Russia will use state guarantees for oil cargoes to sidestep EU insurance ban

A return of state insurance in Russia looks likely as a result of new EU rules on the insurance of Russian oil cargoes.

Dmitry Medvedev, deputy chairman of the Russian security council, said on June 6th that “this problem can be solved — insuring supplies can be secured by using state guarantees within the framework of interstate agreements with third countries”.

The EU said on June 3rd that its sixth sanctions package would prohibit EU operators from insuring and financing seaborne transport of Russian oil to third countries, subject to a wind-down period of six months.

Medvedev emphasized that Europe could not cut itself off immediately from Russian oil, and that European countries would need to use alternative methods to continue to import it. “They know that they will still have to find ‘grey’ schemes to get our feedstock and pay for it somehow, bypassing their own idiotic sanctions,” he said.

Other measures included in the latest sanctions package include phasing out Russian crude imports in six months, and other refined products within eight months. Medvedev said that, as a result, European countries would have to look elsewhere in the world for crude the same quality as Russian oil. “In so doing, they will face a shortage of certain types of fuel, such as diesel” Medvedev said.

Member states that have a particular pipeline dependency on Russia and no viable alternatives were granted a temporary exemption for pipeline crude shipments, which will remain in place until the European Council decides otherwise. Member states that benefit from the exemption are not permitted to resell such crude and products to other member states or third countries.

Other exemptions include permission for Bulgaria to continue seaborne oil and oil products imports until the end of 2024. Croatia will also be allowed to import Russian vacuum gas oil until the end of 2023.

The EU claimed that, when combined with German and Polish measures, the new sanctions would see Russian oil import volumes drop by 90%.

Russia’s key crude grade Urals now trades at a significant discount to the Brent Crude benchmark. Platts assessed Urals at $85.47 a barrel on June 1st, while Dated Brent was at $122.96 a barrel.