Russian crude

With two shipments of 50,000 metric tonnes at Karachi Port, Russian crude oil is officially part of Pak economy

It’s official that Russian crude is now part of the Pakistani economy. As two ships carrying 50,000 metric tonnes each berthed at Karachi Port, it was a saga come full circle. The country had espoused this liquid energy for more than a year and underwent political upheavals. The incoming of the first cargo of subsidised oil from the north-eastern hemisphere, as a debut in our history, has formally diversified Pakistan’s oil and petroleum strategy, and is a good omen. Moreover, the fact that the crude will be refined in Pakistan gives the needed technical leverage to enhance cooperation in leaps and bounds to address not only energy scarcity but also add a cheaper resource of energy provision.

This shipment at a cheaper rate, compared to prices on the international index, has come at an opportune moment. Oil and petroleum products are sold at an inflated price in Pakistan despite being imported at subsidised and deferred payment modules. The reason is that the government is the biggest beneficiary as it thrives on revenue slapped in the form of taxes and a plethora of surcharges, as this makes it the biggest pie of revenue. As a result, it impacts cost of production and leads to exports becoming uncompetitive, apart from leading to a price spiral. To what extent this heavily subsidised Russian oil can make a difference is anybody’s guess. The government, it is claimed, has already suffered a loss of Rs700 billion by unnecessarily delaying the deal for reasons of realpolitik exigencies.

The crude from Moscow, widely known as Urals oil, is said to have a composition mixture of 32% HSD and 50% furnace oil. This aspect makes it less attractive for not only refineries but also the conglomerate of importers as it ends up in little profits. Likewise, the pattern of energy consumption is LNG, and the furnace extraction is of no good. These issues will keep the Russian product in a perplexed arena. But the biggest attraction, apart from a cheaper price, is its accessibility in non-dollar payment modules. This will keep the wheel of the economy oiling on.

Published in The Express Tribune, June 13^th, 2023.

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