The UK and EU have agreed a coordinated ban on insuring ships carrying Russian oil, shutting Moscow out of the vital Lloyd’s of London insurance market and sharply curbing its ability to export crude, according to British and European officials.
Lloyd’s has been the heart of the marine insurance industry for centuries and blocking its members from insuring Russian oil cargoes will pile more pressure on global commodity markets, which have been in turmoil since Moscow’s invasion of Ukraine.
The insurance ban is part of a new EU sanctions package targeting Russian oil exports. Brussels agreed to an embargo on most Russian oil shipments late on Monday but the involvement of the UK unlocked the insurance ban. This could have much broader consequences for Moscow’s exports and leave it looking for insurance in smaller, less developed markets.
Insurance has been a big sticking point in the development of the EU oil ban, with underwriters warning of the wider economic consequences of clamping down on a sector that is crucial to international trade.
There was also a concern in Brussels that the EU acting alone on insurance sanctions would mean that more business flowed to London’s international market. “There is a level playing field issue if London keeps on providing insurance and then a lot of it goes via Lloyd’s of London,” a senior commission official said.
Ursula von der Leyen, president of the European Commission, announced action on shipping on Tuesday but officials said it was London’s decision to drop its opposition that cleared the way for the new sanctions package.
Greece and Cyprus, which have significant shipping sectors, only agreed after a commitment from the UK to follow suit, officials said.
The UK government refused to comment, but people briefed on the plans said an announcement was imminent on Britain banning insurers from covering ships carrying Russian oil. “This is something that is happening in a coordinated way,” said one.
Helima Croft, head of commodities strategy at RBC Capital Markets, said: “It’s hard to underplay how significant a move this is by the UK and EU. Taking out insurance will have a huge impact on Russia’s ability to export its oil. It’s one of the toughest sanctions Europe has in its armoury.’