UK to Cap Price of Russian Oil Using Insurance, Brokerage, Shipping Services Ban

The UK government is to cap the price of Russian oil for any company in the world using the country’s insurance, brokerage and shipping services.

The UK Treasury said in a statement on Thursday that the country will prohibit the provision of the services from Dec. 5, part of a broader international effort to undermine Russia’s war effort in Ukraine.

The ban won’t apply to oil purchased at or below a price cap set by a coalition of the G-7 nations and Australia, the UK Treasury said. The decision aligns the UK more closely with the European Union, which has also said it will ban insurance and services for the shipment of oil not sold below the cap.

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The insurance industry has been in limbo about whether and how the UK would follow the EU’s measures, although the expectation was that it would do so.

The UK’s move comes as the US and EU continue to finalize plans for the cap, which was met by skepticism from investors and parts of the oil market, but is designed to slash revenues to Vladimir Putin’s war machine.

The final level of the cap will be set in due course by the coalition, the UK Treasury said in the statement. The exemption for transporting Russian oil at levels under the price cap is to allow countries to continue to secure affordable oil, the Treasury said.

The Office of Finance Sanctions Implementation will issue a license to exempt contracts to ship Russian oil signed before Dec. 5 and delivered before Jan. 19 from the ban, aligning with the US’s approach.

It’s unclear how Moscow will view the step or if it will draw a response. The Kremlin has said it won’t sell to anyone purchasing under a cap. A large shadow fleet of tankers, likely using alternative insurance, has been amassed over the past few months.

The UK won’t itself make use of the cap as it has introduced an import ban on Russian oil.

London is an important insurance market for the transport of oil. Protection and indemnity insurance covers companies against risks including oil spills. The UK is also home to the International Group of P&I Clubs, an over-arching organization of mutuals from across the world that cover 95% of the tanker fleet for P&I.

–With assistance from Ellen Milligan.