Maiden Russian crude oil shipment due next month

Moscow agrees to receive payment in rubble, yen and UAE dirham against oil supplies

ISLAMABAD:

The first oil cargo from Russia is expected to arrive in Pakistan by the end of April after the latter agreed to the former’s demand to import a single cargo first as a test case to bridge “trust deficit”.

Moscow has already offered to export 100,000 barrels of crude oil per day to Islamabad.

Following Saudi Arabia that also exports around 100,000 barrels of oil per day, Russia will emerge as the second largest crude oil supplier to Pakistan if the both the countries sign a deal.

Sources told The Express Tribune that Russia had raised doubt “over the seriousness of Pakistan to mature the oil deal”. Therefore, in a recent meeting held between the two countries, Moscow had asked Islamabad to import “one oil cargo” as a test case.

The sources said that Russia had heavy crude oil but Pakistan lacked the technology to refine such oil, therefore, it agreed to export blended oil to the country.

However, Moscow asked Islamabad to import “one crude oil cargo” first to exhibit trust in the oil deal.

Following Russian demand, sources said that Islamabad agreed to import “one crude oil cargo” by the end of April this year, paving way for a bigger deal.

Payment mode

As Pakistan faces dollar crunch, it could be a challenge for the country to pay for Russian crude oil in the same currency.

Earlier, a foreign company had offered a Pakistani refinery to import Russian crude oil but the Pakistani banks had refused to make payment.

Russia has now agreed to receive payment in three currencies – Russian rubble, Chinese yen and UAE dirham against the supplies of crude oil to Pakistan.

Sources said that the State Bank of Pakistan (SBP) and Russian counter bank were pondering over a payment mechanism for the oil import in three currencies other than dollars.

Who will import Russian crude oil?

Sources said that Pakistan had planned to set up a new Special Purpose Vehicle (SPV) company that would be responsible for the import of Russian oil to the Pakistani refineries.

This will be a state-run company which would also deal with the Russian side on all matters regarding the import and payment of oil.

Pricing of Russian oil

Since Russia attacked Ukraine, the world witnessed a shocking surge in the price of oil with the European Union countries also facing a threat of shortage of petroleum products during the current year.

There had also been reports that diesel stocks were depleting fast in the world.

Recently, almost all the sectors in Pakistan were confronted with the issue of opening of LCs.

Experts say it will be a major relief for Pakistan if the country is able to strike the oil deal with Russia and make payment in currencies other than dollar.

Sources said that Islamabad had earlier desired to strike the oil deal with Moscow at ceiling price cap that was imposed by the G-7 nations.

Even, the United States had agreed with Pakistan on the matter.

But Russian President Vladimir Putin had announced that they would not deal with a country that wanted to import oil at capped price.

Pakistani authorities had earlier stated that Islamabad would import crude oil from Russia at 30 per cent discounted price. However, Russia denied any such development.

Sources said that Pakistan and Russia had not finalised the price of Russian crude yet, adding that the negotiations continued as Islamabad hoped to receive “good discounts” from Moscow.