Pakistan and Russia are expected to start negotiations on importing oil and liquified natural gas (LNG) this week.
A Pakistani delegation comprising Dr. Musadik Malik, Minister of State (Petroleum Division), Capt (R) Muhammad Mahmood, Additional Secretary In-charge (Petroleum Division), and other senior government officials will depart for Moscow on a 3-day trip today to get a deal done on the import of discounted fuel, mode of payment and shipment cost, among other things.
Besides fuel imports, both sides are expected to discuss other areas not limited to the Pakistan Stream Gas Pipeline (PSGP) and a gas pipeline from Russia to Pakistan through Kazakhstan. To recall, Russian oil is cheaper than global oil prices and can be sorted in Pakistani refineries, and one private refinery already has previously used Russian crude oil to produce finished products.
It is worth mentioning that Russian ships have been banned by Western allies from transporting fuel products to other nations as a result of Moscow’s war with Ukraine. Currently, traders buy Russian oil and sell it to a buyer country at higher prices. This is how the price of Russian products rises due to trader premiums and shipping costs.
Keeping this in mind, if Pakistan imports Russian oil, the main issue will be the mode of payment. Russia receives rubles from purchasing countries, and rubles are linked to gold. But once the payment method is determined, and if the landed cost of Russian crude oil in Pakistan remains affordable, local refineries will start importing Russian oil. It all depends on the price, mode of payment, and shipping cost that Pakistan’s official delegation will negotiate with Russian authorities.
While Pakistan starts talks with Russia, it is no secret that the South Asian nation currently has no long-term LNG supplier, and spare supply in the market is rapidly dwindling due to increased demand from Europe. Keeping that in mind, any deal in place will help the South Asian nation save billions of dollars if energy projects with Russia are implemented while purchasing petroleum products from Moscow would relieve pressure on the country’s forex reserves.