A group of Western insurers has criticized the Russian oil price cap, stating that it has become unenforceable and has instead pushed more ships into joining a shadow fleet, delivering a harsh rebuke to the measure that was intended to cut revenue to the Kremlin. The International Group of P&I Clubs, which comprises 12 marine third-party liability insurers covering 87% of the world’s ocean-going tonnage, submitted a statement as written evidence to a UK parliamentary hearing on Tuesday.
The group said the price cap has had little success since being introduced two years ago, as Russia has switched to its own fleet as well as ships outside Western oversight. “The oil price cap appears increasingly unenforceable as more ships and associated services move into this parallel trade. We estimate around 800 tankers have already left the International Group Clubs as a direct result of the introduction of the oil price cap,” the statement said.
U.S. and European Union officials have considered the price cap to have succeeded in cutting revenue to Russia while keeping oil flowing and avoiding a price shock. However, Tom Keatinge, director of the Royal United Services Institute’s Centre for Finance and Security, told the hearing that there are insurers within the reach of the UK and the G7 who are providing insurance in breach of the oil price cap. He added that these firms should be added to the sanctions list and that the international community should be made aware that dealing with these insurers could lead to “hot water.”