Last month, Turkey implemented a requirement for proof of insurance for oil-carrying ships following the implementation of European Union sanctions on Russia. This has resulted in a standoff over sanctions and insurance, causing a congestion of oil tankers at the Bosphorus shipping strait. The situation escalated on Thursday, with millions of barrels of crude oil now stuck.
The Turkish Transport Ministry has faced pressure from the US, UK, and the insurance industry to change its rules. However, the ministry emphasized that the large number of vessels waiting at the strait should not be used as a means to pressure Ankara over its insurance requirements.
The ministry declared that laden tankers without insurance letters will be removed from Turkish waters, though it remains unclear if this approach will free up any of the blocked vessels to sail into the Mediterranean.
According to Bloomberg shipping data, as of Wednesday, there were 26 tankers carrying over 23 million barrels of oil from Kazakhstan unable to pass through the Bosphorus and Dardanelles straits. These waterways are crucial chokepoints for the transportation of crude and other commodities from the Black Sea. Kazakh authorities estimated a smaller backlog, indicating that the Turkish ministry’s estimation stands at 15 vessels.
The ministry’s statement outlined the following points:
- Northbound tankers will require proof of insurance, hindering tankers entering the Black Sea to collect cargo.
- Valid insurance coverage has been required since 2002.
- Eleven out of the 15 halted oil tankers are bound for the European Union.
- Ships in the Sea of Marmara will be removed from Turkish waters.
- Owners have the option to provide a new insurance policy that covers their time in Turkish straits.
- Turkey is open to “all solutions” offered by flag states.
Turkey announced last month that passing tankers would need to provide letters from their insurers, confirming that they were covered to navigate the straits. The straits witnessed the flow of nearly 700 million barrels of crude over the past year. Turkey’s decision was a response to European Union sanctions on Russia, which disallow insurance coverage for vessels carrying oil priced above $60 per barrel.
US and UK officials have been urging Turkey to reconsider the proof-of-insurance requirement, particularly as shipments from Kazakhstan are not subject to sanctions. US Treasury Secretary Janet Yellen insisted that Kazakh shipments are not subject to a price cap and therefore should not face additional procedures. She stated that the US is in talks with Turkish authorities to address the situation.
Turkey stated that it considers it “unacceptable” for protection and indemnity clubs, which provide insurance for risks such as collisions and spills, to not provide confirmation letters to their commercial customers. The ministry clarified that the required letter is solely meant to confirm that the ship’s insurance is valid during its passage through the straits.
The Turkish Ministry also mentioned that it is working on a separate solution for ships without insurance letters that were bound for Turkish refineries, citing the “public good and national interest.” Previously, insurance verification was typically conducted through insurers’ websites, which are regularly updated.
The latest round of sanctions states that a ship carrying Russian oil is only considered to have industry standard coverage if its cargo was purchased at $60 per barrel or less. While the majority of the blocked ships are from Kazakhstan, Turkey’s rules apply to any tanker carrying a cargo, regardless of its origin.
