Britain is to play a crucial role in the western strategy of preventing Russia “profiteering from its war of aggression in Ukraine” through the global sale of oil.
Allies plan to cap Russian oil prices – a move they say will restrict revenue for the Kremlin while still permitting supplies to reach countries that have not imposed import bans, thus avoiding crippling energy shortages.
Despite western financial penalties, Vladimir Putin’s war chest is growing. Russia is said to have made $100bn (£82bn) through the sale of oil and gas in the first 100 days of the war. It is currently earning an estimated $800m a day.
Insurance companies will have a major part to play in any capping process. It would be extremely difficult for markets to receive Russian oil by sea without this service, and insurers in London, the international centre for marine insurance, must cooperate if the policy is to succeed.
The International Group of Protection & Indemnity Clubs in London covers around 95 per cent of the global oil shipping fleet.
IGPIC and other insurance groups have been drawn into sanctions regimes in the past; for example, they found themselves sanctioned for covering cargoes of Iranian oil during western sanctions on Tehran.
Ministers are due to hold talks with the insurers on the capping scheme. Some industry figures have expressed unease about using insurance as a mechanism for enforcing political decisions, pointing out that underwriters may not necessarily know the trading price.
Moscow and Beijing could set up their own marine insurance systems and, if global tanker fleets refuse to carry Russian oil, importers such as China and India – the latter now a major market for discounted supplies from Moscow – could use state-owned vessels.
Jake Sullivan, the US National Security Adviser, acknowledged at the G7 summit in Bavaria that the capping plan needs work and cannot be “pulled off the shelf as a tried and true method”.
However, the idea was formulated in Washington and Janet Yellen, head of the US Treasury, is a strong backer.
The US Treasury reports Ms Yellen has spoken to Constantinos Petrides, finance minister of Cyprus, which has Europe’s largest ship management centre, about “the goal of placing a price limit on Russian oil to deprive the Kremlin of revenue to finance their war in Ukraine while mitigating spillover effects for the global economy”.
A senior US official said in London: “Every day that goes by, we see additional revenues flying into Russia and every additional day sees Vladimir Putin’s war chest growing.
“We are doing everything we can to stop Russia profiteering from its war of aggression in Ukraine. There is a need for urgency in meeting the complex technical and diplomatic challenges we are facing.”