberg that oil supplies from Kazakhstan are vital in these technical discussions at EU level, as well as the investment guarantees needed to finance the transition phase, for example in infrastructure in Croatia. Oil from Kazakhstan – and any other third country – will be exempt from the embargo, even if it arrives via Russia.
Source: Capital
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