The details of Pakistan’s deal to purchase crude oil from Russia, which were kept under tight garbs, is finally being revealed. The first shipment of oil is being currently offloaded in the port city of Karachi after a deal was struck with Moscow earlier this year.
It has been revealed that Pakistan has ditched the US dollar in making payments and instead paid for its first import of Russian crude oil in Chinese currency yuan. It has been known Pakistan did not receive any ‘special discount’ on the deal either and paid the market price.
Minister of State for Petroleum Musadik Malik has not disclosed the commercial details of the deal including pricing or the discount. He said the payment was made in RMB and Pakistan received Urals grade oil which is one of the lighter crude available. The oil is also suitable for our refineries without any adjustment.
The Russian energy minister contradicted the statement and said that Pakistan did not receive any special discount and the price was the same for all buyers. His remarks raised questions as the government including Prime Minister Shehbaz Sharif asserted that Moscow agreed to supply oil at a discounted price.
Pakistan has purchased 100,000 metric tons of Russian crude oil, of which 45,000 tons arrived last week. Discounted crude is expected to bring a significant decrease in the price of petroleum products. Energy imports make up the majority of the country’s external payments. The deal in yuan marks a significant shift in the US dollar-dominated export payments policy.
It also offers a respite as Pakistan faces an economic crisis and with an acute balance of payments problems risking default on external debt. The foreign exchange reserves held by the central bank are barely enough to cover a month of imports. The IMF seems disappointed by the economic team and is not willing to issue the next tranche of payments.
Pakistan recently announced to allow barter trade with Russia, Afghanistan and Iran. The purchase gives Russia a new outlet amid growing sales to India and China as it redirects oil from western markets due to Ukraine conflict. For Pakistan, it marks a significant shift in buying from Saudi Arabia and the UAE.
However, it is necessary that the commercial terms of the deal must be revealed before the nation. The government must take the nation into confidence over the deal if it in the nation’s interest. It is expected we may witness a gradual decline seeing in petroleum usage which will reduce the import bill and improve the economic situation.
