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Insurance sanctions

Posted by John Reed on

Sanctions on Russians prevent them or their foreign customers from getting routine insurance for political risk or trade credit. I think the latter is letters of credit. Those say that if you deliver the product that the customer in the other country  ordered and they do not pay for it, the bank that issued the letter of credit will pay for it.

I initially forgot about the role of insurance in international trade. I believe the first insurance on earth was for cargoes in ocean going ships. And the insurers now are going beyond the literal wording of the sanctions and just refusing to get involved with Russian at all because of their reputations and/or possible future expansions of sanctions.

Insurers of cargoes going to Black Sea Russian ports are having to pay big extra premiums.

The G-7 formed a task force to search for and seize Russian Oligarchs’ jets, yachts, homes which are outside of Russia,

In addition to the Russian stock market and FOREX dealers being closed, the Russian bond market is also shut down.

In theory, Russia can switch to only trading with China and India, who abstain from condemning Russia. But at least it would force much of the trade to go via truck and railroad which are far less efficient than ocean-going ships.

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