Russia’s dark fleet – crude oil tankers with “insurance”?
Western sanctions on Russian oil have had unexpected consequences for insurance of crude oil tankers, here’s how.
A recent investigation and documents leaked to Financial Times and Danish investigative journalism outlet Danwatch brought to light that Russia’s ‘dark fleet’ does have marine insurance but many policies covering tankers carrying Russian crude are worded in a manner so as to make it impossible to claim against them in the event of a spill of sanctioned cargo.
What is dark fleet?
According to Lloyd’s List, a marine tanker is considered to be a part of the dark fleet if it is 15 years or above in age, anonymously owned and/or has a corporate structure designed to obfuscate discovery of the real beneficial owner, solely deployed in sanctioned oil trades, and engaged in one or more of the deceptive shipping practices.
Another reason for this term is the way these tankers operate. Being involved in the smuggling of Russian crude oil, these tankers are usually old and they sail in secret, often with automatic identification systems disabled. According to Windward, a maritime risk management consultancy, there are about 1,100 tankers in the Russian dark fleet!
The background
Shortly after the Russian invasion of Ukraine in 2022, western insurers in the EU, UK and the USA banned the insuring of Russian crude oil tankers in accordance with sanctions.
Despite this, the Russian crude oil trade seemed to be going strong and it was discovered, thanks to documents leaked, that its tankers are being insured with mainly by Russia’s largest domestic insurance company Ingosstrakh backed by non-western reinsurers.
Why is this a problem?
Many policies covering tankers carrying Russian crude are so worded as to make it impossible to claim against them in the event of a spill of sanctioned cargo.
While on paper, the sanctions are enforced and Ingosstrakh reserves the right to cancel cover for tankers selling oil above the price cap (imposed by EU regulations), it would be naïve to believe that this price cap is being adhered to by operators of the dark fleet, whose central justification is NOT to observe it. According to data, around 90% of Russian oil exports are being traded above the price cap.
What happens if there is a major oil spill?
In case of an oil-spill, the clean up bill which could cost billions of dollars would end up being met by the IOPC Funds (International Oil Pollution Compensation Funds) since insurers like Ingosstrakh could easily cite the policy wording and back out of paying for the damage.
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