Tanker backlog builds in Turkish Straits as sanctions insurance impasse continues

The number of crude tankers waiting to transit the Turkish Straits from the Black Sea to the Mediterranean had risen by four on the day as of early Dec. 9, amid an ongoing stalemate between the Turkish authorities and shipping insurers over Istanbul's demands for appropriate insurance letters due to Western curbs on Russian crude exports.

Currently, 28 laden crude tankers are waiting to pass through the Bosporus and Dardanelles straits, at the north and south of the key transit waterway, according to Platts cFlow trade flow data from S&P Global Commodity Insights, up from 25 early Dec. 8. Almost all the tankers are carrying Kazakh-origin CPC Blend crude loaded at the Russian port of Novorossiisk, according to the cFlow data. The vessels waiting outside of the Bosporus straits are transporting 14.4 million barrels of CPC Brent crude, according to cFlow, with Italy, France, and Greece the three main destinations for the cargoes.

Southbound tanker delays to transit the straits were assessed at 10 days on Dec. 9, unchanged from Dec. 7 but up from three days at the start of the month and the highest since Dec. 3, 2021, according to assessments by Platts.

Although largely seasonal, the tanker delays have also escalated after Turkey issued a notice dated Nov. 16 requiring all ships transiting or entering Turkish waters from Dec. 1 to provide letters confirming that insurance cover will remain in place under any circumstances throughout the duration of the transit or while the ship is in a Turkish port or waters.

The move came ahead of the EU's embargo on seaborne Russian crude imports and the G7's $60/b price cap on Russian oil shipments, which came into force on Dec. 5.

Turkey's Maritime Authority said Dec. 8 that it would continue to enforce checks on the insurance held by crude oil tankers passing through its territorial waters and block vessels that do not hold the required level of insurance cover.

But it blamed the requirement on the EU's sanctions, claiming that insurance for tankers traveling through the Turkish Straits could be invalid in the case of an accident, adding that "this has been confirmed both by the relevant EU directive and by high-level government agencies in Europe."

"Our country is not obliged to police the sanction decisions of other countries and international organizations exclusive of the sanction decisions taken by the United Nations Security Council," the Maritime Authority said in a statement.

A European Commission spokesperson said the Commission was aware of tankers being denied passage via the Straits and was in contact with the Turkish authorities "to seek clarifications" and "working to unblock the situation."

White House Press Secretary Karine Jean-Pierre told reporters Dec. 9 that US officials have been in touch with Turkish officials over the tanker logjam to explain that the new price cap on Russian crude "doesn't necessitate additional checks on ships passing through Turkish waters."

"Our understanding is that virtually all of the delayed tankers are not carrying oil from Russia and are not affected by the cap," Jean-Pierre said. "Turkey has made clear they share our interests in a well-supplied market and allowing seaborne oil to transit the Turkish straits. They have made clear their goal is to resolve this issue as quickly as possible. … And we feel like we are going to get to a place where this will get resolved."

Tanker rates

The International Group of P&I Clubs, which represents 13 mutual insurers providing cover for 90% of the global shipping industry, said on Dec. 5 that the Turkish requirements "go well beyond" the information contained in a normal confirmation of entry letter and advised its members not to issue a new cover letter to shipowners and charterers.

The P&I Clubs said they had sought to resolve the issue through talks with the Turkish authorities, expected to take place on Dec. 5.

The P&I Clubs did not respond to requests for new comment on the talks.

The growing tanker backlog to transit the Turkish Straits comes amid rising tanker rates to carry crude from the Black Sea to the Mediterranean and higher demurrage costs for delayed vessels.

Platts assessed rates for the Black Sea to Mediterranean route for 135,000 mt crude tankers at $27.57/mt on Dec. 9, down from a recent jump to $31.74/mt on Nov. 22 but up from $21.23/mt before Turkey announced the new insurance requirements.

"High uncertainty around regulations creates disruptions to the market which tend to benefit the freight rate markets," analysts at S&P Global said in a recent note. "Activity seems to be happening under the radar with seemingly no fixtures reported out of Russia as of late."

The value of Russia's main Urals export-grade crude has been trading below the G7's $60/b price cap since Nov. 18 and was last assessed by Platts at $40.06/b on Dec. 8, a $36.29/b discount to Dated Brent.