New Turkish insurance rules delay Kazakh oil deliveries

The decision by Turkey to ask western insurers to guarantee cover for ships transiting the Bosphorus Strait that were found to have broken sanctions rules has not just caused a bottleneck for Russian tankers; it has also caused a backing-up for Kazakh oil exports.

In fact, a majority of the 19 or so tankers stuck at the beginning of the week as a result of the impasse between the Turkish authorities and the Group P&I clubs were reported to be laden with Kazakh oil, brokers told Bloomberg. Kazakhstan does not have a direct connection with the sea, so its seaborne oil exports are piped over the border and loaded at a terminal in Novorossiysk, Russia.

Kazakhstan said on Wednesday December 7th that the build-up of the oil tankers at the Bosphorus was normal during the winter season. “The waiting time in the Bosphorus and Dardanelles is six days for now. For the winter season, this is a normal wait; last year, the wait in the straits in December was about 14 days,” Kazakhstan’s Energy Ministry said.

Tankers carry a “blue card,” the IMO-standard certificate proving marine insurance, and local officials can verify it using an online service. But Turkey announced in mid-November that, come December 2nd it would require a letter from the insurer declaring that the coverage would be valid for a specific voyage through the Bosphorus. However, the Clubs say that the letter required goes further. Gard said that Turkey’s new rules required a guarantee that “cover will remain in place under any circumstances” while the vessel is in Turkish waters.

The International Group said that its 13 members saw this as a catch-all requirement which would overrule insurers’ own exclusion clauses for material issues involving the ship – such as sanctions breaches.

Further, EU, UK and US laws forbid insurers from providing cover to certain vessels and oil cargoes. Therefore, noted Gard, a letter of promise to provide cover even for vessels which turn out to be sanctioned “would expose the club to a breach of sanctions”.

Turkey has expressed concern that the impact of the $60 price cap that came into effect on December 5th could be that uninsured vessels would be sailing through the crowded Bosphorus Strait, with serious potential financial impact should there be an accident, particularly if pollution followed.

The price cap could require some Russia-serving tanker operators to take out alternate sources of insurance, but Turkey is concerned that these might not be as financially robust as the Group P&I Clubs, who have a complex reinsurance system in place should a huge loss occur.

Russian tankers can access their own domestic insurance through Ingosstrakh Insurance Company, with reinsurance through the Russian National Reinsurance Company (RNRC). But the capacity and political willingness of these insurers to pay in the event of a major casualty is untested.

It was for this reason that Turkey attempted to cover its own potential financial loss by inserting the requirement for a letter of guarantee.

The International Group is in talks with Turkish officials to find a middle ground. The US Treasury has also engaged in conversations with Turkish authorities in an attempt to resolve the issue, according to the Financial Times.

Marcus Baker, head of marine and cargo at broker Marsh, told yesterday’s Radio 4 Today programme (December 7th)that active conversations were taking place between Turkey and the Group P&I Clubs in an attempt to achieve a wording that would be satisfactory to both sides.

Meanwhile, Russia said that it was concerned about the build-up of oil tankers in the Bosphorus Strait and is discussing the issue with insurance and transport companies, RIA cited Russian deputy foreign minister Alexander Grushko as saying on Wednesday.

“We are aware of this situation. Of course, it causes us concern from the point of view of the interests of our operators. This problem is being discussed with transport and insurance companies. After all, insurance companies insure, not the state,” Grushko is quoted as saying, adding that “if the problem is not solved, of course, there will be involvement on the political level.”