The United States has called on European governments to find a way to soften the blow to the oil market after the ban on insurance for ships carrying Russian crude and fuels comes into force, the report reported. Financial Times, adding that Washington fears the ban will lead to even higher oil prices.
The European Union and the United Kingdom agreed to ban insurers from covering Russian oil shipments last month in a bid to further reduce Russia’s access to export markets and, therefore, its oil revenues .
“It is hard to underestimate the significance of this decision by the UK and the EU. Purchasing insurance will have a huge impact on Russia’s ability to export its oil. This is one of the toughest sanctions Europe has in its arsenal,” Helima Croft of RBC Capital Markets said at the time.
However, it looks like the ban would be harsh on everyone else as well, with the United States being particularly affected. According to the FT report, Washington touted the idea of limiting the insurance ban to certain price levels, with insurers allowed to insure Russian oil shipments under a price cap, but European governments were not. really agree with the idea. It is also unlikely that Moscow will agree to this idea.
“They fear prices will skyrocket,” the FT quoted an unnamed EU official as saying, adding that the US was also pressuring its G7 partners to find a solution to the price-sanction conundrum. .
According to US Under Secretary of State Wendy Sherman, there have been “very intense discussions between the United States and Europe to do this in a really constructive way that hurts Russia but not more Europe, nor to the rest of the world”.
Meanwhile, there have been warnings that the insurance ban will not have the desired effect. The former chief economist of the IMF, Olivier Blanchard, notably declared earlier this month that “tankers simply will not be able to transport Russian oil. The result will be a – potentially significant – decrease in Russian oil exports. Yes, Russia will suffer a loss of revenue, but Europe and the United States will likely suffer from a substantial increase in world oil prices.
By Irina Slav for Oilprice.com
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