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Company Response

29 Jul 2024

Author:
NorthStandard

NorthStandard response

  1. In common with all members of the International Group Clubs (IG), NorthStandard is a non-profit making mutual insurance association. As such, NorthStandard provides cover for the third party liabilities of shipowners such as oil pollution, wreck removal, loss of life and damage to property. Without P&I cover the innocent victims of maritime accidents would in all probability not receive the compensation which they are due.
  2. There is no financial incentive to NorthStandard or any other member of the IG deriving from the provision of this cover to vessels lawfully carrying Russian oil or indeed any other commodity. All members of the IG provide cover at cost. The reference to “profiteering” in your email is factually inaccurate.
  3. NorthStandard does not insure vessels that either trade in breach of sanctions or expose the club to a risk of sanctions. Contractual provisions provide that cover is terminated from the point at which the offending cargo is loaded.
  4. NorthStandard only provides insurance for vessels engaged in lawful trades. It is not for clubs to determine what should or should not be a lawful trade – that is for government. To unilaterally withdraw cover from lawful trades would have profoundly detrimental effects on consumers and the victims of maritime accidents.
  5. Under the EU / G7 Coalition Russian Oil Price Cap Scheme (ROPC), Russian oil may be lawfully carried, and vessels carrying it insured, by EU/G7 ships and insurers.
  6. The ROPC has as its objectives: “The price cap policy is intended to maintain a reliable supply of crude oil and petroleum products to the global market while reducing the revenues the Russian Federation earns from oil after its own war of choice in Ukraine inflated global energy prices.” OFAC Guidance on Implementation of the Price Cap Policy for Crude Oil and Petroleum Products of Russian Federation Origin, 20 December 2023. [My emphasis.]
  7. The ROPC was drafted in close consultation with industry – and particularly the London insurance market and the IG. It relies on the provision of an attestation that the price of the oil cargo is below the requisite price cap. Provided customary due diligence has been performed and an ostensibly valid attestation provided the oil may be carried and insured.
  8. The challenges surrounding the credibility of the attestation process were known to industry and government from the outset. It is however fundamental to the operation of the ROPC and representatives of OFAC, OFSI and DG FISMA have consistently and repeatedly affirmed the primacy of the attestation process notwithstanding reported sale prices averaging significantly in excess of the crude oil price cap.
  9. The dialogue between industry and government is active and ongoing. As a result in part of the feedback provided by maritime industries including the IG, new requirements requiring the level of detail required on the attestations provided to Tier III shipowners and clubs came into effect on 19 February 2024.
  10. The ROPC has been effective - Russian oil is trading consistently at a discount to world oil prices. Because of this Russia has sought to ship its oil on vessels that are beyond the reach of Coalition sanctions. The so called Parallel Fleet.
  11. The problem here is not EU/G7 shipping and service provider participation in the ROPC. The problem is the rapid growth of fleet of vessels that exists in the main to transport Russian Oil outside of the ROPC scheme. If this is allowed to grow then western sanctions generally and the ROPC specifically will no longer be able to prevent Russia profiting and manipulating markets in commodities such as oil.

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