Not So Fast….

August 5, 2022

Are sanctions on Russian oil being relaxed?

During the six months since Russia invaded Ukraine, the United States, the United Kingdom and the European Union have announced multiple rounds of sanctions targeting the Russian government, Russian companies as well as specific individuals.  Every new round of sanctions was stricter and more comprehensive than the previous one.  Arguably, the most significant set of sanctions was announced on June 4th, 2022.  On that date the EU released its 6th Sanctions Package, which included the long-awaited ban on seaborne oil imports from Russia (pipeline exports are excluded).  This ban is to be implemented in late 2022 for crude oil and early 2023 for petroleum products.  It was accompanied by a prohibition on providing insurance for the transportation of oil and petroleum products from Russia.

The addition of the insurance ban was the kicker.  It has major potential implications for the oil and tanker markets.  This was not virtue signaling.  These sanctions were going to have a material impact on Russian oil exports.  However, since the EU sanctions package was announced, other countries have pushed alternative proposals or taken a step back in their support.  Even the EU itself has found it necessary to ease some of the restrictions.  What is going on?

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