ISLAMABAD: All Pakistani commercial banks have refused to open letters of credit (LCs) for Russian-crude oil in the light of economic sanctions by the United States, the United Kingdom and the European Union against Moscow for invading Ukraine, a local newspaper reported Saturday.
According to the publication, the commercial banks have stated that payment in US dollars is not possible against the import of Russian crude oil, citing US and EU sanctions on Russia due to Ukraine war.
However, if the government manages to enter a G2G agreement with Russia for the import of crude oil under transaction mode based on the ruble — ensuring no impact of sanctions on Pakistan — the refineries can utilize crude oil up to 15-30%, keeping in view its technical suitability for making finished products.
On the other hand, the refineries are in their short and long-term agreements with Abu Dhabi National Oil Company (ADNOC), Aramco, and Kuwait Petroleum Corporation (KPC) for crude oil imports.
More importantly, the current transportation freight for imports from Russian ports is estimated in the range of $3-3.5 million compared to the current freight of $0.8-1.0 from the Middle East ports and the sea voyage from the Black Sea would be around 16-26 days compared to 4-5 days from the Middle East.
This means that the freight charges, from Russia’s ports to Karachi, stand at $8 per barrel which is 8-12 times higher in comparison to the United Arab Emirates (UAE) ports.
This is the essence of the written responses of four refineries — PARCO, BYCO (Cnergyico Pk Limited), PRL, and NRL — to the government against letters written to them on June 27, seeking recommendations on five issues, which included the technical suitability of the Russian crude oil, quality and grades, cost of transportation and freight charges, payment mechanism, and existing terms of the contract.
