Pakistan purchases first cargo of discounted Russian oil

Pakistan has made its first order for discounted Russian crude oil, according to an agreement between Islamabad and Moscow, the country's petroleum minister said. 

As Moscow diverts oil from western markets due to the Ukraine war, the purchase of Pakistan gives Moscow a new market, boosting its sales to India and China, said an exclusive Reuters report.

Analysts claim Pakistan would have found it difficult to accept the crude agreement, but the country desperately needs financing. Pakistan is a long-time ally of the West and the arch-rival of India, which is historically closer to Moscow.

As Pakistan experiences a severe balance of payments problem and faces the possibility of defaulting on its debt obligations, discounted crude offers relief. The central bank's foreign exchange reserves hardly have enough money to last four weeks of regulated imports.

The majority of the nation's foreign payments are made in the form of energy purchases.

Under the deal, Pakistan will buy only crude, not refined fuels, Minister Musadik Malik told Reuters late on Wednesday. Imports are expected to reach 100,000 barrels per day (bpd) if the first transaction goes through smoothly, he said.

Our orders are in, we have placed that already," he said, confirming source-based information that the country would not buy refined products.

The final agreement was struck recently, according to a Reuters source in Moscow with knowledge of the negotiations 

An inquiry for comments was not answered by the Russian authorities.

Two trading sources acquainted with the conversations claimed that major Russian oil corporations have recently discussed the potential delivery of oil to Pakistan but have refrained from disclosing the names of potential suppliers. Under the condition of anonymity, one of the individuals claimed that Russia intended to provide Pakistan with Urals crude.

According to statistics from analytics company Kpler, Islamabad bought 154,000 bpd of oil in 2022, roughly maintaining the level from the previous year.

Saudi Arabia, the biggest exporter in the world, and the United Arab Emirates were the main suppliers of the crude. The 100,000 bpd from Russia should significantly reduce Pakistan's dependence on fuel from the Middle East.

After leading a trip to Islamabad in January, Russian Energy Minister Nikolay Shulginov declared that oil supplies to Pakistan could start after March.

Since early February, Pakistan and the International Monetary Fund (IMF) have been negotiating the release of a $1.1 billion tranche of a $6.5 billion bailout that was agreed upon January 2019.

(With inputs from agencies)

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