Millions Of Oil Barrels Halted In Tanker Ships Close To Turkey In Sanctions Mess

A standoff over insurance and sanctions that have resulted in a jam of huge oil tankers at the Bosphorus shipping strait reportedly escalated on Thursday, leaving several million barrels of crude being stuck.

Late last month, Turkey reportedly insisted on getting proof that oil-carrying vessels are insured after the EU sanctions on Russia came into effect. It has come under pressure from the US and the UK and also the insurance industry to alter rules.

On Thursday, the Turkish Transport Ministry mentioned that the huge number of vessels now waiting for navigating the straits — a key chokepoint for oil flows from the Black Sea — should not be used to pressurize Ankara regarding rules needing proof that tankers are insured.

The ministry mentioned that it would get rid of laden tankers lacking an insurance letter from its waters, even though it was not clear if the approach may free some of the blocked ships to sail into the Mediterranean Sea.

About 26 with over 23 million barrels of oil from Kazakhstan were not able to sail through the Dardanelles and Bosphorus straits as of Wednesday, per shipping data by Bloomberg. The waterways are key chokepoints for the flow of crude and other commodities from the Black Sea. Kazakh authorities reportedly estimated a considerably smaller backlog. The Turkish ministry placed the number at about 15 vessels.

The ministry’s statement also highlighted the following:

• North-bound tankers will require proof of insurance, hindering the tankers entering the Black Sea for cargo collection
• Valid cover has been required since 2002
• 11 of 15 oil tankers (halted) bound for the EU
• Ships in the Sea of Marmara to be removed from the Turkish waters
• Option for owners to offer a new insurance policy covering time in the Turkish straits
• Turkey is open to solutions extended by flag states

Late last month, Turkey declared that sailing tankers would need to provide letters from insurers to show they were well-covered to navigate the straits, through which nearly 700 million barrels of crude sailed in 2021. Turkey’s move was a response to the EU’s sanctions against Russia, especially those that bar insurance of vessels if the oil they are loaded with costs more than $60 a barrel.

‘Unacceptable’

Relevant UK and US officials have been striving for Turkey to reconsider the proof-of-insurance needs, given that cargoes coming from Kazakhstan aren’t subject to sanctions.

It has been explained that they aren’t subject to a price cap, Janet Yellen, the US Treasury Secretary mentioned on Thursday, indicating Kazakh shipments. There aren’t reasons why they must be subjected to any kind of processes, she mentioned, mentioning that the US is in talks with Turkish authorities regarding the need to “manage the situation.”

Yet, Turkey mentioned that it was “unacceptable” for indemnity and protection clubs that insure risks, including spills and collisions not to offer confirmation letters to commercial customers. The letter demanded is to confirm that the vessel’s insurance remains valid during the passage via straits, the ministry mentioned.

Turkey is trying to work out a separate solution for vessels without letters that were bound for Turkey’s refineries, the ministry mentioned, citing “public good and national interest.” Until now the conventional way of checking insurance has been via the insurers’ websites which are continuously updated.

But the most recent sanctions stipulate that a vessel loaded with Russia’s oil has industry-standard cover if the cargo was bought at $60 per barrel or lower. Almost every waiting vessel is from Kazakhstan, however, Turkey’s rules apply to tankers with cargo on board, not just the ones from Russia.

References: Economic Times, Insurance Journal