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Thursday, February 22, 2024  
11 Shaban 1445  

Pakistan moves closer to buying cheaper Russian crude oil supplies

Both countries in final stages of sorting out supply hiccups

Pakistan and Russia have agreed to sort out all the entanglements – transportation, insurance, payment, and rolling – for a supply of crude oil by late March.

“We have established a timeline for this agreement in our joint agreement. This is late March,” Russian Energy Minister Nikolay Shulginov said while responding to queries after Pakistan and Russia signed memoranda of understanding (MoUs).

Pakistan receives the bulk of its crude oil (energy imports) from the Gulf. Negotiations started last year with Russia as Pakistan pursued cheaper options in the face of sanctions on Moscow. India is already buying crude oil from Russia.

Pakistan is desperately looking at cheaper avenues of energy in the face of a bulging import bill that, coupled with a rupee value seemingly out of sync with market fundamentals and a stalled International Monetary Fund (IMF) programme, is only adding to the country’s economic woes.

Shulginov was addressing a press conference with Federal Economic Affairs Minister Ayaz Sadiq at the conclusion of the 8th session of the three-day Pakistan Russia Inter-Governmental Commission on Trade, Economic, Scientific and Technical cooperation Friday.

“As for the LNG supply the LNG volumes in Russia are mostly committed to long-term contracts so the spot market and capacity are very small but nevertheless we have decided that it would be a good idea for Pakistan to approach gas from Novatek [natural gas producer in Russia] to largest LNG producing companies in late 2023 to discuss the conditions when they have the spare capacities.”

When asked about a similar question, the Russian minister said that both countries were in the final stage of agreeing above mentioned issues. “We have already set a clear timeline and what’s also important is Government of Pakistan is facilitating these talks.”

Pakistan will pay for crude oil purchases from Russia likely to begin in late March, in currencies of friendly countries, the Russian energy minister said.

“We have agreed that the payments will be made in the currencies of friendly countries,” he said. Buyt, he did not specify the ‘friendly countries’ and neither of the two ministers gave details on the size of the planned purchases.

Petroleum Minister Musadik Malik told Geo News separately that Islamabad “wants to import 35% of its total crude oil requirement” from Russia.

Energy purchases make a major chunk of imports for Pakistan which is facing a severe balance of payment crisis with its foreign exchange reserves falling to $4.6 billion, barely enough to cover three weeks of imports.

Historically the South Asian country has had no major commercial relations with Moscow, unlike neighbouring India, hence payment mechanisms in light of Western-led financial sanctions on Russia are likely to present a challenge.

Pakistan depends on oil from Gulf countries, mainly due to close political and friendly ties, which often extend facilities like deferred payments, and that route is cheaper logistically given proximity to the Strait of Hormuz.

The energy deals follow a visit to Moscow in November by a Pakistani delegation including Malik.

(With input from Reuters)

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