As of yesterday, the EU's sanctions on tankers carrying oil with a price tag of more than $60 per barrel, known as "Price Cap", have officially started.
According to the statements made by the EU, this sanction affects more than two-thirds of Russian oil imports to the EU and is expected to be the most effective means of pressure applied to Russia to end the war it has been waging with Ukraine for nearly a year, from the EU perspective.
The sanctions prevent EU operators from "insuring and financing the transportation of Russian oil to third countries, especially by sea".
In the sector, many ships coming from India, China and other countries, especially Greek shipowners, are insured by companies in Europe and England.
Russia, on the other hand, stated in its statement that it does not recognize the ceiling price application of EU and G7 countries and will not comply with it. This means that Russia will not sell oil for less than $60 and as a result, tankers carrying Russian oil will no longer be covered by the UK-based insurance system, which has more than 90% fleet coverage in the world insurance system.
Events are evolving in a direction where Russia will stop selling oil to the EU and can evaluate its oil in the rest of the world's markets. However, there is a dimension to the event that even if Russia gives up everything, it is not possible to give up on it. Because in order to bring oil to world markets, it has to pass through a very important passage through the Turkish Straits.
On the days when it is clear that the price cap application, which the EU has been talking about for months, will now be realized, an important announcement has been made in Turkey.
With an official letter sent by the General Directorate of Maritime Affairs on 16 November 2022 to all relevant institutions, it has been stated that as of 1 December 2022, all ships carrying dangerous goods that will use the Turkish Straits are required to confirm their P&I insurance.
The following statements are included in the article, which is an "administrative action":
"There are statements that draw attention to the fact that "in cases where an illegal commercial act has been made or prohibitions have been violated before a responsible loss, or in other cases such as these, damages will not be covered even if the ship has a valid P&I policy.
In the event of a possible accident, it is very likely to have catastrophic consequences for our country, our values and our people, and it is necessary to confirm that P&I insurance is still valid and comprehensive, especially during the passage of cargo ships such as crude oil products through the Turkish Straits.
Otherwise, after a possible accident, in case the P&I insurance company cannot be found or the insurance company rejects the work and actions required for the above-mentioned reasons, or the processes regarding all these take time and the necessary interventions are delayed; First of all, our country, our values and our people may be damaged to a vital extent, and if the Turkish Straits, which is an important waterway, remain closed during this process, the supply chain and logistics mobility will come to a standstill and a global crisis may occur.
For this reason, it is considered that it will be the most cost-effective and reasonable solution to receive an additional confirmation letter that the ship will still be covered by the valid P&I insurance during this voyage."
Insurers have declared their positions in advance. Even their acceptance of the validity of the existing certificate, let alone the additional confirmation letter, became questionable. It is highly likely that they will not pay in the event of an accident.
On the first day of the implementation, loaded tankers began to accumulate and wait in the north of the Bosphorus. There is a possibility that this situation will create problems and cause problems especially in Turkey and Russia. Perhaps one of the secondary goals of the quarterbacks is to make a rift between Turkey and Russia in this way.
As a matter of fact, Turkey seems to be faced with a dilemma. If he allows the passage of tankers, he will be faced with the situation of violating EU sanctions against international law, and he will not be able to find an interlocutor (other than the owner) who will compensate for the damage in case of an accident to these ships that do not carry a valid P&I guarantee. If he does not allow it as an alternative, the risk of waiting tankers will lead to a greater risk of pollution in its territorial waters and a deterioration in its relations with Russia.
A solution seems possible for the dilemma that has arisen in all this turmoil.
“If Putin trades with state ships, the problem will be solved”
The requirement that all ships carry a valid P&I guarantee is actually a requirement of the CLC Convention (International Convention on Civil Liability for Damage from Oil Pollution).
The mentioned Convention points to the owner as liable for the damage arising from oil pollution. It is applied to oil tankers carrying cargo, not to tankers carrying ballast if gas-free operation has been carried out. It does not include the fuel transported as a bunker (BunkerConvention has been prepared to make up for this deficiency).
Although the CLC Convention holds the owner responsible, after all, the financial resources of an average ship owner is well-known. In the event of a major pollution, holding the owner responsible is often not enough to compensate the damage even by taking all his assets. For this reason, it is obligatory to have insurance for ships carrying more than 2000 tons of oil. Today, P&I insurance appears to be the insurance that can meet this demand (1992 CLC art. VII).
Avvording to the VII/12 Article of the 1992 CLC Convention, if the ship's owner is one of the Contracting States, then this ship does not need the guarantee of one of the P&I Clubs. Instead, the State, who is actually the owner of the ship, issues a document and in this document states that:
1- The ship is a commercial ship belonging to the State;
2- The guarantees specified in Article V/1 of the Convention for damages arising from the oil carried by the ship are guaranteed by the State;
3- Preparing the document by adhering to the form element determined in Article II of the Convention, to the extent possible.
If the conditions are specified, an insurance or additional certificate of approval is no longer required from this state ship, even if it carries more than 2000 tons of oil.
Few states in the world know international law as much as the Russians. Our state is one of them. The author of these lines, of course, is not so confused as to instruct Putin, but there is such a way and if Putin makes a move and declares that the Russian state has bought 10 tankers and hoists the Russian flag on these tankers; then there may be seen as a slolution to pass the tankers through the Straits from the aspects of P&I insurance coverage. .
Of course, the fact that commercial tankers under the ownership of the Russian state can reach the Aegean does not solve the problem. However, it can provide a solution to the most important stage of this problem; Moreover, the author of these lines has a solution proposal for the continuation of the trip, which may be the subject of another article.