Reuters: ISLAMABAD Pakistan’s petroleum minister said on Monday that the South Asian nation’s first government-to-government purchase of discounted Russian oil was paid for in Chinese currency, marking a major change in its export payment policy, which had previously been dominated by the U.S. dollar.
Discounted crude provides relief as Pakistan struggles with a severe balance of payments deficit and runs the danger of defaulting on its debt. The central bank’s foreign currency holdings only cover four weeks’ worth of restricted imports.
On Sunday, the first shipment of discounted Russian crude oil that was organised under a new agreement that Islamabad and Moscow signed earlier this year landed in Karachi. in the moment, it is being unloaded in Karachi’s port in the south.
In a phone conversation with Reuters, the petroleum minister Musadik Malik said the payment was made in Chinese currency but would not discuss the price or the discount Pakistan obtained.
The first government-to-government (G2G) contract between Pakistan and Russia, according to him, included the purchase of 100,000 tonnes, of which 45,000 tonnes had already arrived at Karachi Port and the remaining was on its way. In April, Pakistan made the deal.
The purchase by Pakistan provides Moscow with a new market to complement its supplies to India and China, as it diverts oil from Western markets due to the war in Ukraine.
Analysts claim the oil agreement also gives a fresh path for Pakistan at a time when its finance requirements are enormous despite being a longtime Western ally and the arch-rival of neighbouring India, which traditionally is closer to Moscow.
The Russian crude would first be refined by Pakistan’s Refinery Limited (PRL), according to the ministry. He had originally described the shipment’s acquisition as a test run to determine its technical and financial viability.
Given that the South Asian nation has historically imported Middle Eastern petroleum products, Malik on Monday downplayed worries about the financial sustainability of the project as well as worries about the capacity of local refineries to handle Russian oil.
The refining of this oil won’t ever result in a loss, according to iterations of several product mixtures that Malik and his team have tested, and they are certain it will be profitable.
According to the minister, “no adjustments (were) needed at the refinery to refine the Russian crude.”
The bulk of Pakistan’s foreign payments come from energy imports. According to statistics from analytics company Kpler, Islamabad bought 154,000 bpd of oil in 2022, roughly maintaining the same level as the previous year.
Saudi Arabia, the biggest exporter in the world, and the United Arab Emirates were the main suppliers of the oil. The 100,000 bpd from Russia should significantly decrease Pakistan’s reliance on gasoline from the Middle East.