A standoff over sanctions and insurance that has caused a jam of oil tankers at the key Bosphorus shipping strait escalated on Thursday, leaving millions of barrels of crude stuck.
Late last month, Turkey insisted on proof that oil-carrying ships are insured after European Union sanctions on Russia came into effect. It has come under pressure from the US and UK and also the insurance industry to change its rules.
But the Turkish Transport Ministry said on Thursday the large number of vessels now waiting to navigate the straits — a vital chokepoint for oil flows from the Black Sea — shouldn’t be used to pressure Ankara over rules requiring proof the tankers are insured.
Millions of Barrels of Oil Stuck Near Turkey on Sanctions-Related Insurance Glitch
The ministry said it would remove laden tankers without insurance letters from its waters, although it wasn’t clear if its approach might actually free some of the blocked vessels to sail into the Mediterranean.
Twenty-six tankers holding more than 23 million barrels of oil from Kazakhstan were unable to pass the Bosphorus and Dardanelles straits as of Wednesday, shipping data compiled by Bloomberg showed. The waterways are vital chokepoints for the flow of crude and other commodities from the Black Sea. Kazakh authorities estimated a smaller backlog. The Turkish ministry put the number at 15 vessels.
The ministry’s statement also said:
- Northbound tankers will require proof of insurance, hindering tankers entering the Black Sea to collect cargo
- Valid cover has been required since 2002
- 11 out of 15 halted oil tankers bound for the European Union
- Ships in Sea of Marmara to be removed from Turkish waters
- Option for owners to provide a new new insurance policy that covers their time in Turkish straits
- Turkey is open to “all solutions” offered by flag states
Late last month, Turkey announced that passing tankers would have to provide letters from their insurers proving they were covered to navigate the straits, through which almost 700 million barrels of crude flowed in the past year. Turkey’s move was a response to European Union sanctions against Russia that bar insurance of vessels if the oil they’re carrying costs above $60 a barrel.
US and UK officials have been pushing for Turkey to reconsider the proof-of-insurance requirement, especially given that cargoes from Kazakhstan are not subject to sanctions.
“We’ve explained that they’re not subject to a price cap at all,” US Treasury Secretary Janet Yellen said Thursday, referring to the Kazakh shipments. “There’s no reason whatsoever for why they should be subjected to any type of procedures,” she said, adding that the US is in talks with Turkish authorities about “trying to manage the situation.”
Still, Turkey said it was “unacceptable” for protection and indemnity clubs that insure risks including collisions and spills not to provide confirmation letters to their commercial customers.
“This letter demanded by us is only about confirming that the ship’s insurance is valid during its passage through Straits,” the ministry said.
Turkey is working on a separate solution for ships without letters that were bound for Turkish refineries, the ministry said, citing “public good and national interest.”
Until now the conventional way of checking insurance has been via the insurers’ websites, which are constantly updated.
But the latest round of sanctions stipulate that a ship carrying Russian oil only has industry standard cover if its cargo was purchased at $60 a barrel or less.
Almost all the waiting ships are from Kazakhstan, but Turkey’s rules apply to any tanker with a cargo on board, not just those from Russia.
–With assistance from Alex Longley and Christopher Condon.
Photograph: Oil tankers waiting to transit the Bosphorus Strait in Turkey in November 2022. Photo credit: Maxar/Getty Images
Copyright 2022 Bloomberg.
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