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The European Union today formally approved the plan for its members to stop buying Russian oil shipped by sea because of the war in Ukraine. That could be a big economic blow to Russia over time, and so could a part of the package that anyone who owns a car can relate to. It's about insurance. NPR's international affairs correspondent Jackie Northam reports.
JACKIE NORTHAM, BYLINE: When this latest round of sanctions was put on the table, much of the focus was Europe's embargo of most Russian oil imports. What got less attention was a ban on providing insurance on tankers carrying Russian crude anywhere in the world, which is set to take effect by the end of the year.
ERIK BROEKHUIZEN: I think some people that are unfamiliar with how these things work, they may underestimate what the impact could be. It's a huge deal.
NORTHAM: Erik Broekhuizen in New York is head of tanker research at Poten & Partners, a ship broker and energy consultancy. He says the EU oil embargo was an important move, but Russia could try to find new clients for its crude. Broekhuizen says adding the insurance ban will prevent that.
BROEKHUIZEN: It's the one-two punch. It's the second one that could be a knockout blow.
NORTHAM: The U.K. is also expected to bar insurance on tankers carrying Russian oil. There's a specific arrangement for maritime insurance where two entities cover more than 90% of the world's tankers. Lloyd's of London covers physical damage. The International Group of P&I Clubs provides liability. John Miklus, president of the American Institute of Marine Underwriters, says vessels can't dock at most of the world's ports unless they have these types of insurance.
JOHN MIKLUS: In case you strike another vessel or, even more importantly, if you ground or have a casualty where you're spilling oil. That's probably the biggest, you know, remember way, way back to the Exxon Valdez or something like that.
NORTHAM: Once the insurance ban kicks in, any European tankers carrying Russian oil, which is most of them, will be barred not only from Europe and the U.K. but from other major markets like China and India, says Helima Croft, head of commodity strategy at RBC Capital Markets.
HELIMA CROFT: The EU is not simply saying, OK, we're not going to take the barrels, but we're fine somebody else taking it and hence we don't have any major market disruption. The EU is actually moving to take those barrels off the market, not just move them around. And that is important.
NORTHAM: But Broekhuizen says that will likely mean higher prices for oil.
BROEKHUIZEN: So if you take off, like, three, four million barrels a day of Russian exports because they can't find the ships to move it, what do you think is going to happen to the oil price?
NORTHAM: And Croft says there's no telling what Russia will do even before the insurance ban kicks in.
CROFT: I think as we look out over summer, the question is going to be, do the Russians respond in such a way to give more economic pain to the West in retaliation?
NORTHAM: Croft says Russia could simply cut all oil supplies to Europe or hold back on other commodities, such as wheat. Jackie Northam, NPR News, Washington. Transcript provided by NPR, Copyright NPR.
