Russia-Pakistan in talks to address issues in oil import deal
Business
Previously both countries reached an impasse regarding payment methods
LAHORE (Web Desk) - Pakistan has made progress in finalizing a loan deal with Russia, with the arrival of the Russian team in Karachi to work out the details of importing crude oil with Pakistan State Oil (PSO).
A senior official privy to the deal showed optimism that all obstacles in importing crude oil from Russia are expected to be resolved this time. However, no words were heard from energy ministry about the payment method and discounts on crude oil prices.
Last month, the technical teams of the Operational Services Centre (PSC), a Russian state-owned entity, held two-day talks with the PSO, but failed to make progress on the formation of a Special Purpose Vehicle (SPV) responsible for importing the crude and payments.
The Russian delegation is yet again in Pakistan to finalize the government-to-government agreement, including the payment method. Russia is requesting payment in China's Yuan or Ruble, but Pakistan wants to pay in Rupees. Once the deal is done, Pakistan will place an order for the crude oil.
The Russian ships are expected to arrive in mid-May, and the Russian crude price may come with a discounted price close to $50 per barrel, against the current $86.09 per barrel price in international markets. Contrary to the SBP wishes, local bank are reluctant to open LC’s because of the G-7’s sanction on Russian oil.
The insiders while addressing the discrepancies said, PSO only imports finished oil products, not crude products. Also the refineries are hesitant to make deals other than their already functioning agreements.
However, some officials are uncertain whether the decision to import Russian crude under the government-to-government agreement at a 30% discount will be able provide the required relief, as the shipping and refining costs around $25 per barrel may diminish the incentive. Additionally, Pakistan refineries may also only be able to extract 10% MS and 50% furnace oil from Ural crude.
