Russia will send its first shipment of crude oil to cash-strapped Pakistan next month after Islamabad agreed to Moscow’s demand to import just one shipment to plug the “slump of the trust” between the two countries, a media report on Sunday.
Pakistan, currently struggling with high external debt and a weak domestic currency, is eager to buy cheap, discounted goods from Russia.
Russia was initially concerned “about the seriousness of Pakistan’s oil trade,” but in a recent meeting between officials from the two countries, Moscow asked Islamabad to import “one load oil” as an example to communicate the decline of trust accordingly. The Express Tribune newspaper.
The first shipment from Moscow will arrive at the end of next month, paving the way for a larger shipment in the future, the report said. Since Pakistan does not have the technology to refine crude oil, Russia has agreed to export blended oil to the country, it said.
After Saudi Arabia which exports about 100,000 barrels of oil per day, Russia will emerge as the second largest supplier of crude oil to Pakistan if this deal is completed, the said.
Sources said that Pakistan and Russia have not yet finalized the price of oil, as Islamabad hopes to get “good reductions” from Moscow, according to Express Tribune report.
In December last year, Russia refused to give Pakistan a 30 percent discount on its crude oil after the Pakistani delegation requested a price reduction.
As Pakistan faces a severe shortage of US dollars, it will be a challenge to pay for Russian crude oil in the same currency.
Earlier, a foreign company offered a Pakistani refinery to import Russian crude but Pakistani banks refused to pay, the report said. Russia has now agreed to receive payment in three currencies – the Russian ruble, the Chinese yen and the UAE dirham against supplies, it said.
The sources said that Pakistan planned to set up a new Special Vehicle Company to be responsible for the import of Russian oil to Pakistan’s factories, the report said.
Energy provides the bulk of Pakistan’s imports, and cheap oil from Russia will help Pakistan curb its trade deficit and balance of payments.
As Pakistan continues to suffer from a severe shortage of foreign reserves, any short or long term trade with Russia will lead to exports. and fuel at low prices will help reduce the country’s financial burden.
Pakistan’s national reserves, which fell to $2.9 billion a few weeks ago, are now close to $4 billion, although the country is eagerly awaiting a $1.1 billion tranche of money from the International Monetary Fund (IMF), according to the State Bank of Pakistan.
Reserves at the beginning of the fiscal year on July 1, 2022 were about $ 10.309 billion, recording a drop of $ 7 billion in just seven months.
The devastating floods inundated a third of the country, displacing more than 33 million and causing $12.5 billion in economic damage to Pakistan’s already struggling economy.
Meanwhile, India’s oil imports from Russia reached 1.6 million barrels per day in February, and are now higher than the combined imports from Iraq and Saudi Arabia.
From a market share of less than 1 percent in India’s import basket before the start of the conflict between Russia and Ukraine, it now stands at a 35 percent share.