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Tuesday, February 27, 2024

Turkey, oil. Tankers are stuck in a traffic jam after the introduction of a cap on oil prices from Russia

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At least 20 oil tankers stuck in a traffic jam off the coast of Turkey. Authorities in Ankara are demanding new evidence of full insurance for all ships, following the imposition of a price cap on Russian oil.

Authorities Turkey introduced new regulations from 1 December this year. According to them, every vessel must be fully insured for all circumstances while sailing through Turkish waters or when calling at ports.

Reuters reported on Tuesday that at least 20 tankers were waiting to pass through the Turkish straits. The ships anchored near the Bosphorus and the Dardanelles. The first of them appeared on November 29 and is still waiting, the Financial Times reported, citing industry sources.

Later on Tuesday, Reuters reported that a letter provided by Russian insurer Ingosstrakh allowed the first tanker to pass through Turkish waters.

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Companies insuring oil tankers and transport of oil after the introduction of the price limit cannot insure ships carrying Russian oil – regardless of its destination – unless it has been sold within the set ceiling.

Price ceiling for Russian oil

G7 countries, Australia and European Union last week, they agreed to set a price ceiling for Russian crude oil, transported by sea, at the level of USD 60 per barrel. The restriction went into effect on Monday.

This step is intended to reduce oil price spikes and reduce the revenues of the Russian budget. “The price cap on Russian oil will limit price spikes caused by extraordinary market conditions and will significantly reduce the revenues that Russia gains from trade in this resource after unleashing illegal aggression against Ukraine. It will also serve to stabilize the world energy prices while mitigating the negative consequences for energy supplies to third countries.

The limit will work by prohibiting the provision of sea-borne oil services – including insurance and financial services – for crude purchased at a price above the set ceiling of $60 per barrel. Companies from the G7 countries control about 90 percent. global maritime transport insurance market, which guarantees compliance with the ban, the US Treasury Department recently emphasized.

The functioning of the price cap mechanism will be reviewed every two months and adjusted to market developments, so that the cap is at least 5%. below the average market price of Russian oil and petroleum products, calculated on the basis of data provided by the International Energy Agency (IEA).

Although the restriction entered into force on Monday, a 45-day transitional period was introduced. This means that tankers that were loaded before December 5 can transport the raw material and unload it until January 19, 2023 without any consequences.

Main photo source: Reuters



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