Lisa wrote:^^ But if the Russians supply oil as CIF, then what price?
Lisa ji,
may be costly because war risk premiums will kick in
any insurance or other company flouting sanctions will be banned after sanctions are lifted. Govt support like India provides to some of its banks and oil companies may shield them for a while.
That's why many Indian banks do not break sanctions but only specific banks allowed by the GOI do so.
ditto with marine or aircraft insurance because individually sold insurance is always reinsured by a consortium. Such insurance will cover hull damage, war damage, cargo insurance, accidents and many other aspects.
Reinsurance occurs when multiple insurance companies share risk by purchasing insurance policies from other insurers to limit their own total loss in case of disaster. Described as "insurance of insurance companies" by the Reinsurance Association of America, the idea is that no insurance company has too much exposure to a particularly large event or disaster.
Indian banks with many branches abroad usually will not break sanctions because, post sanctions the US will vaporize their business dealings abroad.
Insurers purchase reinsurance for four reasons: To limit liability on a specific risk, to stabilize loss experience, to protect themselves and the insured against catastrophes, and to increase their capacity. But reinsurance can help a company by providing the following:
Risk Transfer: Companies can share or transfer specific risks with other companies.
Arbitrage: Additional profits can be garnered by purchasing insurance elsewhere for less than the premium the company collects from policyholders.
Capital Management: Companies can avoid having to absorb large losses by passing risk; this frees up additional capital.
Solvency Margins: The purchase of surplus relief insurance allows companies to accept new clients and avoid the need to raise additional capital.
Expertise: The expertise of another insurer can help a company obtain a higher rating and premium.
If one company assumes the risk on its own, the cost could bankrupt or financially ruin the insurance company and possibly not cover the loss for the original company that paid the insurance premium.
This is why russia will not/can not ship CIF under the current circumstances because russian insurers will not be able to reinsure elsewhere.
Russia may not even have such a company to insure marine trade and their companies having the connections to reinsure outside russia. So the russian state becomes liable for huge claims if things go south
After the sanctions regime ends or even during, russian companies will never be able to purchase reinsurance, so even the russian insurance company's business will dry up very quickly and they will shut down
seven odd countries have already been told not to insure/reinsure russian oil and russian gas carriers and surely the amerikis will pressurise many more countries to do the same.
Any restriction in the oil supply to the market will cause oil prices to spike, maybe > $200+ per barrel, hurting everyone but the amerikis who actually have enough oil on their own to tide over the situation if they are willing to pump it and sell in their own market
Lets see how India plans to cope with the situation
European and British companies account for about 85% to 90% of the business of insuring, reinsuring, and financing seaborne Russian oil. Owners of oil tankers of any nationality will refuse to carry Russian oil if they can’t get high-grade insurance. The operators of the Suez Canal, for instance, don’t permit uninsured ships to sail through the vital channel. Russia, in response, says its state-owned insurance company will provide the reinsurance that British and European firms won’t. But Russian firms don’t have the same reputation as the British and European insurers, and their coverage may not be accepted by major ports and canals; the same is true for Indian and Chinese insurers.
The British and European companies largely control the insurance and financing market for oil tankers, and particularly, ships that carry refined petroleum products.
It is not a scheme that could work for other commodities or in other markets.