Following on yesterday's "Umm, Last Thursday's Most Active Brent Crude Option Has A $200 Strike Price".
From naked capitalism, November 11:
Oil Executives Warn G7 Price Cap Could Lead To Stranded Tankers
Yves here. Is G7 managing to undo what little progress it had made on key details of how the “fire, aim, ready” Russian oil price cap will work when it goes live on December 5?
Get a load of this, from the Financial Times in G7 says Russian oil price cap to be ready ‘in the coming weeks’ a week ago:
The G7 decided in September that the cap will work by allowing western companies to provide insurance to seaborne Russian oil exports, so long as the crude has been sold at a price below the cap.
“We will finalise implementation of the price cap on seaborne Russian oil in the coming weeks,” the ministers said in a joint statement following two days of talks in Germany….
The pledge comes a day after the UK said it would cut off the vital Lloyd’s of London insurance.
Pull out a calendar. The sanctions go live in less than four weeks. Both insurance and international trade are complex, legally and documentation-intensive businesses. Parties need time to prepare procedures and forms. But the G7 big kahunas seem to think if they can reduce a plan to PowerPoint, that’s the same as making it happen.
Note that one James O’Brien, head of sanctions co-ordination at the US state department, gave the pink paper airy assurances that the industry was providing input and everyone was a grown up, they can see what is coming. That is clearly contradicted by the OilPrice story below. The normally bland OilPrice shows annoyance at how the feckless oil price cap designers haven’t bothered sorting out key details, which are, contrary to O’Brien, causing headaches and probably problems for industry participants.
A turf war of sorts has contributed to this sorry outcome, meaning sloppy implementation on top of bad concept. The US Treasury is the lead player in the US on sanctions and anti-money laundering; my impression is they’ve also been the party in charge of international sanctions regimes like those against Iran.
We reported on September 7 that the Treasury had published guidance that took positions on issue that now seem to be open. As we’ll see below, it appears UK upset the apple cart, perhaps because it saw itself as the big fish in this process as the dominant provider of insurance for oil tankers and cargoes.
In any event, as you can see from the extract below, the procedures seem far more in flux than they looked to be two months ago:
Moreover, the G7 plans to use its bank sanctions weapon to force other countries to comply. From Maritime Executive:
Marine insurers, bankers and tanker owners may not be liable if their customers violate the new G7 price cap on Russian oil sales, according to the U.S. Treasury – so long as they rely on their customers’ word for shipment price compliance. The ruling addresses some of the shipping industry’s main concerns about the potential effects of the ban....
....MUCH MORE
