Minister of State for Petroleum Musadik Malik on Monday said that the Russian crude shipment was paid for in Chinese currency, a private TV channel reported.
Pakistan had opened the Letter of Credits (LCs) in the Bank of China to make the payment due to a shortage of dollar in the country and a row between the US and Russia over the Ukraine issue. The first cargo of discounted Russian crude oil arranged under a new deal struck between Islamabad and Moscow arrived in Karachi on Sunday. It is currently being offloaded at the port.
The development, which followed a series of negotiations between the two sides, was celebrated by Pakistani Prime Minister Shehbaz Sharif, who said it was a fulfilment of one of his promises. “I have fulfilled another of my promises to the nation. Glad to announce that the first Russian discounted crude oil cargo has arrived in Karachi and will begin oil discharge tomorrow,” Sharif said in a tweet.
“Today is a transformative day. We are moving one step at a time toward prosperity, economic growth, energy security & affordability,” he said, terming the development “the beginning of a new relationship between Pakistan and the Russian Federation.” “I commend all those who remained part of this national endeavour & contributed to translating the promise of Russian oil import(s) into reality,” he added. According to sources, this Russian oil shipment would not be part of the oil pricing mechanism in the country. This, the sources added, meant that the PRL would enjoy the benefits or the losses of the Russian oil. The sources further said that the shipment was a test case to examine the quality of the crude oil and the ratio of refined products, adding that a report would be sent to the federal government for future decisions regarding the long-term commercial oil deals.
Pakistan had placed the order for the first Russian crude oil cargo at a discounted rate of up to $18 per barrel. Islamabad followed the Platts crude oil prices, which meant Platts minus discount of $16-18 per barrel, the sources said. The sources said that Pakistan would examine the economics of the refined petroleum products based on the discounts. They added that Pakistan had received specifications of the Russian oil, which were not too good.
Additionally, the freight of the Russian oil was too high. According to the sources, Russia had offered discount rates of $16-18 to match the quality and the freight of Arabian light oil, which the Pakistani refineries were currently processing. The procurement of crude oil has long been at the centre of local politics, particularly after the visit of former Prime Minister Imran Khan only a day before Russia launched its war on Ukraine on Feb. 24, 2022.
Khan, ousted through a no-confidence vote in parliament in April last year, claimed that his Moscow visit was one of the reasons behind his ouster.
Currently, the South Asian nuclear country meets 80% of its oil requirements, or roughly 154,000 barrels per day, through traditional Gulf and Arab suppliers, mainly Saudi Arabia and the United Arab Emirates.
