Pakistan To Purchase Russian Oil At 50 USD Per Barrel; How Will The Decision Benefit Pakistan?

The economically-stripped Pakistan is making constant efforts to purchase Russian oil at 50 USD per barrel, at least 10 USD less than the price cap imposed by Western countries. The price cap was imposed on the Russian invasion of Ukraine, which was stated by the media reports recently. Crude oil costs 82.78 USD per barrel.

Pakistan, which is fighting against high external debt and a weak national currency, is in need of purchasing cheap oil at discounted rates in Russia.

Moscow will address the request of Pakistan for discounted oil after it completes the formalities like the mode of payment, shipping charges with premium, and insurance, according to valid media sources.
The first consignment of oil from Moscow will arrive in Pakistan by the end of April.

The shipping of oil from Russian oil will take around 30 days, which would increase the costs of each barrel by 10 to 15 USD because of the transportation costs.

Russia was worried about the seriousness of Pakistan taking an oil contract. But, the recent meeting between the two officials ended with Moscow importing one oil cargo like a test case to build trust between the nations. It has been stated by valid news sources.

Pakistan will first import one oil cargo oil ship to test the costs of importing.
Since Pakistan is facing an economic crisis and a US dollar liquidity crunch, it will pay Russia for the oil with currencies of friendly countries like China, UAE, and Saudi Arabia.

In December 2022, Russia refused to provide oil to Pakistan at a discounted price of 30 percent after the Pakistani government asked for a price reduction.

Energy consists of the biggest share of imports for Pakistan, and cheaper oil from Russia will help them to maintain the increasing trade deficit and payment balance crisis.

Pakistan is dealing with a serious shortage of forex reserves. The negotiations with Russia to reduce oil prices will help to relax the financial burden imposed on the country.

The forex reserves plummeted to a critically low value of 2.9 billion USD a few weeks ago. Now, the value has risen by 4 billion USD because the country is waiting for a bailout from the International Monetary Fund, according to the estimates made by the State Bank of Pakistan.

The forex reserves of the fiscal year on July 1, 2022, accounted to be 10.309 billion USD, which has shown a decline of 7 billion USD in seven months.

The catastrophic floods that surrounded three-fourths of the country have impacted more than 33 million and caused economic damage to the collapsing economy.

Russia to ship its first consignment to cash-strapped Pakistan:

Russia will send its first consignment to the economically collapsing economy after Islamabad agreed to Moscow’s demand to import a single cargo to restore trust between countries.

The cash-strapped economy is desperate to purchase oil from Russia. The latter was concerned about the seriousness of Pakistan taking into notice the oil agreement. But a recent meeting between the two countries has resulted in the decision.

The first consignment will reach Islamabad by April. It will pave the way for better negotiations in the future. Pakistan lacks the technology to refine oil. Thus, Russia has accepted to export blended oil to the former. It has been stated by the reports.

Russia will become the major provider of oil if the agreement takes place, following Saudi Arabia, which exports 100,000 barrels of oil every day.

Sources have stated that the countries have not finalized the prices of oil, and Islamabad has hoped to gain discounts from Russia.

Sources have stated that the country has decided to establish a new Special Purpose Vehicle company that would take over the import of Russian oil to Pakistani refineries.

At the same time, India’s oil imports have risen from 1.6 million barrels per day and are now higher than the combined imports from traditional oil suppliers like Saudi Arabia and Iraq.

Less than 1 percent of India’s imports accounted for the oil from Russia. But, at present, it stands at 35 percent.

Edited by Prakriti Arora